What Is a Critical Illness Rider in Life Insurance?

What is a critical illness rider?

A critical illness rider is a life insurance add-on that lets you access part of your policy’s payout if you’re diagnosed with a serious health condition.

The definition of “critical illness” varies by insurer, but generally, this life insurance rider may kick in if:

  • You have a heart attack or stroke.

  • You’re diagnosed with cancer or kidney failure.

  • You require a major organ transplant.

Critical illness riders fall under the umbrella of life insurance living benefits. These features offer ways to take advantage of the money within your life insurance policy while you’re still alive.

Did you know…

A critical illness rider is different from an accelerated death benefit rider, which typically applies if you’re diagnosed with a terminal illness. If you’re in the market for life insurance, read the fine print of any riders before opting in.

How critical illness riders work

Like most life insurance riders, a critical illness rider needs to be added to your policy when you buy it. You can’t add it later, like when you’re diagnosed with a medical condition that meets your insurer’s criteria.

To activate a critical illness rider, you’ll need to provide proof of your serious health condition to your insurer. Once the use of your rider is approved, you’ll be able to access a percentage of your policy’s death benefit, up to a certain dollar amount. You’ll typically receive the payout in a lump sum, though some insurers will give you the option of receiving the money over time. You can spend the funds however you like — that may be on medical bills, everyday expenses or in-home care.

A critical illness rider offers you a path to secure extra money at a time when you may be facing medical costs and unable to work. The downside is that it reduces your death benefit.

Let’s say you have a $500,000 life insurance policy and a critical illness rider that allows you to access up to 25% of the death benefit (i.e. $125,000) if you’re diagnosed with a qualifying illness. If you were to activate this rider, your survivors would only receive $375,000 — rather than $500,000 — if you died while the policy was in force.

Alternatives to a critical life insurance rider

A stand-alone critical illness insurance policy is another option. This type of coverage provides you with cash if you become seriously ill, which may suit those who want extra financial security in case they get sick, but don’t want to reduce their life insurance death benefit. A stand-alone policy is also worth considering for those who want critical illness coverage and don’t need life insurance.

Learn more about life insurance riders

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