Life Insurance 101: What is a spouse term rider?

What is a rider in insurance? Specifically, what is a spouse term rider, and how does it work?

A spouse term rider for life insurance essentially allows two people to share a life insurance policy.

When you’re engaged in advanced planning, you may find that you need to pair a spouse term rider, child rider, or others to fully protect your spouse and other dependents in the event of your passing.

Read on to learn more about the spouse term rider specifically and about life insurance riders in general.

If you need to see rates from top life insurance companies in your area, enter your ZIP code into our free quote tool above.

What is an insurance rider for life insurance?

An insurance rider is an add-on to a policy. It’s a provision that allows you to add life insurance benefits to your policy. It also permits you to restrict original coverage and amend policy terms. Insurance riders are helpful because you do not need to purchase a new insurance policy. However, riders, like many add-ons, may increase your insurance rates.

Some riders are more expensive than others, but most do not come at much of an additional cost to your insurance policy. No matter the type of policy, your insurer will itemize all of your riders so you can see how much they cost.

If you have a life insurance policy, it is best to add a rider as you purchase your policy. Be sure to go over all the riders your life insurance company offers, then choose the best options to help protect you and your beneficiaries. Adding riders later will likely trigger another underwriting process. Also, some insurance companies might not allow you to add riders later.

Life insurance riders can allow you to do the following:

• Convert a term life insurance policy to a permanent life insurance policy
• Increase your death benefit
• Borrow against your policy
• Pay for part of your health care
• Prevent your policy from lapsing after heavy borrowing
• Cover funeral costs
• Waive your monthly payments

In short, life insurance riders allow you to tailor your policy based on your needs and those of your beneficiaries. The spouse term rider is popular because it extends coverage for married couples. It also costs less than taking out a separate life insurance policy for the other insured person.

How does the spouse term rider for life insurance work?

The spouse term rider is a “first-to-die” provision you can add to your life insurance policy. It comes into effect when one spouse dies, providing some financial protection for the surviving spouse. You can add a spouse term rider to a whole life policy, but not a term life policy.

The spouse term rider differs from the survivorship — or “last-to-die” — policy. The survivorship policy covers two people but only pays out when both named insured pass away.

A spouse term rider adds value if both spouses earn income, but regardless, this rider will increase the overall value of your policy.

What is another rider you should add to your life insurance policy to protect your spouse?

Above, we briefly discussed how you could expand your life insurance coverage, but what are the specific riders you can add to your policy? Also, which ones work best with a spouse term rider?

Here are some rider types you might consider adding to your life insurance policy:

Accelerated Death Benefit

Life insurance companies often add the Accelerated Death Benefit rider automatically, meaning it’s free of charge. With this provision (which is also called the Living Benefit Rider), you may tap into your death benefit to pay for medical bills and other expenses if you receive a terminal illness diagnosis.

You may be able to take all or up to 80% of the benefit, and you don’t need to disclose how you use the funds. However, your beneficiaries may only take what is left of the death benefit after you pass away.

Accidental Death

An Accidental Death rider will pay your beneficiaries if you die in a tragic accident. Accidental death policies can take the place of regular life insurance policies, but the rider can supplement your existing policy. Some insurance companies may also allow you to add a Disability Income Rider to your policy.

Annuities

What is an annuity? The following definition comes from Investor.gov (managed by the Securities and Exchange Commission):

An annuity is a contract between you and an insurance company that is designed to meet retirement and other long-range goals, under which you make a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date.

There are three types of annuities:

• Fixed annuity. Your insurance company will pay you a specified interest rate during accumulation.
• Indexed annuity. With an indexed annuity, your insurance company will credit you with a return based on changes to an index, like the S&P 500.
• Variable annuity. You can purchase payments from different investment options, usually mutual funds. Your rate of return and the stipends you receive depend on your investment choices. The SEC regulates variable annuities because they are securities.

An annuity rider guarantees that your life insurance company will make payments to you at a specified date. You might have to wait for one year of accumulation at the earliest to start collecting annuities without a withdrawal charge.

If you die during the accumulation phase, an annuity ride is helpful to your beneficiaries if they can receive the accumulated value of your annuity.

Estate Protection

An estate protection rider protects you from additional state taxes if you have this protection while establishing a trust.

Guaranteed Insurability Benefit

This rider might be available to you if you’re younger than 40. You can purchase an additional permanent life insurance policy early if you get married or have a child. The rider will lapse on the issue date anniversary after you turn 40.

Long-Term Care

A long-term care rider allows you to dip into your death benefit if you need funds to pay for your long-term care. This rider is helpful for a disabled or chronically ill surviving spouse, and it is often cheaper than a standalone long-term care policy.

No-Lapse Guarantee

A no-lapse rider allows you to keep your policy in force, no matter how much you borrow from it. An extended version of this rider prevents the lapse of your policy, regardless of its net value.

Term Conversion

If you purchase a term life insurance policy, you may want to consider converting it to a permanent life insurance policy. You also might need to add a term life insurance conversion rider, but some insurance companies allow you to convert without a rider.

Check to see if your insurance company allows you to add a spouse when you convert your term life policy to a permanent one.

Waiver of Payments

Many life insurance companies will allow you to waive your monthly payments if you become disabled, but you might need to clear an elimination period. The trade-off is that the rider lapses when your policy expires or you reach a certain age.

Read more: Should I consider my spouse’s income when determining the coverage amount?

Spouse Term Rider for Life Insurance: The Bottom Line

As you can see, a spouse term rider offers extra protection for a surviving spouse, but it does cost extra to add it to your life insurance policy.

Of the other riders listed above, the most useful to tack on to your spouse term rider would ideally cover accidental death and the surviving spouse’s possible disability.

When purchasing a life insurance policy, weigh the costs of any riders against your current and future financial responsibilities. A spouse term rider might be worth the investment, especially when paired with other riders to increase the value of your life insurance policy.

We hope that this discussion of the spouse term rider for life insurance was helpful to you. When you’re ready to see rates from top life insurance companies in your area, enter your ZIP code into our free quote tool below.