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Insurance Riders-What Are They and Why All The Hype?

When jumping from a plane 12,000 feet above the earth’s surface, every skydiver packs a main parachute as well as a reserve.  In other words—the typical safety feature, plus a backup – just in case.

In the world of insurance products, that ‘reserve chute’ is often referred to as rider. In a very high level explanation, insurance riders simply extend coverage beyond the standard coverage offered in a policy and protect you from risks which concern you enough to spend the added premium to purchase this additional protection. 

In many cases, consumers have been led by the media to believe that they’re generally better off paying for expenses out of pocket rather than paying for additional riders.  Consider a parallel for a moment: you buy a $600 dollar TV at most major retailers, and you’re instantly offered the “extended warranty” for another $200.  While those warranties, when purchased, may save the day on occasion, in the larger picture, many consumers believe the retailer always wins, raking in millions from the sales of warranties which are never used.   

In the case of insurance riders, the same could be surmised, but be careful.  As we all know, things happen, and when they do, the best reassurance you may have could be the insurance rider you’ve purchased.

So which insurance riders are worth your dollars?  Here’s a quick look at a few common riders that can be
well worth considering.

Guaranteed Insurability:
A guaranteed insurability rider on a life insurance policy offers you, the insured, the right to purchase additional life insurance at a future date without having to prove continued insurability (ie. without another physical exam).  As an example, a Guaranteed Insurability rider might allow you to buy additional coverage every five years.  This can be a tremendous benefit to those who’ve incurred health circumstances after initially being insured.  It’s often said that “it’s your health that actually buys life insurance,” and a Guaranteed Insurability rider may be worth considering (often at a cost of an additional10-15% of your premium1) if you have significant concerns about future health issues or are in a high-risk group for a condition which would render you uninsurable.  (Note that with many insurance carriers, such a rider only guarantees your right to buy additional coverage until you reach a certain age, so be sure you understand the stipulations of your particular contract.)

Long-Term Care:
We’ve all seen the costs of Long-Term Care in this country skyrocket.  The national median rate for a private room in a skilled nursing facility is now over $213 per day – that’s over $77K a year.  A single bedroom residence in an assisted living facility?  Nearly $40K per year on average.2 Given such high costs, many look to Long Term Care Insurance (LTCI), only to determine that it’s awfully expensive, too, for coverage one may or may not use.  A popular alternative?  More affordable Long-Term Care riders available on many of today’s life insurance and annuity products.  These ‘backup chutes’ may allow you to use the death benefit from your contract to cover long-term care expenses in the event you incur them. Depending on the particular product and rider, the Long-Term Care benefit may even exceed your policy’s death benefit – providing much more reasonably priced reassurance for the days ahead.

The bottom line?  When it comes to your financial security, the best coverage or contract is generally the one that’s in place to meet your specific needs when you need it.3 We’re passionate about helping our valued clients find such potential solutions.  We feel your financial future is far too important to simply pull the cord and cross your fingers.  If you’d like to schedule a complimentary consultation to review your circumstances as well as the most current riders available, simply contact us today!

1 “Insurance Riders: When to Say Yes to Extra Protection.” May 31, 2011.
2  Genworth 2011 Cost of C
are Survey. 2011.

3  Insurance and annuity Insurance and annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurance company

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