For most people, the concept of life insurance conjures up the idea of a death benefit, only paid out to beneficiaries at the time of the insuredâ€™s death. Some policies, however, offer certain types of riders that allow a policyholder to access their benefits while theyâ€™re still alive.
Critical illness riders, patterned after critical illness insurance policies, are available from some insurers as an add-on to an existing life or health insurance policy. They offer additional protection for policyholders over and above the base life insurance policy. With a critical illness rider, you can use part of your life insurance money to help you and your family long before your death.
The concept is a popular one.Sometimes with critical illness such as cancer, death happens after a long, drawn-out period that can sap family finances for care expenses while the insured is already unable to work. A critical illness benefit helps bridge that financial gap, allowing the insured to focus on treatment and recovery.
A rider is an additional benefit that can be purchased to â€śrideâ€ť on top of the policy. Some riders add an extra cost to your monthly premium amount but can also add new benefits to your insurance plan that can expand your coverage significantly. Others come at no cost as part of a special sale or agreement; they may simply be added on to the policy.
Available rider types vary greatly by the insurance company, but some typically available riders include:
Within a given insurance company, riders are offered to prospective policyholders based upon their individual risk factors. A rider available to one policyholder with low risk, for instance, may not be available to another policyholder with higher risk factors such as age or poor health, or it may be more expensive.
A critical illness policy rider allows you to typically access from 40% up to 80% of your insurance policy benefit if you are diagnosed with a major or terminal illness or life-threatening injury. Some of those conditions or illnesses may include:
The above is merely a partial list; your own rider may include other additional conditions or may not include some of those listed above. Generally speaking, however, a critical illness policy rider will cover anything that makes you unable to work, is likely to shorten your lifespan significantly, and puts you in need of financial assistance. To know what exactly is covered on your rider, youâ€™ll want to talk to your life insurance company directly.
Even though a critical illness rider can help you if you find yourself in medically induced dire financial straits, its actual value can only be determined by your own financial situation.
When considering how much of a critical illness rider to purchase for your life insurance policy, youâ€™ll need to take into account the following criteria:
Before you purchase a policy, if you think a critical illness rider is something youâ€™d want to add to your base policy, youâ€™ll want to ensure that any insurance company youâ€™re considering not only offers it, but that you qualify for the rider.
If you do not have a family dependent upon your income, or if you have enough savings to weather a medical catastrophe, you may not need a critical illness rider, choosing instead to rely on your own savings.
Policy riders can add a great deal of value to your life insurance policy and offer benefits not typically seen on a basic policy. Their extra cost, however, can be prohibitiveâ€”especially if youâ€™re not sure if you need one or arenâ€™t certain which riders will offer the biggest benefit for you.
Depending on you and your familyâ€™s situation, a critical illness policy rider may offer another level of security for you, often in the form of a lump sum payment, in case of an unforeseen situation. Before choosing a riderâ€”or a policy to put it onâ€”you should first understand not just your own finances and risk, but how a medical issue could affect your family and your financial health.