What is a Guaranteed Insurability Rider?
A guaranteed insurability rider is a life insurance rider that allows the policy owner to buy additional life insurance coverage at specific later dates without submitting any additional evidence of insurability.
Why people add guaranteed insurability option riders
Your life insurance needs might change over the years. You might have additional children or start earning more money. At that point, you may want more life insurance to better reflect the needs of the people you will leave behind when you die.
Normally, buying new life insurance would require you to choose one of two paths. You could sit for an additional medical exam, which could turn up something that causes your additional coverage to cost more. Or you could choose life insurance that isn’t medically underwritten, like guaranteed issue life insurance, but it will cost more than coverage that comes with a medical exam.
At least, that’s the case without a guaranteed insurability option rider, also called a guaranteed purchase option rider. But with this policy add-on, you get the option to buy additional life insurance coverage at a later date without having to submit new evidence of insurability, like the aforementioned medical exam.
Guaranteed insurability option riders are optional. If you choose to add one to your life insurance policy, the cost of your coverage will go up.
With this rider in place, you get the choice to buy additional life insurance at specific points called option dates. Your life insurance company might set those option dates at predetermined intervals (e.g., every three years) or at life milestones, like the birth or adoption of a child.
Some of these riders will also cap the amount of life insurance and specify the type of policy (e.g., whole life) coverage you can buy at your option dates.
Most guaranteed insurability option riders expire at a certain point, like when the insured turns 40.
Who might add this rider
If you’re on a tight budget, adding this rider gives you the option to increase your life insurance coverage down the road, when you’ll be better able to afford it, with a rider that has a lower cost than adding the additional insurance now.
Guaranteed insurability option riders can also be a good fit for individuals with a family history of serious medical conditions. With this rider in place, you’ll be able to adapt your life insurance as you need through the years, even if you get a major diagnosis.
You can add guaranteed insurability riders to either term or permanent life insurance policies, although it might not make sense to add them to a term policy. That’s because term life insurance covers you for a set period of time only, so you may not need to consider any extra longer-term coverage.