What Is A Rider In Insurance?

Insurance options are like menu items at a restaurant. When you order an entree, it comes with certain predetermined items, like a steak that comes with a side of mashed potatoes and steamed veggies. If there’s something you want on the menu that’s not included with the entree you want, you’ll have to order it a la carte.

Insurance riders are like a la carte menu items. A standard insurance policy – whether it’s homeowners, renters, life or another type of insurance – comes with certain basic protections, but may not provide the exact form of coverage you’re looking for. That’s where riders come in.

An insurance rider (also called an insurance endorsement) is an add-on that policyholders have the option to use to supplement the coverage their standard policy offers.

Riders can be used to increase the amount of coverage a policyholder receives or insure additional items or situations that aren’t covered by their main policy.

Riders can help an insurance policy cater more specifically to a policyholder’s individualized needs.

When you purchase an insurance policy, your contract will stipulate the amount of coverage you’ll get, how much you pay for that coverage and coverage limits. For example, your insurance policy may provide you coverage up to a certain dollar amount. If you find that having a larger amount of coverage makes more financial sense for you, you can talk to your insurance company about adding a rider to your policy that increases your coverage at an additional cost to you.

If you want to add a rider onto a current insurance policy, you can simply contact your insurance provider and tell them you’d like to add to your current coverage. If you’re shopping for a new policy, you can mention during the application process if you have additional items you’d like covered, or if you’d like more coverage.

If you have extensive insurance needs – say, for example, you have a large, priceless art collection – you may want to talk to your insurance agent, a financial advisor or other financial professional about what options make the most sense for you.

Depending on what type of insurance you’re dealing with, there are many different types of riders you can get added to your policy. Let’s take a look at some of the more common riders people utilize.

Homeowners Insurance

Having a homeowners insurance policy is vital for every homeowner, but the standard policy might not be adequate for your needs.

For example, if you live in an area that’s prone to earthquakes, you might be able to have your insurer add an earthquake rider onto your policy, as opposed to purchasing a completely separate earthquake insurance policy.

Another common type of rider or endorsement for homeowners insurance is what’s known as “scheduled personal property” coverage. Under a normal homeowners insurance policy, certain types of items have limits for the amount of coverage your insurer will provide on them. As an example, let’s say your homeowners insurance policy grants up to $100,000 in personal property coverage, but states that jewelry is only covered up to $1,500. If you have jewelry that exceeds this limit that you’d like your homeowners insurance policy to provide coverage for, you would ask your insurance agent about adding a scheduled personal property rider to your policy to ensure that those pieces are covered.

Homeowners insurance companies can provide riders for a variety of situations, including things like sewer backups or even identity theft.

Life Insurance

If you want more extensive coverage than what a typical life insurance policy provides, you may want to ask your life insurance agent about riders that can potentially give you access to funds in circumstances other than your death.

For example, an accelerated death benefit is a rider that lets you receive a portion of your payout before you’ve passed away. This rider can help those who have been diagnosed with terminal illnesses by allowing them early access to their money so they can cover medical expenses.

Health Insurance

Health insurance works differently than other types of insurance, and has changed quite a bit since the Affordable Care Act was enacted. In the world of health insurance, exclusionary riders limit the amount of coverage you can get for certain conditions. However, the ACA made it a law that insurance providers can’t refuse to cover you or charge you more due to a preexisting condition. Thanks to the ACA, exclusionary riders are no longer permitted in health insurance plans.

Auto Insurance

Your auto insurer may offer some beneficial additions to your policy that could end up saving you money in the long run. If you’re interested in supplementing your coverage, be sure to reach out to your auto insurance agent.

One type of auto insurance rider you may come across is accident forgiveness. Getting in a car accident can cause your insurance costs to increase significantly. Having an accident forgiveness rider can provide responsible drivers with a bit of a safety net by providing assurance that the insurer won’t increase their rates after an accident. Typically, these types of riders only apply to a single accident; once you’ve used your accident forgiveness rider, it won’t apply to future crashes.

Another popular car insurance endorsement is rental reimbursement. With this type of rider, an auto insurer provides reimbursement for the cost of renting a car while the policyholder’s car is being repaired. Typically, reimbursement is only available if the repair is due to a covered claim.

Before adding a rider to your insurance policy, there are a few important factors to think about first.

Their Financial Impact

While it’s possible for insurance riders to save you money in the long run, you should also consider whether the cost of an increased insurance premium is affordable and worth it for you.

If you’re considering a particular rider, do the math to figure out the long-term costs of a premium increase and consult your own finances to determine whether you could afford to go without the supplemental coverage.

Your Coverage Limits

Before considering a rider, make sure you understand the full extent of your insurance plan as it currently stands. Once you know exactly the ways in which you’re already covered, it will be easier for you to spot areas where you’re lacking coverage that you might one day need.

Likelihood Of Covered Events

It’s always good to be prepared, but depending on your circumstances, some situations might be so unlikely that you don’t think extra coverage is worth it. For example, you might decide to forgo earthquake coverage if you live in an area that’s never experienced a major earthquake.

However, you should be very careful about deciding on what coverage you need based on the likelihood of certain events happening. Just because something isn’t likely to happen doesn’t mean it won’t, and forgoing coverage can be a huge financial risk.

Riders can give you more extensive insurance coverage and make you feel more financially secure, but that security comes at a price. Be sure to learn your insurance policies inside and out before choosing to add a rider to them.