What Does a Benefit Builder Rider in Life Insurance Mean?

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When young people buy life insurance, they can't always afford the full amount of coverage they need. Or they may be thinking ahead to future years, when they may have children, or after a series of career advances and pay increases, when they will need a greater face amount in life insurance than they have now. However, a lot can happen between now and the time they want to increase their death benefit. Any medical issues may make it difficult or impossible for them to purchase additional life insurance. Many life insurance companies therefore provide a way for people to lock in the option to purchase more life insurance, regardless of their medical status.

Riders

A rider is an optional add-on to an insurance policy. These added benefits or provisions can be free of charge or purchased by paying an additional premium. Common life insurance riders include spousal coverage riders, child coverage riders, a rider guaranteeing the insurance company will pay premiums on your behalf if you are unemployed or disabled -- called "unemployment riders" and "waiver of premium" riders, respectively.

Benefit Builder Rider

In a life insurance context, the term "Benefit Builder Rider" refers to the option to purchase additional life insurance amounts in future years with no medical underwriting. For example, a company can offer a 10 percent increase in life insurance premiums each year for a number of years without evidence of insurability. The insured must pay additional premiums for the higher face amount. If the insured declines any of the offers, the rider becomes void and the insured will not receive future offers.

Other Options

Many companies offer variations on this rider, also called the "guaranteed purchase option." Frequently, companies will offer additional face amounts at regular intervals, say, every three years. Some policies allow for face amount increases upon life events, such as marriage and the birth or adoption of a child. Typically, you will pay additional premium for this rider. Alternatively, you can take the same dollars and purchase a higher death benefit on the base policy, or purchase an accidental death rider, which increases coverage for deaths due to accidents rather than illness.

Other Usages

Some companies may use the term "benefit builder period" as a euphemism to refer to an exclusionary period. Exclusionary periods are common among disability and health insurance policies to refer to the period of time between the day you purchase the policy (and begin paying premiums) and the day benefits become payable.

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