Wanna know about Life insurance rider types and differences
by Guest » Mon Dec 28, 2009 07:09 am
Someone please tell me about the different types of life insurance riders. Are all LI riders alike?
Total Comments: 42
Posted: Mon Jan 04, 2010 11:35 am Post Subject:
Following an issuance of the initial policy, if the policy holder becomes uninsurable, he'd no more be eligible for additional insurance protection. Under such circumstances, these guaranteed purchase options or the guaranteed insurability riders would come to a great help for the policy holders.
Posted: Mon Jan 04, 2010 04:43 pm Post Subject:
It depends on the situation on whether a rider makes sense or not. For instance, it doesn't seem to make much sense to put the waiver of premium on a cheap term policy while it does often make sense to put it on an expensive whole life policy.
I use GIO on children's policies because it can give a child the ability to purchase $1,000,000 of coverage as an adult. Howver, I rarely put it on an adult policy because it's often just as expensive as simply putting a term rider on the policy. Why give somebody the right to purchase more coverage when they can simply purchase more coverage for around the same cost?
Posted: Mon Jan 04, 2010 11:14 pm Post Subject:
Why give somebody the right to purchase more coverage when they can simply purchase more coverage for around the same cost?
Because they can purchase permanent insurance. However this question is missing the point. It wouldn't make sense purchase GIO if I needed additional insurance right now, it would make sense to purchase additional insurance, which I believe if the point you were making.
This, however, if not the point of GIO. GIO is a plan for future insurance needs that could be anticipated, I'm young and expect you have children in a few years, and the unanticipated e.g. we have another kid we didn't plan on having, spouse died and now I've think I need more insurance incase something happened to me (weird one I know but it happens a lot), and/or got a large promotion/new better paying job/make a lot more money than I ever thought I would need to buy more insurance. The Ormans and the Ramsey's of the world would tell us that last scenario simply requires some good investing and self insurance. It's next to impossible (although I'll admit not completely impossible) to self insure your future income stream. You'd need to somehow come up with the net present value of your future earnings. I know the so called "theory" of decreasing responsibility talks about the ability to do this as you get to the tail end of your working years when your level term insurance expires so you won't need it any more blah blah blah! I've never known anyone to get that to work correctly.
An old Massmutual tag line sums this whole conversation up really well. "You can't always predict, but you can always prepare."
Posted: Mon Jan 04, 2010 11:40 pm Post Subject:
I'm talking about a term rider that is convertible. A term rider on a permanent policy is dirt cheap. It can be as cheap as the GIO.
Posted: Tue Jan 05, 2010 03:44 am Post Subject:
Perhaps, but this isn't my experience. Quarter of a million dollars in face amount for a 35 year old male preferred with a GIO of the same face amount that has 5 option dates costs $270 per year.
The term piece would be $1,250,000.
I have two options to do what you're suggesting, YRT term rider, which is $800 per year and a blended term whole life policy, the term portion of that costs $701 per year.
Posted: Tue Jan 05, 2010 07:44 am Post Subject:
You could go either way on the GIO/GPO rider decision -- term or perm/CV additions -- depending on the base policy and what the insurer makes available. Obviously, one would not put permanent additions on a term base.
The value of the rider, however, is the GUARANTEE -- no future need to prove insurability. Without the guarantee, one must qualify repeatedly to obtain additional coverage. If the potential need (bigger family, greater financial responsibilities, etc) to purchase additional coverage is the driving factor, intervening events (heart attack, cancer, etc) may foreclose one's ability to obtain the increase. With the rider, one could literally be on their death bed when an option date arrives, and the increase would have to be granted if requested.
Posted: Tue Jan 05, 2010 08:56 am Post Subject:
Without the guarantee, one must qualify repeatedly to obtain additional coverage.
Does it mean that we'd need to prove insurability each time additional coverage is applied for.
With the rider, one could literally be on their death bed when an option date arrives, and the increase would have to be granted if requested.
Yeah, I do understand that such a thing is very much possible logically. But, have you come across such instances in real life? I'd be curious to know of such instances, if you'd care to share over here.
Posted: Tue Jan 05, 2010 10:03 am Post Subject:
BNTRS, every situation is different. What company will allow a 35 year old to do what you are saying? Those are big purchase options at a small price.
Keep in mind that they aren't very valuable if the client can't afford it. If those options all get used, his insurance costs will be about 8x higher than what he's currently paying.
Posted: Tue Jan 05, 2010 09:43 pm Post Subject:
How am I realistically ever going to know that he/she cannot afford the future increases? We don't know, that's what insurance is all about. If they only ever exercised one of those options, but got preferred instead of standard due to changes in health it would have been well worth it.
The company that I used to quote that, Guardian, will also exercise all those options and waive the premium if the insured has waiver of premium and becomes permenantly disabled.
MAX,
The GIO doesn't add the policy to the current coverage, it makes possible the ability to purchase an entirely new policy. Yes, actually you could add the option to purchase permanent insurance to a term product,it makes sense in some cases, and I've done it before.
Posted: Tue Jan 05, 2010 10:05 pm Post Subject:
BNTRS, I'm doubting what you are writing because it's very different than Mass Mutual or Northwestern Mutual. Neither of those companies will let someone option $250,000 at a pop. Usually, it will be closer to about $125,000. Also, typically, the purchases would be at ages 22, 25, 28, 31,34, 37, 40, and 43 or something similar. Are you POSITIVE that a 35 year old who buys insurance with Guardian can get a GIO that will allow them to purchase an additional $1,250,000 of coverage? If so, thank you for this very valuable piece of information.
