When shopping for insurance, you'll generally have the choice between several predefined plans, usually with varying levels of coverage. One plan may have higher deductibles or lower limits than another, but there will generally be little variation between the policies, and standard policies often will not cover everything you'd like them to. In order to add additional protections to your policy, you may need to purchase an insurance rider.
How an Insurance Rider Works
An insurance rider is a type of specialized coverage that can be purchased in addition to your standard policy. It's not a policy in its own right and cannot be purchased independently, but it can be added to your insurance to protect against specific perils.
They're most helpful in situations where you may be concerned about a particular peril that is not normally covered by your insurance. By adding the rider, you pay a little extra for the peace of mind given by that added amount of protection.
Insurance riders usually present an area of increased risk or cost for the insurer. For example, a sound system rider can be added to auto insurance to pay for expensive aftermarket stereo equipment. This rider exists because the cost of such sound equipment is much higher than the cost of a standard car stereo, so it would cost significantly more to replace. To offset these expenses, insurance companies charge extra by offering a rider. If you opt not to get the rider, your premiums will be lower but there may be gaps in your coverage.
Types of Insurance Riders
Each type of insurance has its own riders that can be added. Not every rider is available for all policies and providers, and the list below is by no means exhaustive, but it should give you an idea of the types of riders that might be available under each type of insurance.
- Scheduled personal property: An SPP policy is designed to cover a specific valuable item within your home, such as a piece of jewelry or original artwork. You'll need to purchase a separate SPP rider for every valuable item you own. Each item will be insured at its appraised value.
- Secondary premises: If you have a vacation home, you may be able to insure it by taking out a rider on your homeowners policy rather than purchasing a separate policy for the additional property.
- Home business coverage: Most homeowners insurance policies do not extend to cover elements of home businesses. A home business rider can provide better liability coverage and extra protection for your business-related property.
- Accelerated death benefits: If you are diagnosed with a terminal illness or require long-term nursing care, this rider will allow you to tap into your life insurance benefits before death in order to pay these expenses.
- Accidental death benefits: This rider allows your beneficiaries to receive a higher benefit if you pass away in an accident rather than from illness. In some cases, called double indemnity policies, the rider is the same as your existing benefit, essentially giving double the pay-out to accident victims.
- Guaranteed insurability: This rider allows you to purchase additional insurance or extend your current policy at a future date without needing to obtain additional medical exams or otherwise qualify for new insurance.
- Waiver of premium: This is a common rider for life insurance. It allows you to pay premiums out of the value of the policy itself rather than your own pocket if you become disabled or otherwise unable to pay the premiums on a regular basis.
- Roadside assistance: Most policies cover towing for vehicles that are damaged in a covered loss, but roadside assistance coverage allows you to receive coverage for towing due to any other reason, like mechanical failure.
- Replacement coverage: Auto insurance generally pays for the actual cash value of the vehicle when it's totaled in an accident. You can, however, purchase a rider that will allow you to buy a replacement vehicle of the same year, make and model. Some insurers even offer an upgrade to a newer car model if certain conditions are met.
- Sound system coverage: If you have after-market stereo equipment in your vehicle, it may not be covered by standard auto insurance. A sound system rider provides protection for this equipment.
- Rental reimbursement: If your vehicle is disabled as a result of an auto accident, rental reimbursement coverage pays for alternative transportation until the car is repaired or replaced.
At one time, it was common for insurance policies to exclude certain procedures, which could only be covered by purchasing a rider. A maternity rider, for example, would be added to the insurance of a woman planning to get pregnant, but pregnancy coverage would not be available on other types of plans. Similarly, riders were available to cover preexisting conditions that might otherwise be excluded from the policy. As of 2014, under the Affordable Care Act, such exclusionary riders are no longer permitted.
Should You Add a Rider?
Because insurance riders generally represent an increased risk to the insurer, they're frequently quite pricey. It's important to consider your needs and determine whether the additional coverage would really be worthwhile or if you'd rather take the risk and pay for the expense out of your own pocket.
Perhaps the best way to decide on a rider is to discuss your options thoroughly with your insurance agent. By explaining your needs and budget, you can get a clearer idea of what a rider may cost and whether it's actually the most effective use of your insurance dollars. In many cases, it may be better to put that money aside into an emergency savings account instead of paying it into premiums for coverage that may never be used. In other cases, a rider is well worth its cost for the peace of mind it may give.