Life Insurance Riders In Canada: What Are They? And How Can They Help Me?

Life Insurance

Rarely are life insurance requirements universal. Fortunately, there are add-ons called life insurance riders that enable you to tailor a life insurance plan to meet your specific requirements.

Riders are the name for these extras. Although handy, most riders have an additional fee. Consequently, you should be careful to add only the riders that you actually require.

We will talk about the numerous alternatives available to you and your family in this piece, as well as the typical life insurance riders in Canada

Life insurance riders quick facts

  • You can add extras called riders to your normal life insurance policy by purchasing them separately. Your insurance will cost more if you add riders.
  • The waiver of premium rider, expedited death benefit rider, living benefit rider, and long-term care rider are among the most popular riders.
  • Many riders only become activated under certain conditions.
  • Certain riders contain limitations on “under what circumstances” they can be included in a life insurance policy.

Why should I consider life insurance riders?

Life Insurance Riders
Life Insurance Riders

When you get life insurance, you can pick from a variety of features and possibilities. You will choose between term and permanent coverage, for example. You will then decide how much coverage you require and choose your dependents.

You can also choose from a variety of supplementary features known as riders.

So why even think about life insurance riders?

You could pick riders because they let you customize the coverage to your needs. You can add riders to your policy’s terms and conditions to provide flexibility and extend coverage. For instance, the renewable term rider allows you to extend your term life insurance policy without going through an underwriting process.

Adding or removing a life insurance rider?

Once you’ve determined whatever riders you require, find out if your insurer offers them. Not all insurance companies provide every possible rider. As a result, you could think about speaking with an impartial broker like Dundas Life to go over your alternatives. Our specialists can assist you in locating the coverage at the greatest price for your particular circumstance.

Is it possible to add a rider to an existing life insurance policy?

Insurance premium
Insurance premium

There isn’t a single, perfect solution. Depending on the kind of rider you choose and your health, you may be able to add one.

The time of purchase is the ideal opportunity to include a rider in your life insurance policy. A life insurance rider can boost your coverage or give you more options. Therefore, it makes sense that the insurer would want to know how much it will cost to provide you with this added benefit. 

Underwriters are able to account for this expense thanks to the medical examination you undergo as part of the procedure and the health questionnaire.

After the life insurance policy is in force, you must submit an application if you want to add a rider. Although some riders cannot be added later, the majority can. To confirm your health, the insurer will require you to undergo a medical examination. They will use this information to determine if they can grant you the requested benefit and, if so, at what cost.

Is it possible to drop a life insurance rider from an existing policy?

It’s considerably simpler to remove a rider from an existing life insurance policy than to add one. Simply advise the insurer of your desire, complete the application, and submit it. The insurer will modify your monthly payment once the rider has been dropped.

Types of life insurance rider: a reference guide

Rider Name Description
Term Rider Adds extra term life coverage to your base policy.
Child Term Rider Provides life insurance coverage to your children.
Spousal Rider Provides life insurance coverage to your spouse
Parent Protection Rider Provides coverage for your parents but requires a separate rider for each parent
Guaranteed Insurability Allows you to buy additional coverage without undergoing underwriting at specific dates in the future
Accidental Death and Dismemberment (AD&D) Provides an additional payout in the event of death or loss of functions or limbs in an accident
Accelerated Death Benefit Lets you access a part of you¬r death benefit amount if you are terminally ill
Critical Illness You receive a lump-sum amount if you are diagnosed with a critical illness covered in your policy
Child Critical Illness You receive a payout if your child develops a covered critical illness
Return of Premiums You will receive the premium dollars paid into the policy if you outlive the policy term
Disability Waiver of Premium The insurer will waive your premium payments in the event of a disability
Mortgage Disability Insurance Covers all or a portion of your mortgage repayments if you sustain a disability
Extreme Disability Benefit Lets you access a portion of your death benefit amount if you sustain a permanent disability
Long Term Care Allows you to receive a part of the death benefit to pay for care while you are ill
Hospitalization Income You receive a daily payout in the event of hospitalization
Family Income Benefit Your family receives a fixed monthly income instead of a lump sum after your death
Fracture You get a lump sum payment if you sustain a fracture in an accident

Types of Life Insurance Riders

Depending on your needs, you can add several riders to your life insurance policy. They are broken down into add-ons that either increase your coverage or provide a disability benefit, critical sickness benefit, or another type of income benefit.

Life insurance coverage riders

Insurance policy
Insurance policy

Term Rider

This add-on is intended to offer more short-term life insurance coverage. Ultimately, a term rider is a term life insurance policy, but it has a significantly shorter term than the main policy.

