Personal Finance Essentials
Riders and Features to Avoid
Life Insurance > Riders and Features to Avoid
Accidental Death Benefit
An accidental death benefit rider – sometimes called double indemnity – pays an additional death benefit if you die as the result of an accident rather than illness. It sounds like extra protection, but it’s an absurd product. Death is death. Whether you die in a car accident or from cancer, your family’s financial need is the same. Don’t pay extra for coverage that only applies to certain causes of death. Get the coverage amount you need and skip the rider.
The same logic applies to cancer life policies and similar products that pay only if you die from a specific cause. Life insurance should cover your death itself, not merely certain forms of it.
Life Insurance on Children
Insurance companies routinely market life insurance policies for children, and new parents are often targeted with pitches warning them to get coverage while their child is young and healthy. Don’t be misled.
Life insurance replaces a financial loss. In most cases, the death of a child – however tragic – does not create a financial loss for the family. Children don’t typically earn income that the household depends on. Buying a separate policy on a young child is an inefficient use of money.
If you want protection against funeral expenses, the right solution is to add a child rider to your own policy. This rider can cost as little as $50 per year for meaningful coverage – far less than a standalone children’s policy. Beyond that, your money is better directed toward coverage on yourself.