A term rider is an add-on to a life insurance policy that provides additional coverage for a specified period of time. Term riders are typically used to increase the death benefit of a policy, but they can also be used to add other benefits, such as a child rider or a guaranteed insurability rider.
Term riders are often less expensive than purchasing a separate term life insurance policy, and they can be added to a variety of different types of life insurance policies, including term life, whole life, and universal life insurance policies.
There are a few different types of term riders available, including:
- Level term riders: Level term riders provide a constant death benefit for the duration of the rider term.
- Increasing term riders: Increasing term riders provide a death benefit that increases over time, typically at a rate of 5% or 10% per year.
- Decreasing term riders: Decreasing term riders provide a death benefit that decreases over time, typically at a rate that matches the decrease in the outstanding balance of a mortgage or other loan.
Term riders can be a good option for people who need additional life insurance coverage for a specific period of time, such as when they have young children or a mortgage. They can also be a good option for people who are unable to qualify for a separate term life insurance policy due to a health condition.
Here are some examples of how term riders can be used:
- A young couple can purchase a term rider to increase the death benefit of their life insurance policies while they have young children. Once their children are grown and financially independent, they can drop the term riders.
- A person with a mortgage can purchase a decreasing term rider to ensure that their mortgage will be paid off if they die before the mortgage is paid in full.
- A person with a health condition that prevents them from qualifying for a separate term life insurance policy can purchase a term rider to add additional coverage to their existing life insurance policy.
If you are considering purchasing a term rider, it is important to compare quotes from different life insurance companies and to choose a rider that meets your specific needs.