Life Insurance Policy Riders for MASSMutual Employees

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According to research published on Forbes, long-term care expenses can be a significant concern for individuals nearing retirement. Fortunately, some life insurance policy riders offer solutions that effectively address this issue. Understanding the options available and considering your specific needs and financial goals can help you make informed decisions about your life insurance policies.

What Are Life Insurance Policy Riders?

A life insurance rider is a policy provision that modifies the policy's coverage or provides additional coverage. Due to the fact that these provisions were not included in the original policy, they must be appended to it. Riders are typically offered at the time of application, and any riders affixed to your life insurance policy will typically incur an additional premium. There are numerous varieties of horsemen. We recommend that our MASSMutual clients consult additional resources to determine the optimal policy provisions, alternatives, and riders for their unique circumstances.

Accelerated Benefits Rider

The accelerated benefits rider, also known as a living benefits rider, enables you to collect a portion of your death benefit prior to passing away in the event of a terminal illness, catastrophic injury, or permanent nursing home confinement. Due to your illness or injury, you may use the accelerated payment to cover medical expenses and care. If you work for MASSMutual and need long-term care, your policy may permit you to receive an advance to pay for skilled, intermediate, or custodial care.

Typically, you can receive an accelerated payment of at least 25 percent of the mortality benefit of your life insurance policy. The maximum quantity of your withdrawal may be affected by a number of variables, including your expected mortality, any outstanding policy loans, and administrative fees. Accelerated payments may be received in installments or as a lump quantity. The proceeds paid out under this provision will reduce the death benefit payable to your beneficiary.

If your benefit is paid out due to a terminal illness and your death is anticipated to occur within 24 months, this is considered a qualified accelerated death benefit. If this is the case, you may be exempt from paying income tax on your benefit.

Accidental Death Benefit Rider

This rider stipulates that if you, the insured, perish in an accident, your beneficiary will receive an additional death benefit. The additional benefit paid to your beneficiary is typically equal to the face amount of your life insurance policy, and is thus commonly known as double indemnity. Typically, this rider incurs an additional premium fee.

This form of rider requires the fulfillment of certain conditions in order to pay out the benefit. Different insurance companies have varying definitions of accidental fatality, so it is essential to comprehend this term within the context of your policy. In most cases, this rider applies only if you die in an accident or as a direct consequence of the accident within a specified period of time. The time allowed between the accident and the decedent's passing can differ, but is typically 90 days. Most accidental death riders exclude certain causes of death. Self-inflicted injuries, injuries sustained during military service during conflict, injuries sustained while committing a crime, and injuries sustained as a result of a riot or insurrection are typically excluded. Generally, the accidental death benefit would not be paid if you perished as a result of any of these circumstances.

Cost-Of-Living Rider

With this rider, you have the option to enhance your policy's death benefit to reflect increases in the consumer price index. However, if you choose to enhance your death benefit, your premium will typically increase as well. Your death benefit is unaffected by changes in the cost-of-living index.

Example(s): If the death benefit on your insurance policy is $100,000 and the cost-of-living index increases by 2%, you have the option of increasing the death benefit on your policy by 2% to $102,000.

Disability Income Rider

The disability income rider stipulates that if you become completely and permanently disabled, you will receive a regular monthly income. Typically, the monthly premium is proportional to the face amount of your life insurance coverage (e.g., $10 per month for every $1,000 of coverage). In addition, the majority of disability income supplements include a premium waiver clause (see below). Certain causes of disability are excluded from the coverage of the disability income amendment. Self-inflicted injuries, injuries sustained during military service during wartime, and injuries sustained while perpetrating a crime are typically excluded.

Be aware that not all insurance companies define completely and permanently disabled in the same manner. Ensure you understand the insurance company's definition of this term.

Long-Term Care Rider

The long-term care rider permits you to use the mortality benefit to pay for potential long-term care costs. Frequently, the policy will permit the long-term care benefit to transcend the death benefit. This may be accomplished by increasing the long-term care benefit by a multiple of the death benefit, such as two or three times the death benefit, or by extending the number of months over which you are eligible to receive long-term care benefit payments so that the total payments available exceed the death benefit. In either instance, however, payments for long-term care will reduce the death benefit dollar-for-dollar.

Guaranteed Insurability Rider

The guaranteed insurability rider allows you to purchase additional life insurance at specified times without providing confirmation of insurability to your life insurance provider. For instance, the rider may allow you to purchase additional insurance at 30, 35, and 40 years of age. With the majority of insurance providers, the guaranteed insurability clause restricts the purchase of additional insurance coverage until a certain age (typically 40). Typically, an additional premium is required to add this supplement to your policy. Your age at the time of purchase would determine the premium for any additional insurance coverage purchased under the guaranteed insurability rider.

This rider is especially beneficial if you belong to a high-risk group for a disease that could render you uninsurable.

Pay or Rider

If you have a life insurance policy on your child, you are typically the policyowner and pay the premiums. If you were to pass away, it is likely that premium payments would cease and the policy would lapse. By attaching a payor rider to a child's life insurance policy, you can ensure that the policy remains in effect in the event of this circumstance.

