Life insurance provides a financial benefit if you die. Living benefit riders can enhance or improve your life while you’re living.
When most of us buy life insurance, we aren’t thinking of ourselves. We’re thinking of those we love, and protecting our families in case something tragic were to happen to us. This is the primary reason for purchasing life insurance — but it’s not the only one. Which brings us to riders.
So, what is a rider in insurance? Life insurance riders are typically add-ons to the policy that allow you to choose additional features, so you can customize life insurance coverage to meet your specific needs. Some riders are inherent to a policy and others are available at additional cost, and/or may involve a fee when exercised. Some life insurance companies offer policies with “living benefits riders.” This type of insurance rider provides benefits that can offer value to you while you’re living.
In this article:
Living benefits riders that make life less hard
With term life insurance, the interaction that most people have with their life insurance company is a monthly bill for 10 to 30 years. You pay your monthly premiums and hope your family will never have to use it. For the team at Haven Life, that seemed like a missed opportunity.
That’s why Haven Life put a new twist on riders that offer life insurance living benefits with Haven Life Plus. What is a living benefit rider? Included in the cost of eligible Haven Term policies, the Plus rider provides eligible policyholders with access to benefits to help them live healthier, fuller and more protected lives. With an eligible Haven Term life insurance policy, you’ll receive term life insurance as well as some noteworthy perks that you can take advantage of right away.
Access to the following services is available through Plus:
Aaptiv is an audio- and video-based, on-demand fitness app with thousands of workouts in a variety of popular categories, including running, strength training, yoga and meditation. A subscription is included at no extra cost.LifeSite provides a secure online safe deposit box for storing, managing and sharing your family’s important documents at no cost.MinuteClinic offers a 15 percent discount voucher for family health services inside CVS Pharmacy and Target stores.Timeshifter uses the latest research in sleep and circadian neuroscience to help you create a personalized travel plan for alleviating the symptoms of jet lag. A subscription is included at no extra cost.Trust & Will is a digital solution that drafts legal wills, and/or establishes a legal trust, for you and your partner at no charge. (Normally, this can cost up to $699.) The service also includes a healthcare power of attorney and directives.Lantern offers an easy way to document your end-of-life wishes — you can organize a bucket list, plan your own remembrance, and even detail what happens to your social media accounts, all online. A full pre-plan premium membership normally costs $149. Plus offers it for no cost.
Accelerated death benefit
While Plus is available with Haven Term, there are many other riders that are common with life insurance policies. For example, a common rider that offers a living benefit is known as the “accelerated death benefit rider.” Let’s say you have a terminal illness while you have an active life insurance policy. You’ll certainly be glad to know that you have life insurance coverage for your family beneficiaries. But in the meantime, loss of income or increased expenses (such as medical bills that are not covered by health insurance) could deplete your family’s assets or even result in debt before you pass. Your debt may then need to be settled by your estate.
When insured, an accelerated death benefit rider allows you to receive an advance of a portion of the available policy’s death benefit early if you are diagnosed with a terminal illness expected to result in death within the time period noted in the rider, generally 12 months, which could make your last days easier. Typically, you need a diagnosis that gives you one year or less to live. A portion of the death benefit is paid out to you to use as you wish — to help cover medical bills, pay shared debts, get your affairs in order, or even create memorable experiences with your family.
Most, but not all, basic life insurance policies offer this accelerated benefit rider as an inherent benefit of your policy, which means it’s included in the price of your monthly premium. Generally, an administrative fee is charged if the rider is exercised.
And the amount of your policy that insurance companies allow you to access for this type of benefit varies. For example, Haven Term policyholders can access up to 75 percent of their life insurance death benefit, or a maximum of $250,000, whichever comes first. (Just note: Accessing these benefits reduces the payout to your beneficiaries upon death dollar-for-dollar.)
Disability waiver of premium
Waiver of premium is another common rider that offers a living benefit. This living benefits rider will waive premiums for the policy and any eligible riders if the policyholder becomes totally disabled as described in the rider. This helps prevent your life insurance policy from lapsing. Usually, this living benefit rider can be added at an additional fee to your premium payments. Policies vary, and there may be age or state availability limitations that apply.
The Social Security Administration found that one in four Americans will become disabled before reaching retirement age, so the possibility of meeting the definition of total disability at some point is more common than you might think.
Depending on the life insurance living benefits rider, it could cover you for a specified number of months, or up to a certain age. The individual terms of the rider vary from carrier to carrier. Additionally, there are no fees associated with using this benefit (that’s what the added premium cost covers). But, there may be a waiting period before you can file a claim to use this rider.
Other types of riders that offer living benefits
While the accelerated death benefit is a more common type of rider that offers a living benefit, there are other specialized riders.
A long-term care rider can cover the cost of a nursing home or in-home nurse as you age. Usually attached to the more expensive whole or permanent life insurance policies, this coverage can help supplement a stand-alone long-term care insurance policy while also providing a death benefit.
Then there’s the disability income insurance rider. This rider acts like long-term disability insurance, but instead of buying a separate policy, it’s a rider on your life insurance coverage. If you were to become disabled and unable to work, the life insurance company would pay you a monthly stipend to replace a portion of your income. Additionally, premiums for life insurance coverage may be waived while the policyholder is receiving disability benefits.
Another type of life insurance rider is the critical illness rider. With the critical illness rider, benefits are paid to the policyholder to cover treatment for illnesses specified in the policy contract, which could include any number of critical medical conditions that are likely to limit your life expectancy.
There’s also the accidental death benefit rider. An accidental death rider is an alternative rider to term life insurance. This optional feature gives your beneficiaries access to a larger cash payout if you die in an accident. Keep in mind, that not all accidents would be covered by this rider.
You should know that claims paid from policies with riders like these will reduce the policy’s death benefit and (if applicable) cash value of the policy. When the policyholder dies, his or her beneficiaries will receive a reduced amount that reflects the money already used to help pay claims.
Finding the policy that works best for you
A living benefits rider is like a sidecar to your life insurance policy to help improve your benefit options while you’re still living. Depending on the rider, it can add enhancements to your coverage to add support to more areas of your life. Not every person needs every rider available to them.
No one wants to read the fine print when buying a life insurance policy. But you don’t want to miss out on benefits that could make your life better.
Always check to see what riders are automatically included with the price of your life insurance – like the accelerated death benefit and Haven Life Plus rider with the Haven Term policy. You might find that your life insurance policy could benefit you as well as your loved ones.
About Chelsea Brennan
Chelsea Brennan is the founder of Smart Money Mamas, a personal finance blog that focuses on family finance, investing, and reducing money stress. Chelsea is an ex-hedge fund investor whose work has appeared in a wide array of publications, including Forbes, Business Insider, and more.
Read more by Chelsea Brennan
Our editorial policy
Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus
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