You might be prompted to add one or more riders when purchasing a life insurance policy. Add-ons called life insurance riders can be used to expand the coverage of your policy’s protection. A guaranteed insurability rider, also called a guaranteed purchase option rider, enables you to increase the death benefit of your insurance policy without having to undergo a second medical exam. If you believe your needs for life insurance may change in the future, adding this kind of rider might make sense, though it might also result in higher premiums.
- You can increase the amount of coverage on your life insurance policy without taking a new medical exam thanks to a guaranteed insurability rider.
- A guaranteed purchase option rider is another name for it.
- For a policy with this kind of rider, your premiums will typically be higher.
What Is a Rider for Guaranteed Insurability?
Standard life insurance policies are designed to pay a specific death benefit to one or more beneficiaries that you specify. You can improve or increase the coverage of your insurance policy with riders.
These add-ons can cover a number of circumstances, such as:
- Accelerated death benefit riders that can be used to pay for final expenses before you die
- Long-term care insurance riders to pay with nursing home costs
- If you become totally disabled, disability income riders can be used to replace up for lost income.
- Children’s riders to include young children in the coverage of life insurance
By using guaranteed insurability or guaranteed purchase option riders, you can increase the death benefit of your life insurance policy at a later amount without having to undergo a medical exam.
The insurance insurer frequently requests a medical exam when you first buy life insurance. This exam typically entails taking blood and urine samples, measuring your body mass index, and checking your blood pressure. Your life insurance rate class is established using the exam results, your responses to a medical and lifestyle questionnaire, and other factors. How much you pay for life insurance is influenced by this rate class. Your premiums will likely be lower the health you are overall.
You can avoid additional medical examinations by purchasing a guaranteed insurability rider. On the other hand, if you were to buy a new life insurance policy, that could result in higher premium rates if you’re a lot older or your health has changed since you first obtained coverage.
Guaranteed insurability and guaranteed issue life insurance are not the same thing. No medical examination is necessary for that particular type of life insurance policy, but there is a waiting period before the death benefit is paid.
How a Rider for Guaranteed Insurability Operates
Although they may be less advantageous with a term life policy, guaranteed insurability riders can be added to both term life and permanent life insurance policies. This is so because term life insurance is only designed to cover you for a predetermined amount of time. You might not need to consider getting additional coverage in the long run if you only need coverage from the ages of 35 to 55 to pay off your mortgage or other debts, for example.
It may be desirable to increase your death benefit as you get older because permanent life insurance remains in effect for as long as you continue to pay the premiums.
When it works to how guaranteed insurability interacts with a life insurance policy, insurance companies are free to set their own terms. On what is known as an option date, however, you are typically allowed to purchase more life insurance. These option dates may be actual dates on the calendar or they may be connected to significant life events, like getting married or having a child. You may be allowed to increase your coverage during a predetermined period before or after an option date.
When option dates are predetermined, they may coincide with the anniversary of the date of policy purchase and be dispersed over three or five years. This means that if you decide to use the option to buy more insurance, you could prepare in advance.
Each insurer will charge you differently for adding a guaranteed insurability rider to your policy, but it might only cost you a few extra dollars a month.
There are age cutoffs for some guaranteed insurability riders, after which you are no longer able to increase the death benefit of your policy.
Who Requires a Rider for Guaranteed Insurability?
Depending on the type of insurance, your age, your financial situation, and your general health, you may want to consider adding a guaranteed purchase option rider to your life insurance policy.
For instance, a term life insurance policy may be more appropriate for your needs than a permanent one if you’re young, healthy, and have no plans to get married or have children. You could continue to have a policy that would pay off any debts you might leave behind and cover place of your funeral and burial costs. The additional cost of guaranteed insurability might not be justified in that situation.
Or, if you do have dependents, you might be able to purchase a sizable enough term policy to cover care of their requirements for many years. Compared to whole life or other permanent insurance, term insurance is significantly less expensive.
However, you might want to think about adding a guaranteed purchase option rider if:
- You want to keep your life insurance coverage as permanent.
- One or more of your medical conditions could deteriorate as you age.
- Due to the medical history of your family, you are more likely to experience serious illnesses or long-term health conditions.
- As the family’s primary provider, you want to make sure that any death benefit you leave behind will be sufficient to meet their needs.
- You want to purchase a long-term insurance policy for your child who has a chronic health condition.
It can be beneficial to increase the specifics of guaranteed insurability with an insurance agent so that you fully understand what it might cost, how much your coverage can be increased by, and whether there are any restrictions on its use. For instance, your insurance company might only permit you to increase the death benefit of your policy up to a specific age. You won’t be able to get more insurance after you reach the cutoff age without purchasing a new policy.
Without the need for a second medical exam, you can increase your life insurance coverage by adding a guaranteed insurability rider. If you already have enough insurance, it might not be necessary, but it will add the cost of your policy.