5.2 Death Benefit and Insured Riders

Death Benefit and Insured Riders

This group of riders increases the amount paid at death or extends life coverage to additional insureds. Unlike living-benefit riders, these pay only upon a death (and in the accidental-death case, only a specific kind of death). Examiners test the exact trigger, the multiplier, and whose death is covered.

Accidental Death and Accidental Death & Dismemberment

The Accidental Death Benefit (ADB) rider pays an additional amount if the insured dies as a direct result of an accident, typically within 90 days of the accident. When the rider doubles the face amount it is called the double indemnity rider; some pay triple.

• The death must be accidental - not from illness, suicide, or war (common exclusions).
• The benefit is in addition to the base death benefit.
• Coverage usually ends at age 65-70.

The Accidental Death & Dismemberment (AD&D) rider adds dismemberment payments. The full benefit is the principal sum; loss of one limb or one eye typically pays the capital sum (often half the principal sum).

Worked Example: Double Indemnity

A policy has a $250,000 base death benefit plus a double-indemnity accidental death rider.

Trap: the accidental death rider does not pay if death results from natural causes or if the insured dies of the accident after the policy's stated time limit (commonly 90 days).

Guaranteed Insurability Rider

The Guaranteed Insurability (GIR) rider lets the insured purchase additional coverage at specified future dates or events without evidence of insurability (no medical exam). Option dates are typically every 3 years between ages 25 and 40, plus "alternate" dates for marriage or the birth of a child. New coverage is issued at attained-age rates based on the original risk class, regardless of any health decline.

This rider protects insurability for people whose health may deteriorate. The new coverage is a separate, smaller permanent policy added without underwriting.

Term Riders on Other Insureds

Several riders extend term coverage to people besides the primary insured:

• Spouse/Other-Insured Term rider - level term on the spouse or another named adult, expiring at a set age (often 65) and frequently convertible to permanent coverage.
• Children's Term rider - one flat premium covers all children (including future and adopted children) to a set age (often 18-25); usually convertible to permanent without evidence of insurability, often at up to 5x the term amount.
• Family rider / Family Income rider - bundles spouse and children coverage, or pays a monthly income to the family from the insured's death until a set future date.

A Return of Premium (ROP) rider uses increasing term to pay back total premiums paid if the insured dies during the term.

Cost-of-Living and Index Riders

A Cost-of-Living (COLA) rider periodically increases the death benefit to keep pace with inflation, usually tied to the Consumer Price Index, without requiring evidence of insurability for each increase. This protects the policy's real value over decades. The added coverage is typically priced as one-year term at the insured's attained age, so premiums for the rider rise as the insured ages.

Distinguish the COLA rider from the automatic increase features inside universal or variable life: COLA is a defined, index-linked benefit boost on a fixed contract, whereas UL death-benefit changes flow from premium and cash-value behavior. On the exam, COLA = inflation protection, no new underwriting, attained-age cost.

Term Rider Conversions and Exam Traps

Term riders are valuable precisely because they can usually convert to permanent insurance without proving insurability. The Children's Term rider is the classic example: one premium covers all current and future children, and at the conversion age each child can convert - often to a multiple of the original term face amount, sometimes up to 5x - at standard rates regardless of the child's health. This is a frequent exam point because it pairs "no evidence of insurability" with "all children, one premium."

Watch these traps:

• The accidental death rider excludes death from illness, suicide, war, and (often) hazardous activities - candidates wrongly assume "any death" doubles the payout.
• The time limit (commonly 90 days) means a delayed death from an accident may not qualify.
• Guaranteed Insurability issues coverage at attained-age rates in the original risk class - not at the original premium and not re-underwritten.

Payor, Family Income, and Family Maintenance Riders

Several income-style riders are tested for how long they pay and from what date they measure. A Family Income rider uses decreasing term: on the insured's death, it pays a monthly income to the family from the date of death until the end of a fixed period measured from the policy's issue date (for example, a 20-year family-income period). Because the period is measured from issue, the longer the insured lives, the shorter the remaining income stream.

A Family Maintenance rider uses level term: it pays a monthly income for a full fixed period that begins at the insured's death (for example, 20 years starting whenever death occurs), making it more expensive than the family-income rider for the same income. The Payor Benefit, by contrast, is not an income rider at all - it simply waives premiums on a juvenile policy if the adult payor dies or is disabled.

Memorize: family income = decreasing term, measured from issue; family maintenance = level term, measured from death.