Whatever type of policy (or policies) your family
decides to buy, it is important to keep your plan flexible. To do this,
you can add special clauses, known as riders, to your policy. Two of these clauses, the renewable and
convertible clauses available with term insurance, were described in the
paragraphs on term insurance. Three other widely available riders add to
the policy cost and may or may not be worthwhile for your situation.
A disability waiver clause
allows premiums to be waived if the policyholder becomes permanently disabled
or unable to work. If you are worried about disability, a disability insurance
policy that will help you pay all of your living expenses may be a better
buy than a disability waiver clause for your life insurance.
A guaranteed insurability clause allows the policyholder to purchase stated amounts of
additional insurance at specified times without passing a physical examination.
Consider whether you'll need to buy more insurance later; the need for life
insurance tends to decrease as time goes by. And if you do expect to need
more insurance, check that your option doesn't end after age 45 or 50, just
when you might develop health problems that could make it harder to buy
life insurance at reasonable rates.
An accelerated death benefits clause allows you, in certain circumstances, to tap the death
benefits of your policy before you die. For you to do that, most policies
require diagnosis of a terminal illness with a doctor's certification that
death is expected within 12 months. Some allow benefits to be used if you
have been in a nursing home for an extended period and are not expected
to leave.
Under this clause, the amount of the death benefit you can take is usually
limited (often to 25 to 40 percent). Some companies will deduct the amount
you receive, plus interest, from what your beneficiaries will receive after
your death. Others deduct the interest in advance, based on your life expectancy.
Then you get a smaller amount to use before your death, but the rest of
your death benefit stays intact for your beneficiaries.