The payor rider stipulates that if the premium payer dies or becomes disabled prior to the child reaching a certain age (typically 21 or 25), the insurance company will waive the premiums until the child reaches that age. Because this rider exposes the insurance company to greater risk, you will be required to pay a higher premium to add it to your life insurance policy. Before an insurance company will typically issue a payor rider, the payor must provide evidence of insurability, as the payor is effectively being insured for the amount of premiums that may be waived.

Return-Of-Premium Rider

This provision stipulates that if you (the insured) pass away within a certain period of time after purchasing the policy, the insurance company will pay an amount equal to the total premiums paid in addition to the face value of the policy. Typically, the specified time period is 10 or 20 years. In effect, you are purchasing an increasing term rider (see below), and your premiums will consequently increase.

Term Riders

Riders for term insurance enable you to add term coverage to your permanent policy. In the event of your death during the term rider's duration, your beneficiary would receive the current face amount of the term coverage in addition to the death benefit on your permanent policy. There are numerous varieties of term riders, each of which is explained separately.

There are two essential regulations regarding term riders. First, they can only be utilized alongside permanent policies. In other words, a term policy cannot have a term clause attached. Second, the premium payment period of the permanent policy must be at least equal to the duration of the term rider.

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Level Term

Through the duration of a level term rider, the face amount of the term coverage remains constant. The term coverage expires when the rider expires. Generally, level term riders are written for 5, 10, 15, or 20 years. The face amount of term coverage is typically three to five times the face amount of your permanent policy, although this varies by insurance provider.

Typically, the cost of the level term rider is less than that of a distinct term insurance policy. The rider may only be utilized in conjunction with a permanent policy. Typically, you will pay a single premium that covers the cost of both the perpetual insurance and the term rider. Your premium will decrease when the rider expires to reflect the reduction in coverage. This form of rider may be suitable if you require additional life insurance for a limited time (e.g., until your children graduate from college).

Decreasing Term

With a decreasing term rider, the face amount of the term coverage begins at a certain level and then decreases at predetermined intervals over the duration of the rider. Upon expiration of the rider, the term coverage will be null. Similarly to level-term riders, decreasing-term riders are typically written for 5, 10, 15, or 20 years. The initial face amount of term coverage is typically between three and five times the face amount of your permanent policy, although this varies by insurance provider.

Example(s): You may acquire a 20-year, $10,000 decreasing term rider with a decreasing premium. The initial nominal value of the rider would be $10,000 and would gradually decrease over the rider's term, perhaps by $500 per year. At the conclusion of 20 years, the face value of the term rider will be negative.

When you add a decreasing term rider to your insurance policy, you typically pay a single premium that covers the cost of both the perpetual insurance and the term rider. Your premium will decrease when the rider expires to reflect the reduction in coverage. Because you may be tempted to cease paying premiums during the final years of the rider (because the coverage amount is so small), insurance companies have developed two variations of the decreasing term rider.

Decreasing Term with Accelerated Premiums

This is a variant of the diminutive phrase rider. Your insurance company may require you to pay the premiums for a decreasing term rider over a shorter period of time than the rider's complete life.

You could purchase a 20-year, $10,000 decreasing term rider for a term of 20 years. The insurance company may require you to pay the rider's premiums for the first sixteen years. The term coverage would remain (on a decreasing basis) for the final four years, but you would no longer be required to pay the rider's premiums.

Decreasing Term with Accelerated Benefit

This is another variant of the diminutive term rider. With this form of rider, the face amount of the term coverage would decrease normally over a specified time period. For the remainder of the tenure, the face amount would remain unchanged.

You could purchase a 20-year, $10,000 decreasing term rider for a term of 20 years. In the first 15 years, the nominal value may decrease until it reaches $2,000. The face value would remain at $2,000 for the remaining 5 years of the clause. Upon expiration of the supplement, the term coverage would terminate.

Increasing Term

With an increasing term rider, the face amount of the term coverage begins at a specific level and increases at predetermined intervals for the duration of the rider. The quantity of the increasing coverage may be tied to the accumulation of cash value or the total amount of premiums paid. Because the quantity of your insurance coverage increases annually, your premium payments will likely increase annually as well.

Waiver-Of-Premium Rider

The waiver-of-premium rider stipulates that if you become completely and permanently disabled, your life insurance company will pay your premiums. In order to determine whether a disability is total, the insurance company may consider whether you will be able to return to your previous occupation or engage in any profitable work. In order to determine whether the disability is permanent, the insurance company may require a 3-to-6-month waiting period following the injury, during which you are responsible for paying your own premiums. If the waiting period expires and you continue to be disabled, your condition will be deemed permanent. The premiums you paid during the waiting period will be refunded, and the insurance provider will commence making payments on your behalf.

It is essential to understand how your insurance company defines total and permanent disability because this term is defined differently by different insurance companies.

This rider will incur an additional premium because it exposes the insurance company to greater risk than if it were not included. While the insurance company is paying your premiums, your life insurance policy remains in effect as if you were paying them. If you have this form of life insurance policy, death benefits, cash values, and dividends will continue as long as your premium is paid. If, at some point in the future, you no longer meet the criteria for total and permanent disability, you will simply resume paying your premiums. You are not required to repay insurance premiums paid on your behalf.

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