Health policy riders

What a rider is

A rider is a separate form attached to a health insurance policy that changes what the base policy does. Riders are also called endorsements or amendments. A rider can:

• add a benefit the base policy lacks,
• increase a benefit the base policy already has, or
• limit coverage by excluding a named condition.

A rider never stands alone. Once attached it is part of the entire contract, the policy plus the application plus any attached riders and endorsements, so a promise that is not written into the policy or an attached rider is not part of the coverage.

Riders that add benefits cost extra premium, and the insurer may require evidence of insurability for them. A rider that limits coverage costs nothing; it is the price of getting coverage at all.

Riders that add or expand benefits

• Waiver of premium: once the insured has been totally disabled for a stated waiting

period (commonly 90 days), premiums are waived for as long as the disability lasts, usually with a refund of premiums paid during the waiting period. Coverage stays in force.

• Guaranteed insurability (future increase option): the right to buy more coverage at

stated ages, dates or life events without new evidence of insurability. Common on disability income policies.

• Cost of living adjustment (COLA): raises benefits during a long claim, indexed to

inflation, so the benefit keeps its buying power.

• Social insurance supplement (SIS): pays an extra benefit when Social Security or other

social insurance disability benefits are denied or have not yet begun.

• Accidental death and dismemberment (AD&D): a lump sum for accidental death, or for the

loss of sight or limbs.

• Hospital confinement: a stated daily amount while the insured is an inpatient.
• Return of premium: refunds some or all premium if claims stay below a stated level over a

stated period.

• Dependent riders: add a spouse or children to the coverage.

Riders that limit coverage

An impairment rider, also called an exclusion rider, excludes loss arising from a named condition or body part, such as a chronic back problem. It lets the insurer accept an applicant it would otherwise decline. Underwriting has three choices for a substandard risk:

1. Decline the applicant.
2. Issue a rated policy: full coverage at a higher premium.
3. Issue at standard rates with an impairment rider that removes the specific risk.

The insured should sign or acknowledge the rider, and the producer should point it out at delivery; an unread exclusion is a classic source of claim disputes.

Under the Affordable Care Act, individual and group major medical plans may not exclude preexisting conditions, so impairment riders now appear mainly on disability income and other coverage outside major medical. Florida law also bars an issuer from imposing any preexisting condition exclusion on an "eligible individual" with at least 18 months of prior creditable coverage who seeks individual coverage (Fla. Stat. 627.6487(1)(b), (3)(a)1).

Riders in Florida small-employer plans

Florida small-employer health benefit plans must be guaranteed issue, and additional or increased benefits may only be offered by riders (Fla. Stat. 627.6699(5)(d)1). A rider for additional or increased benefits may be medically underwritten, may be added only to the standard health benefit plan, and its added rate must follow that section's rating rules (Fla. Stat. 627.6699(5)(b)).

Exam tip: Benefit riders add coverage for extra premium. An impairment rider takes a named condition out of coverage so the applicant can be accepted at standard rates.