With a 35 year old, you should typically have a good idea of what may be affordable in the future.
Posted: Mon Jan 04, 2010 11:35 am Post Subject:
Following an issuance of the initial policy, if the policy holder becomes uninsurable, he'd no more be eligible for additional insurance protection. Under such circumstances, these guaranteed purchase options or the guaranteed insurability riders would come to a great help for the policy holders.
Posted: Mon Jan 04, 2010 04:43 pm Post Subject:
It depends on the situation on whether a rider makes sense or not. For instance, it doesn't seem to make much sense to put the waiver of premium on a cheap term policy while it does often make sense to put it on an expensive whole life policy.
I use GIO on children's policies because it can give a child the ability to purchase $1,000,000 of coverage as an adult. Howver, I rarely put it on an adult policy because it's often just as expensive as simply putting a term rider on the policy. Why give somebody the right to purchase more coverage when they can simply purchase more coverage for around the same cost?
Posted: Mon Jan 04, 2010 11:14 pm Post Subject:
Why give somebody the right to purchase more coverage when they can simply purchase more coverage for around the same cost?
Because they can purchase permanent insurance. However this question is missing the point. It wouldn't make sense purchase GIO if I needed additional insurance right now, it would make sense to purchase additional insurance, which I believe if the point you were making.
This, however, if not the point of GIO. GIO is a plan for future insurance needs that could be anticipated, I'm young and expect you have children in a few years, and the unanticipated e.g. we have another kid we didn't plan on having, spouse died and now I've think I need more insurance incase something happened to me (weird one I know but it happens a lot), and/or got a large promotion/new better paying job/make a lot more money than I ever thought I would need to buy more insurance. The Ormans and the Ramsey's of the world would tell us that last scenario simply requires some good investing and self insurance. It's next to impossible (although I'll admit not completely impossible) to self insure your future income stream. You'd need to somehow come up with the net present value of your future earnings. I know the so called "theory" of decreasing responsibility talks about the ability to do this as you get to the tail end of your working years when your level term insurance expires so you won't need it any more blah blah blah! I've never known anyone to get that to work correctly.
An old Massmutual tag line sums this whole conversation up really well. "You can't always predict, but you can always prepare."
Posted: Mon Jan 04, 2010 11:40 pm Post Subject:
I'm talking about a term rider that is convertible. A term rider on a permanent policy is dirt cheap. It can be as cheap as the GIO.
Posted: Tue Jan 05, 2010 03:44 am Post Subject:
Perhaps, but this isn't my experience. Quarter of a million dollars in face amount for a 35 year old male preferred with a GIO of the same face amount that has 5 option dates costs $270 per year.
The term piece would be $1,250,000.
I have two options to do what you're suggesting, YRT term rider, which is $800 per year and a blended term whole life policy, the term portion of that costs $701 per year.
Posted: Tue Jan 05, 2010 07:44 am Post Subject:
You could go either way on the GIO/GPO rider decision -- term or perm/CV additions -- depending on the base policy and what the insurer makes available. Obviously, one would not put permanent additions on a term base.
The value of the rider, however, is the GUARANTEE -- no future need to prove insurability. Without the guarantee, one must qualify repeatedly to obtain additional coverage. If the potential need (bigger family, greater financial responsibilities, etc) to purchase additional coverage is the driving factor, intervening events (heart attack, cancer, etc) may foreclose one's ability to obtain the increase. With the rider, one could literally be on their death bed when an option date arrives, and the increase would have to be granted if requested.
Posted: Tue Jan 05, 2010 08:56 am Post Subject:
Without the guarantee, one must qualify repeatedly to obtain additional coverage.
Does it mean that we'd need to prove insurability each time additional coverage is applied for.
With the rider, one could literally be on their death bed when an option date arrives, and the increase would have to be granted if requested.
Yeah, I do understand that such a thing is very much possible logically. But, have you come across such instances in real life? I'd be curious to know of such instances, if you'd care to share over here.
Posted: Tue Jan 05, 2010 10:03 am Post Subject:
BNTRS, every situation is different. What company will allow a 35 year old to do what you are saying? Those are big purchase options at a small price.
Keep in mind that they aren't very valuable if the client can't afford it. If those options all get used, his insurance costs will be about 8x higher than what he's currently paying.
Posted: Tue Jan 05, 2010 09:43 pm Post Subject:
How am I realistically ever going to know that he/she cannot afford the future increases? We don't know, that's what insurance is all about. If they only ever exercised one of those options, but got preferred instead of standard due to changes in health it would have been well worth it.
The company that I used to quote that, Guardian, will also exercise all those options and waive the premium if the insured has waiver of premium and becomes permenantly disabled.
MAX,
The GIO doesn't add the policy to the current coverage, it makes possible the ability to purchase an entirely new policy. Yes, actually you could add the option to purchase permanent insurance to a term product,it makes sense in some cases, and I've done it before.
Posted: Tue Jan 05, 2010 10:05 pm Post Subject:
BNTRS, I'm doubting what you are writing because it's very different than Mass Mutual or Northwestern Mutual. Neither of those companies will let someone option $250,000 at a pop. Usually, it will be closer to about $125,000. Also, typically, the purchases would be at ages 22, 25, 28, 31,34, 37, 40, and 43 or something similar. Are you POSITIVE that a 35 year old who buys insurance with Guardian can get a GIO that will allow them to purchase an additional $1,250,000 of coverage? If so, thank you for this very valuable piece of information.
With a 35 year old, you should typically have a good idea of what may be affordable in the future.
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