Question

6. Additional riders and benefits often can be added to a life insurance policy to provide greater protection to the insured. Describe each of the following riders and options and discuss who benefits, the insured, the insurer, or the beneficiary, from these provisions.

a. Waiver-of-premium provision

b. Guaranteed purchase option

c. Double indemnity rider

d. Cost-of-living rider

Answer 1

a. Waiver-of-premium provision: The waiver-of-premium provision states that if an insured person becomes totally disabled either from accident or from disease during the term of the policy and disability is permanent in nature in that case the premium payments on life insurance policy will be waived off for the whole period of disability. The insured person gets benefited from this provision.

b. Guaranteed purchase option: Guaranteed purchase option permits the policyholders (insured) to purchase specified amounts of additional insurance in specified time in future without evidence of insurability. The policyholder (insured person) gets benefited from this provision.

c. Double indemnity rider: Double indemnity rider also known as accidental death benefit and it provides double the face amount of the policy if the insured person dies because of an accident. The beneficiary of insured person gets benefited from this provision

d. Cost-of-living rider: A cost-of-living rider allows the policyholder to purchase one year term insurance equal to percentage change in consumer price index so that policyholder can be protected from the increases in the amount of insurance without required to provide the evidence of insurability. The policyholder (insured person) gets benefited from this provision.