What is a Term Rider? - Insurance Rider Series 2
This is week two of our series of posts all about insurance riders. Last week we released a post about insurance riders in general.
This will be focused on term riders. What they are, why you might need one, and what terms are available.
What is a term rider?
A term rider adds extra term life coverage to your base policy.
This add-on is designed to provide additional temporary life insurance cover. A term rider is ultimately a term life insurance policy with a much shorter-term length than the base policy.
These are often added to permanent life insurance policies.
These types of riders are especially useful when someone is starting off their career and their liabilities are high, while their assets are still low.
A policyholder can stack up many term riders to ensure they have more protection when they are younger.
The coverage amount reduces as different term riders slowly start expiring over the years.
As the policyholder becomes more financially independent, their life insurance policy will only provide the coverage they truly require.
Using the term rider in this manner is referred to as “laddering”.
This approach is useful in situations when more protection is needed in the early part of someone’s life insurance policy term.
For instance, they may need a higher death benefit amount when they have a high mortgage balance.
Why use term riders?
Another reason why a person might want to add a term rider to their policy is if they have small children.
A term rider can provide additional coverage until their children reach adulthood.
Which helps ensure that their family is financially protected during the critical years when the children are dependent on them.
A term life insurance rider can also be a cost-effective way to increase coverage.
Permanent life insurance policies can be expensive, and adding a term life insurance rider can provide additional coverage without the high cost.
This can be particularly beneficial for those who have limited budgets or are just starting their careers.
As mentioned previously, term riders last for a shorter period than the base policy. A Term 10 rider or even a Term 20 rider to a 30-year term policy, or a permanent policy.
We do this with our leveraged life insurance, which will usually have a base amount of whole life or universal life and then add a big amount of term rider because that will provide the correct amount of insurance needed, and allows a client to put a lot of cash into it. And grow it.
Series
What are Insurance Riders? - Insurance Rider Series Part 1
What is a Critical Illness Rider? - Insurance Rider Series 3
What is a Guaranteed Insurability Rider? - Insurance Rider Series 4
What is a Disability Waiver of Premium Rider? - Insurance Rider Series 5
What are Child and Spousal Riders? - Insurance Rider Series 6
What is a Return of Premiums Rider? - Insurance Rider Series 7
What are Paid-Up Addition Riders? - Insurance Rider Series 8
Next Steps:
We are Canadian experts in setting up strong life insurance plans for business owners, incorporated professionals, investors and their families. Where we shine is in the proper structure of your life insurance portfolio for maximum wealth protection, tax savings, business growth and legacy.
If this sound good to you, we're happy to meet and see if we can be a good fit to work together. Schedule a no-pressure Discovery meeting with one of our advisors using the button below.
Related Insights
OpCo to Legacy: The Estate Tax Trap
If your business owner client passed away tomorrow, what would happen—from a tax perspective—and what have you done as their advisor to plan for it?...
How Critical Illness Insurance works in Canada
What would happen if you were diagnosed with cancer tomorrow? How would you cover your mortgage, your bills, or your business expenses while you focused...
How Disability Insurance Works in Canada
What would happen if you suddenly couldn't work—due to an accident or serious illness? Understanding How Disability Insurance Works in Canada can help you prepare...
Critical Steps to Safeguard Your Legacy With Estate Planning
What happens to everything you've worked so hard to build—your business, your investments, your family home—after you're gone? It's important to understand the critical steps...
How to Be Like Jim Pattison
What if you could borrow the exact wealth-building strategy used by one of Canada's richest entrepreneurs—without being a billionaire? If you've ever wondered how to...
How to Invest in your Holding Company In Canada
Are you a Canadian business owner with retained earnings building up inside your corporation? If those funds aren't being put to work through a holding...
How do Capital Gains Work in Canada
How Do Capital Gains Work in Canada? A Guide for Business Owners and High-Income Professionals. Capital gains tax in Canada can take a serious bite...
How Life Insurance Works in Canada
Most Canadians believe life insurance is simply a backup plan. It is something you purchase in case the worst happens so your family is protected....
The Canadian Business Owner’s Guide to Wealth Management
You’ve built a successful business. Your corporation is generating profits. Retained earnings are accumulating. On paper, everything looks strong. Now is the perfect time to...
How to Use Whole Life Insurance as Collateral for Tax-Free Loans in Canada
What if you could access capital for your business, investments, or retirement — without selling assets, triggering capital gains, or paying tax on withdrawals? You...
How Canadian Business Owners Can Stop Losing Money to Taxes
How Canadian Business Owners Can Reduce Taxes Using RRSPs & TFSAs Are you a successful Canadian business owner, real estate investor, or incorporated professional? If...
The Core Principles of the Infinite Banking Concept (IBC): A Canadian Perspective
Managing your finances in today’s world means more than just saving money—it’s about creating a system that gives you control over your wealth, both now...
