Takeaways
- Insurance riders bolt on additional coverage to an existing insurance policy.
- Insurance riders will increase insurance premiums but expand coverage.
- Insurance riders allow policyholders to supplement basic policies to tailor choices.
- Some insurance policies don’t allow riders once your coverage has begun.
- Insurance riders are created to extend, carve out, or add coverage for different types of insurance, like life, pet, or auto insurance.
What Is an Insurance Rider?
An insurance rider is an add-on, deletion, change, or exclusion of a benefit to an originally stated insurance policy. Many riders offer additional coverage to the original or existing policy. Depending on the policy, riders can be added at the beginning, middle, or end of an existing insurance policy.
Insurance riders can be applied to almost all types of insurance products, like life insurance or even pet insurance. Riders increase the cost of your insurance premiums, but that is because you are paying for more overall coverage.
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How an Insurance Rider Works
Insurance provides a financial safety net for catastrophic life events. Over 100 million Americans do not have enough or lack any life insurance. In 2023, nearly 27 million Americans did not have any health insurance during the entire year.[1]
Typically, insurance policies are written to cover the needs of most current and future policyholders. However, certain policyholders may have insurance needs outside the standard coverage zone—this is where insurance riders can help.
Insurance riders are specialized policies that operate in addition to a standard insurance policy. You must have an existing insurance policy to use riders. Most companies allow insurance riders to be purchased when first getting your insurance policy or after the policy has started.
Insurance riders are available for various insurance types but are most used in health and life insurance policies. Instead of purchasing an entirely new policy, a rider allows you to customize your existing policy by implementing additional coverage.
A report from LIMRA states that nearly every age group and race cites cost as a top reason for being underinsured.[2] If costs keep you underinsured, an insurance rider could be a solution. Riders can offer you a chance to get the coverage you want and provide cost savings over purchasing an entirely new policy.
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When You Need a Rider
Insurance policies are issued for a set time, called the policy term. Most types of insurance follow a set policy term:
- Term life insurance, for example, may be issued for 10, 20, or 30 years.
- Health, pet, and homeowner policies are usually issued annually.
Once you decide you need more or alternate coverage, that’s when an insurance rider starts to make sense. Instead of canceling your current policy and buying a new one, you can purchase a rider to augment your current policy.
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Insurance Rider Example
For example, let’s say a 35-year-old mother of two recently purchased a 20-year term life insurance policy with a $500,000 death benefit to provide financial security for her family if something were to happen to her.
She wants some coverage for her children but does not want to take out separate policies for each other. Rather than obtain separate policies for each child, she could add a child term rider to her policy.
Common Types of Insurance Riders
- Guaranteed coverage: This allows you to be insured without additional medical examinations or qualifications to receive benefits.
- Accidental death: If you die as the result of an accident, your beneficiary receives an additional death benefit due to the nature of death.
- Premium waiver: In the event of disability or illness, the insured would no longer be required to pay premiums but still retain insurance coverage.
- Accelerated death: If an insured person is diagnosed with a terminal illness, they may be able to use some of the death benefits before death. The amount disbursed is subtracted from the final amount paid to beneficiaries.
- Child term: This rider provides a death benefit to your child before maturity. Some companies allow you to transform the term policy into a permanent one after the child matures.
- Long-term care: This policy covers the expenses of moving into a nursing home or receiving extensive medical care at home.
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Pros of Riders
- Tailored coverage: Riders allow you to customize insurance policies to get the protection you seek.
- Cost-effective: Not every insurance policy fits your needs. With riders, you can choose what additional coverage you want to pay for rather than purchasing an inflated policy that covers more than you need.
- Allow changes to the original policy: Rather than get a new insurance policy every time you experience a life event; you can simply make addendums to your original policy.
Cons of Riders
- Expensive: Insurance riders offer coverage outside of typical benefits. Even though you can technically save money with a rider, you still end up spending more money for your total insurance coverage. Consult your budget to see if you can afford these additional costs, and ensure they are "must have" insurance coverage additions.
- Duplicate coverage: Depending on the type of rider you purchase, you may end up with some duplicate coverage. Check your insurance declarations to avoid paying for more than you need. (Consult with a financial advisor to map out your coverage).
- Time-sensitive: Insurance riders may have separate expiration dates from your standard policy. When your coverage ends, you will lose the additional coverage the rider provides. From here, you can align your new insurance term with the rider to align expiration dates.
Smart Summary
Insurance riders allow individuals to customize insurance plans without purchasing separate policies. Riders do not replace comprehensive coverage but work in addition to a standard policy. Purchasing an insurance rider will increase your monthly premiums and may alter your future deductions. Well-crafted insurance policy coverage should be part of any holistic financial planning.
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(1) United States Census Bureau. Income, Poverty and Health Insurance Coverage in the United States: 2023. Last Accessed January 13, 2025.
(2) LIMRA. 2023 Life Insurance Fact Sheet. Last Accessed January 13, 2025.
