Important Insurance Considerations

Monday, September 17, 2012

When you are shopping for insurance, looking more deeply into the available options can make a real difference in your coverage. For example, if you want a particular type of coverage from your policy but it is not included as written, you can ask your licensed insurance professional about add-ons called riders that tailor your policy to more thoroughly meet your needs.

Also called an endorsement, a rider is an addition or amendment to an insurance policy that provides additional coverage at an extra cost. Conversely, a rider might remove or limit certain coverages.

Following are some common riders:

Homeowner’s or Renter’s Insurance

Floater policy. This addition to your homeowner’s or tenant insurance policy provides a higher dollar amount of coverage for items such as heirloom jewellry and expensive electronics whose replacement value is limited in the original policy.

Full replacement cost (vs. actual cash value) rider. This rider ensures that if any of your possessions are stolen or damaged due to situations specified in your policy, you will be reimbursed an amount high enough to replace the items. Standard homeowner’s policies provide for reimbursement of the original purchase price minus depreciation – a value that often falls significantly below the cost to replace the items.

Life Insurance

Accidental death benefit. This rider offers an increased payout should the policyholder’s death result from an accident. It is sometimes called double indemnity, because it typically doubles the amount of the benefit paid.

Accelerated death benefit. Designed to ease the burden of costs associated with treating a terminal illness or securing long-term care, this rider enables the policyholder to collect all or some of his or her life insurance benefit while living.

Guaranteed insurability. This rider ensures that your term life insurance policy is renewable at the end of its term and that you need not provide additional proof of your insurability.

Car Insurance

Rental car. A rental car rider transfers the coverage you have on your car to a rental car you are driving. You may also add a rental reimbursement rider, which purpose is to cover the cost of renting a vehicle during the time your car is being repaired after an accident, or for a specified time period after it has been stolen.

Gap insurance coverage. 

This covers the cost of the difference between the amount you receive from your insurance policy after your car is totaled in an accident and the amount you still owe on your car loan.

Towing and labor. This rider pays the expenses incurred when your car breaks down and needs to be towed.

Health Insurance

Health insurance riders are often of the sort that remove coverage from a policy. For example, if you have a pre-existing medical condition, an insurance company might write your policy to include a rider saying that it will not cover expenses for that particular condition until a specified period of time, generally a year, has elapsed. This type of rider protects the insurance company from having to immediately start paying for pre-existing conditions.

Travel Insurance

Trip cancellation and interruption. This rider provides coverage for expenses if a trip is cancelled or cut short due to illness, injury or other emergency situation.

Golf/ski trip upgrade. This rider pays any prepaid greens or lift fees in the event of an emergency.

These examples offer only a glimpse into the types of coverage that can be added to your policies. For complete information about customizing your insurance plans, seek the advice of a licensed insurance professional.