5.2 Death Benefit and Insured Riders

Death Benefit and Insured Riders

A second family of riders adjusts who is covered, how much is paid at death, or when the death benefit is enhanced. These riders are added to the base policy and underwritten according to the additional life being insured or the additional risk being assumed. The exam expects you to distinguish among term riders, guaranteed-insurability features, and benefit multipliers.

Term Riders on a Base Policy

A term rider layers level term coverage on top of a permanent base policy. Common forms:

• Spouse/Other-Insured Term Rider — covers a spouse or another family member as level term, usually convertible to permanent coverage and expiring at a stated age (e.g., 65). It is cheaper than a separate policy and underwritten on the added insured.
• Children's Term Rider — covers all eligible children under one flat premium, regardless of the number of children, including children born or adopted later. Coverage is a small level amount (e.g., $10,000 per child) and is typically convertible to permanent coverage at the child's adulthood without evidence of insurability, often at up to 5x the rider amount.
• Family Rider / Family Income — packages coverage on spouse and children, or pays a monthly income to survivors for a set period after the insured's death.

Guaranteed Insurability Rider (GIR)

The Guaranteed Insurability Rider lets the insured purchase additional permanent coverage at specified future dates or ages without proving insurability. Typical option dates fall every three years (ages 25, 28, 31…) or at life events such as marriage or the birth of a child. The new coverage is issued at attained-age rates but with no new medical underwriting, so a person who becomes uninsurable can still grow protection. This is the rider that protects future insurability, not future premium.

Accidental Death Benefit (ADB) — "Double Indemnity"

The Accidental Death Benefit rider pays an additional amount (commonly equal to the face, hence "double indemnity," sometimes triple) if death results from an accident, usually within 90 days of the accident and before a stated age (often 65 or 70). Deaths from illness, suicide, war, or aviation (other than as a fare-paying passenger) are excluded.

Worked example. A $250,000 policy with a double-indemnity ADB rider. The insured dies in a covered auto accident within 90 days. The beneficiary receives the $250,000 base plus an additional $250,000 ADB, for $500,000 total. If the same insured died of cancer, only the $250,000 base is paid.

Return of Premium and Cost-of-Living Riders

• Return of Premium (ROP) Rider — increasing term coverage equal to the sum of premiums paid, so the death benefit is the face amount plus all premiums returned. It is a term rider whose face grows over time.
• Cost-of-Living (COLA) Rider — periodically increases the face amount in line with an inflation index (e.g., CPI) without new underwriting, protecting purchasing power. The premium increases with each adjustment.

Distinguishing the Two ADBs

A classic exam trap: Accelerated Death Benefit (living benefit, terminal illness) versus Accidental Death Benefit (extra payment for accidental death). Both abbreviate to ADB. Read the trigger: "terminal illness / chronic illness" → Accelerated; "died in an accident within 90 days" → Accidental.

Accidental Death and Dismemberment Variations

Many insurers offer an Accidental Death and Dismemberment (AD&D) version of the accidental rider that also pays for certain non-fatal accidental losses. The full benefit, called the principal sum, is paid for accidental death or for losses such as both hands, both feet, or sight in both eyes. A capital sum — usually one-half the principal — is paid for a single loss such as one hand, one foot, or sight in one eye.

Worked example. An insured carries a $100,000 AD&D rider. An accident costs the insured the sight in one eye. The rider pays the capital sum of $50,000 (one-half the principal sum). If the same accident had caused loss of both feet, the full $100,000 principal sum would be paid.

The standard exclusions repeat across accidental riders: death or injury from disease or bodily infirmity, suicide or intentional self-injury, war, illegal activity, and aviation other than as a fare-paying passenger. The accidental death must also occur within the time limit — usually 90 days of the accident — and before the rider's expiry age, commonly 65 to 70.

Note that these riders pay in addition to the base death benefit; they do not reduce it the way a living benefit does. That is why a $250,000 policy with a double-indemnity rider pays $500,000 for a covered accidental death but only the $250,000 base for death from illness. Producers should set client expectations carefully, because accidental death accounts for a small share of all deaths, so the rider is inexpensive but rarely triggered.