What is a Term Life Insurance Rider?

A term insurance rider adds temporary coverage to a permanent life insurance policy for a set amount of time, usually 10, 20 or 30 years. Life insurance riders offer additional coverage to complement standard policies and the options vary among insurers.

Term life riders can typically be added to permanent policies, such as whole life insurance or universal life insurance, often for an extra fee. The payout from a term life rider can be used to cover temporary or short-term costs in the event of your death. For example, you may want to add a term life rider that lasts as long as your mortgage or until your children finish college so these larger expenses are covered if you die unexpectedly.

Let’s say you take out a permanent life insurance policy worth $100,000, which may be sufficient to cover your beneficiaries if you die after retirement or with fewer financial obligations. Adding a 20-year term life insurance rider worth $100,000 could help fulfill financial needs and bridge gaps if you die within that time frame.

It’s often cheaper to add a term life insurance rider to a permanent policy instead of buying a term policy now and a permanent life insurance policy later.

There are two main types of life insurance: term life insurance, which offers coverage for a fixed number of years and pays out if you die during the “term,” and permanent life insurance, which typically covers you for your entire life.

While the names can be confusing, a term life rider generally refers to temporary coverage added to a permanent life insurance policy. Some companies allow you to add a term life rider to a term life insurance policy to bump up your coverage even more, though this is rare.

Some of the most common life insurance riders include:

Assessing your needs can help you determine whether you need a permanent life insurance policy with a term life rider, or a different type of life insurance altogether. For many people, a standalone term life insurance is enough to provide their beneficiaries’ with a financial cushion.

Since the premiums for a term policy are usually cheaper than a permanent policy, you could save and invest the difference to plan ahead for yourself or your loved ones after the term ends. If you want to leave the option for permanent coverage open, consider adding a term conversion rider to your term life policy. This allows you to upgrade your policy to a permanent life insurance policy before a deadline specified by your insurer.