In order to ensure they have more protection when they are younger, a policyholder can stack up numerous term riders. As different term riders gradually start to expire over the years, the coverage amount decreases. The amount of coverage provided by the policyholder’s life insurance will only increase as they grow more self-sufficient financially.

This method of using the word “rider” is known as “laddering.” When you require greater protection in the early years of the term of your life insurance policy, this strategy can be helpful. For instance, if your mortgage balance is significant, you could want a bigger death benefit sum.
Term riders, as we discussed previously, have a shorter duration than the base policy. A 30-year term policy can have a Term 10 rider or even a Term 20 rider added.

Child Term Rider

The kid of the insured is covered by this rider’s life insurance. Adopted children, stepchildren, and biological children are all acceptable inclusions. All children, including unborn ones, are covered under a single kid term rider.

If any of the children who are covered by the rider pass away while the life insurance policy is still in effect, a small death benefit will be paid. Typically, the coverage does not go past $30,000. In the event that the unimaginable occurs, the compensation can assist parents in paying for the burial, paying for therapy, or taking time off work to grieve.

You won’t have to subject your kids to any medical examinations. However, certain insurance 

companies might inquire about their health. The insurance provider might decline to provide coverage if a child has a serious underlying ailment. As a result, if you have numerous kids, 

some might be covered while others would not.

In general, coverage for children lasts until they become 25. They have the option to change their term insurance into a permanent insurance policy after they turn 25.

Spousal Rider

A marital rider extends your policy’s protection to your spouse. In other words, the same insurance will provide coverage for both you and your husband.

A spousal rider is less expensive than purchasing a separate life insurance policy for your spouse. But generally speaking, it provides less coverage than having two independent insurance.

Parent Protection Rider

In the case of your parents’ passing, the parent protection rider offers coverage. Each parent needs their own rider. The goal is to pay for estate expenses (such as paying off debts and funeral expenses) following your parents’ passing.

Guaranteed Insurability Rider

You are able to get more life insurance with this rider at future occasions. Achieving a certain age or after your policy has been in effect for a certain amount of time are two examples of such milestones. When a significant life event, such as a marriage or childbirth, occurs, you might also be eligible to enhance the benefit amount. However, the maximum coverage you are permitted to have is fixed.

The guaranteed insurability rider may make sense for someone who doesn’t initially need a lot of protection but may eventually need more coverage. This rider would be helpful to a 25-year-old single lady who wants to get married and buy a house someday.

Although the additional coverage will cost more, you won’t need to provide evidence of your insurability. This implies that you won’t need to undergo testing or respond to questions about your health. The insurer cannot deny your application based on a decline in your health when determining your new premium rate.

On permanent insurance plans, the guaranteed insurability rider is typically offered.

Accidental Death & Dismemberment Rider

Whole life insurance
Whole life insurance

If you pass away in an accident or lose a limb or a function (like hearing), this rider offers an additional sum.

In most cases, if you pass away in an accident, the extra payout goes to your beneficiaries. On the other hand, if you are hurt, you will get the benefits.

Only in the event that you are hurt or pass away within certain limits will the insurer pay the compensation. For the majority of applicants, this rider might not be pricey enough due to its limited breadth of coverage. But others who lead riskier lives—perhaps because of hazardous work or hobby—might find it helpful.

The amount of the benefit you receive often depends on your injury. One policy with an AD&D rider, for instance, may pay 50% of the death benefit amount if you lose one function or limb in an accident and 100% of the death benefit amount if you lose two or more functions or limbs.

Accelerated Death Benefit Rider

Most life insurance policies often include this rider. If you are told you have a terminal illness, you are able to access all or a portion of the death benefit sum (like 50%). Depending on the insurer, the word “terminal disease” may mean different things. It is generally understood to have a life expectancy of 12 months or fewer. Another name for this rider is a living benefit rider.

Getting a cash advance on your death benefit will enable you to cover medical costs without having to use up any of your resources. But you can also utilize the cash for other things. You are not required to provide any receipts or explain to the insurance company how you are utilizing the reward. Your beneficiaries’ payout will be less as a result of your accelerated death benefit.

The most money you can borrow from an insurer is typical $250,000 or 50% of the death benefit amount, whichever is less. Consider the case when you have a $2 million life insurance policy. You become ill with a terminal condition and want the expedited death benefit.

The most money you might get if your request is granted is $250,000 Your beneficiary will receive $1,750,000 after your passing.

