Term, other-insured, and long-term-care riders

Riders that add people, years, or care

A rider is an optional amendment attached to a base life policy. It changes or adds to the coverage, it usually costs extra premium, and it ends no later than the base policy ends. This lesson covers three families of riders: term riders, which add extra death benefit for a limited time; other-insured riders, which put additional people under the same policy; and long-term-care riders, which let the insured use part of the death benefit while still alive to pay for extended care.

A box in the center is labeled base permanent policy, showing the insured, the owner, and the death benefit. Three rider boxes connect to it. Above it is the term rider, which adds extra death benefit for a fixed period, either level or decreasing, with no cash value. To the left are other-insured riders: a spouse rider giving level term coverage on the spouse, and a children's rider covering all the children for one premium, both convertible to permanent coverage without evidence of insurability. To the right is the long-term-care rider, triggered when the insured cannot perform two of six activities of daily living or has a cognitive impairment, paying a monthly percentage of the death benefit. Below it a note says care paid early while the insured is alive reduces the death benefit dollar for dollar, and whatever is left goes to the beneficiary. A line under the center box reminds you that riders end no later than the base policy. — Term riders add years, other-insured riders add people, and LTC riders pay care from the death benefit.

Term riders

A term rider attaches temporary coverage to an existing permanent or interest-sensitive policy, providing extra protection for a fixed period of time. It is useful when the need for insurance is bigger for a while, such as while a mortgage is outstanding or children are young.

Level term rider: the extra face amount stays the same for the rider period.
Decreasing term rider: the extra face amount declines over the period, which suits a declining debt such as a mortgage. A mortgage protection rider is a decreasing term rider.
Family income rider: decreasing term that, if the insured dies during the rider period, pays a monthly income to the family for the remainder of that period, measured from the policy's start.
Family maintenance rider: level term that pays a monthly income for a full fixed number of years measured from the date of death, if death occurs within the rider period.

Because a term rider has no cash value of its own, it adds pure protection at a low cost. It usually expires at the end of its period or at a stated age, and it is often convertible to permanent coverage.

Other-insured riders

An other-insured rider covers a person other than the insured under the base policy, almost always with level term insurance.

Spouse rider: level term coverage on the insured's spouse. It typically allows the spouse to convert to permanent coverage without evidence of insurability before the rider ends or when the base insured dies.
Children's rider: level term coverage on the insured's children, usually for one premium regardless of the number of children. Newborns and adopted children are added without increasing the premium. Each child can convert to permanent coverage without evidence of insurability, typically when the rider ends at a stated age.
Family rider: one rider combining spouse and children's coverage.

The base insured owns the policy and pays the premium; the other insured is simply a covered life under the rider. Other-insured riders are usually cheaper and simpler than buying separate small policies.

Long-term-care riders

A long-term-care rider (an accelerated benefit rider for long-term care) lets the policyowner draw part of the death benefit early to pay for long-term care.

Trigger: benefits usually begin when the insured cannot perform a set number of activities of daily living (commonly two of six: bathing, dressing, eating, toileting, transferring, and continence) or has a severe cognitive impairment, certified by a licensed health care practitioner.
Elimination period: a waiting period, often 90 days, before benefits start.
Monthly benefit: paid as a percentage of the death benefit, such as 2 percent per month, up to a stated lifetime maximum.
Effect on the policy: every dollar paid out reduces the death benefit and usually the cash value. Whatever has not been used is paid to the beneficiary at death.

These riders combine life insurance with care funding, so the benefit is not lost if care is never needed. A rider sold as long-term-care insurance must meet the state's long-term-care rules, including a disclosure statement before the sale, and it may not be described as tax-qualified unless it actually qualifies.

Term riders add years of extra protection; other-insured riders add people; long-term-care riders let the insured spend some of the death benefit on care while alive.