Life insurance products can be confusing, but very important when protecting your families future and your personal estate. Attached to each life insurance policy are riders, options, exclusions, provisions and waivers. A rider is a separate document that “rides” or attaches to the main life insurance policy that gives special provisions that provide benefits or make adjustments to the policy.
In most cases with juvenile life insurance policies, a parent or guardian is the policy owner that pays the premium and coverage, while the child is the insured. A payor rider on a policy will cease premium payments of premium if the parent (policy owner) becomes disabled or dies. The payments will become waived by the insurance company until the child has reached a certain age, usually ages 21 or 25.
A payor rider will apply when the payor dies or becomes disabled before the insured has reached an age that is stated in the policy, the insurance policy will still remain in force. This can be applied to death only or death and disability.
The payor rider guarantees the possibility that the juvenile insurance policy will achieve what it’s policy owner wanted it to do, even if the parent/policy owner isn’t there to see it happen. If the parent isn’t able to pay premiums, it still guarantees that the child will have an insurance policy.
This rider does expose the life insurance company to a greater risk, so they must charge higher premiums for the payor rider. The insurance company will manage these risks and pool all their policies together and determine the proper amount to charge to add the rider on. As with any other business, the insurance company is trying to make money. They employ actuaries that complete complex algorithms to arrive at figures which minimize risk, make the company money and while still being competitive in pricing against other insurance companies.
When the policy owner applies for the payor rider, they must prove that they are qualified for the benefit of the rider. This is done in many aspects including medically, morally, and financially. Before the insurer will include a payor rider with the juvenile policy, the policy owner or payor, must provide proof of insurability.
When applying for life insurance policies, make sure that your insurance agent explains all aspects of the policy thoroughly. An applicant will also have a “free look” at all policies, in which it gives the policy owner a time to review the agreement. Many riders can be included to polices that can be beneficial which could be added on for free or have an additional charge.