Critical illness benefits riders

Critical Illness Rider

A variation of an accelerated death benefit rider is this. If you are seriously ill, you are still able to receive all or a portion of your death benefit. From one life insurance policy to another, there may be differences in the amount of money you can access and the health conditions that qualify as critical illnesses.

The amount your family will receive after your passing will be reduced if you take money from your death benefit.

Child Critical Illness Rider

If your child is found to have a serious disease covered by your policy and you have this rider, you will receive a lump sum payment.

Various life insurance providers have different lists of conditions that they cover in detail.

Parents are allowed to spend the compensation anyway they see fit, however it may assist with covering medical costs.

Return of Premium Rider

Return of premium riders is an add-on option included with some term life insurance plans. If you live longer than the policy’s term, your premiums are refunded. But bear in mind that this rider could drastically increase the price of life insurance.

Say, for illustration, that at the age of 25, you purchased a 30-year term life insurance policy with a return of premium rider.

You are still living today, 30 years later, at the age of 55. Your life insurance premiums will be refunded by the insurer as a result.

Disability income riders

Waiver of Premium Rider

In the event that you suffer a disease or injury that renders you disabled, this rider helps to lessen the potential financial difficulties. You won’t be required to pay monthly premiums if you have this rider plus a handicap.

The waiver covers both the main life insurance policy and any additional riders you may have added. However, the term “disability” might be interpreted in a limited way, therefore carefully review the policy provisions.

Disability Income Rider

Financial security is offered by this rider in the case of a handicap. If you experience sickness or injury that renders you disabled and unable to work, you will get monthly benefits. When purchasing this rider, the amount of the monthly payment and its length are predetermined. 

There is typically a waiting period.

In other words, you won’t begin getting paid until a specific amount of time has passed after you become disabled – typically 30 or 90 days.

Mortgage Disability Insurance Rider

If you become unable to work due to a handicap, this rider will pay all or a portion of your mortgage.

Extreme Disability Benefit Rider

With this rider in place, in the case of a permanent handicap, you receive 50% of your death benefit amount or $250,000, whichever is lesser. The inability to carry out at least four out of the six daily tasks without help is what the insurer refers to as a “permanent disability.” The six daily life activities are mobility, eating, urinating, continence, and bathing.

Other Riders

Long-Term Care Rider

With this option, you can take advantage of the death benefit in part while you’re still living to cover long-term care costs. The refund can be used to pay for private caregivers, nursing homes, or other aging-related medical bills. A beneficiary will receive less money than you anticipated if you deduct money from your death benefit, so keep that in mind.

If at least two basic daily tasks are too difficult for you to accomplish independently, you can use the long-term care rider (such as walking, eating, or bathing).

Family Income Benefit Rider

The insurer will instead provide your family with a predetermined monthly income after your passing if this rider is in place.

Hospitalization Income Benefit Rider

It offers a set amount of money for each day the covered person is hospitalized. Both the overall sum paid out and the number of hospital days that will be covered are predetermined.

Fracture Rider

If you have this rider, you will be compensated if an accident results in a fracture. You can purchase various amounts of fracture protection. The placement and type of the fracture will determine how much is paid out.

Keys Takeaways

  • Riders are optional extras that help you tailor a life insurance policy to meet your specific requirements.
  • You should be careful to add only the riders that you specifically require because the majority of riders have additional costs.
  • The waiver of premium rider, expedited death benefit rider, living benefit rider, and long-term care rider are all typical life insurance riders in Canada.

Should I get life insurance riders?

More flexibility is provided by life insurance riders, but this flexibility has a price. This is why you should carefully assess your life insurance needs initially. The value of a rider will depend on your specific situation. The easiest method to determine what life insurance riders you require is to discuss your circumstances with an independent broker.

Which is the best life insurance policy?

The answer to this question isn’t found in the back of the book. Life insurance is a deeply personal purchase and there are many factors to consider. In addition to taking into account your current family’s financial needs, you should also account for future expenses like tuition, funeral arrangements, estate taxes, and any other debts you would like settled if you died. (If that sounds complicated, there are insurance calculators).  

When you search for insurance quotes, there are a multitude of options to choose from. Nevertheless, you should only purchase a policy you can afford and that makes sense for you and your family.

Thankfully, AG Group Enterprise Ltd, is here to help! Our mission at AG Group is to provide a wide range of life insurance policies, including term coverage, permanent coverage, RRSPs, RESPs, and more! 

With AG group’s insurance policies, you can protect the future of your family and your finances. A good policy ensures a bright future!

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