6 - 1 Special Policy Provisions and Riders  Term riders  Any type of term rider can be added to a base permanent policy  Increasing, decreasing or level term  Principal advantage – no separate policy is additional fees  Used when a temporary need above the base policy is required  Rider may be converted into a permanent forma coverage  Within a specified period  Without evidence of insurability  Check current term rates and level as well as the maximum guaranteed rate Chapter 6 Tools & Techniques of Life Insurance Planning

6 - 2 Special Policy Provisions and Riders  Limitation riders  War rider  Insurance will not be paid in the event of death due to war or acts of war  Aviation rider  Excludes payments of death benefits in the event of death as a results of a plane crash  Unless on a regularly scheduled commercial airline flight  Hazardous occupation or aviation rider  Companies will not issue policies to persons who engage in hazardous occupations  Exclude death benefits if death occurs as a direct result of practicing the occupation or engaging in the avocation Chapter 6 Tools & Techniques of Life Insurance Planning

6 - 3 Special Policy Provisions and Riders  Hazardous occupation or aviation rider  Examples – Hazardous Occupations  Astronaut  Skydiver  Skyscraper window cleaner  Examples – High risk avocations  Skydiving  Scuba diving  Race car driving  Limited benefit period rider  Death benefits limited to a return of premiums paid if death occurs within a certain period of time after the policy was issued Chapter 6 Tools & Techniques of Life Insurance Planning

6 - 4 Special Policy Provisions and Riders  Limited benefit period rider (cont'd)  Policy issued with this rider when insured has a pre-existing health condition  Cost of living riders  Term insurance rider that automatically increases coverage each year, or every few years  Increases based on the CPI  No evidence of insurability required  Insured billed for the increases in premium Chapter 6 Tools & Techniques of Life Insurance Planning

6 - 5 Special Policy Provisions and Riders  Accidental-death-benefit rider  Small additional premium provides a multiple of the face amount of coverage  If death occurs as a result of an accident  Accidental death clause  When death occurs as a result of an accidental bodily injury  Accidental means clause  Both the cause and result must have been accidental  Companies differ with respect to the minimum and maximum age of coverage Chapter 6 Tools & Techniques of Life Insurance Planning

6 - 6 Special Policy Provisions and Riders  Waiver of premium rider  Form of disability insurance  Base policy will continue inforce if the insured become disabled and incapable of premium payment  Period of coverage  Varies from company to company  If disability occurs prior to age 60 – some companies will waive premiums as long as disability continues  Some policies become paid up at age 65  If disability occurs after age 60- some companies will waive premiums until age 65 Chapter 6 Tools & Techniques of Life Insurance Planning

6 - 7 Special Policy Provisions and Riders  Waiver of premium rider (cont'd)  Waiting period  6 months for most companies. Others offer 4 months  Definition of total disability  Majority of carriers – Inability to perform one’s own job for two years, then any job for which reasonable suited by education training or experience  Minority of carriers – Inability to perform any job for which reasonably suited by education, training or experience  Few carriers – Inability to perform any job for pay or profit Chapter 6 Tools & Techniques of Life Insurance Planning

6 - 8 Special Policy Provisions and Riders  Disability income rider  Provides both a waiver of premium and supplemental income if the insured becomes totally disabled  Expressed as a percentage of the face amount payable monthly  Example – 1% with a $500,000 policy creates a $500 monthly benefit  Maximum limits on coverage  A waiting period of 6 months is typical  Premiums vary among carriers, but the stronger the definition, the higher the premium for this rider Chapter 6 Tools & Techniques of Life Insurance Planning

6 - 9 Special Policy Provisions and Riders  Guaranteed insurability option  Attached to permanent policies on younger insured  Option to purchase additional insurance at specified times without evidence of insurability  Traditional option dates – Every three years between ages 25 and 40  Option amount vary but minimums increases are $5,000 to $10,000  Accelerated death benefit  Part or all the face amount may be paid in advance on the diagnosis of certain dread diseases  Payouts vary among companies (25% to 80%) Chapter 6 Tools & Techniques of Life Insurance Planning

Special Policy Provisions and Riders  Accelerated death benefit (cont'd)  Once conditions necessary to trigger accelerated payments have been met  Insured can elect benefits as a single lump sum or as a series of installment payments Chapter 6 Tools & Techniques of Life Insurance Planning