Waiver, guaranteed-insurability, payor, and accidental-death riders
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Riders: bolt-on promises, not stand-alone policies
A rider is an amendment attached to a life policy that adds a benefit, and it usually costs extra premium. A rider has no independent life of its own: it lives and dies with the base policy. Under Texas law, the policy, the attached riders and endorsements, and the application together make up the whole contract, and life policy provisions are governed by the Texas Insurance Code's life insurance chapter (Tex. Ins. Code ch. 1101), inside Title 7 on life insurance and annuities (Tex. Ins. Code Title 7). That matters on the exam: if the base policy lapses or is surrendered, every rider attached to it ends too.
Four riders come up constantly. Learn each one by its trigger and its benefit.
Waiver of premium
Trigger: the insured becomes totally disabled as the rider defines that term, and stays disabled past a waiting (elimination) period. The disability generally must begin before a stated age.
Benefit: the insurer pays the premium for the policyowner while the disability continues. Coverage, cash value growth, and dividend eligibility go on as if premiums were being paid normally. Premiums paid during the waiting period are commonly refunded once the claim is approved. On universal life the same idea appears as waiver of monthly deduction or waiver of cost of insurance.
Waiver of premium waives the premium, never the face amount, and it is not a disability income benefit -- no cash goes to the insured.
Guaranteed insurability rider
Trigger: arrival of a scheduled option date or a qualifying event named in the rider, such as marriage or the birth of a child.
Benefit: the owner may buy a specified additional amount of coverage with no new evidence of insurability. Health has become irrelevant; price has not. The new coverage is issued at the insured's attained age, so each option costs more than the last. Options not exercised within the stated window are lost.
Payor benefit rider
This one sits on juvenile policies, where an adult pays for a child's coverage.
Trigger: the payor -- not the insured child -- dies or becomes totally disabled before the child reaches a stated age.
Benefit: premiums are waived until the child reaches that age (or until the policy matures), so the child's coverage survives the loss of the person who was funding it. Note the flip in whose health matters: the child is the insured, but the payor's death or disability is what triggers the benefit.
Accidental death and AD&D riders
Trigger: death results from accidental bodily injury, independent of all other causes, and occurs within the time limit stated in the rider after the accident.
Benefit: an additional amount on top of the face amount -- often equal to the face amount, which is why it is nicknamed double indemnity. Typical exclusions include war, self-inflicted injury, certain aviation, and death while committing an illegal act; the benefit usually terminates at a stated age. An accidental death and dismemberment version adds a schedule: the principal sum for accidental death or a major loss, and a capital sum (a percentage) for lesser losses such as one hand or the sight of one eye.
Death from disease or from natural causes pays the base face amount only. No accident, no accidental death benefit.
Fast contrasts
- Waiver of premium: insured disabled, premium excused.
- Payor benefit: payor dead or disabled, premium excused on a child's policy.
- Guaranteed insurability: buy more, no medical exam, attained-age price.
- Accidental death: extra money, accident only, time limit and exclusions apply.
Key terms
Sample questions
An insured owns a whole life policy with a waiver of premium rider. She becomes totally disabled as the rider defines that term and remains disabled well past the elimination period. Once the claim is approved, what does the rider do?
Reveal answer
Correct answer: The insurer pays the premiums for her while the disability continues, and coverage, cash value growth, and dividend eligibility go on as if premiums were being paid normally
Waiver of premium waives the premium only. While total disability continues past the waiting period, the insurer funds the premium on the owner's behalf and the contract keeps performing normally — coverage stays in force and cash value and dividend eligibility continue. Premiums paid during the waiting period are commonly refunded when the claim is approved.
A grandmother buys a juvenile whole life policy on her seven-year-old granddaughter and adds a payor benefit rider. The grandmother dies two years later. What is the effect of the rider?
Reveal answer
Correct answer: Premiums on the child's policy are waived until the child reaches the age stated in the rider
The payor benefit rider sits on a juvenile policy. Its trigger is the death or total disability of the payor — the adult funding the coverage — not the death of the insured child. The benefit is a waiver of premiums until the child reaches the age stated in the rider or the policy matures, so the child's coverage survives the loss of the person paying for it.
A policyowner reaches a scheduled option date under a guaranteed insurability rider and elects to buy the additional coverage. Which statement correctly describes how that purchase works?
Reveal answer
Correct answer: The additional coverage is issued with no new evidence of insurability, at a premium based on the insured's attained age
The guaranteed insurability rider removes health from the equation, not price. A specified additional amount may be purchased with no new evidence of insurability, but the new coverage is issued at the insured's attained age — so each successive option costs more than the last. Options not exercised within the stated window are lost.