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
Before You Sell Your Investments, Read This.
Markets are down, your portfolio took a hit, and you're wondering—should I sell now and cut my losses? Stop. Because selling during a market downturn...
Why Life Insurance Isn't Just for When You Die
If you think life insurance is something you'll never personally benefit from, you're missing the bigger picture. Permanent life insurance can provide liquidity, protect your...
Whole Life Insurance vs. Universal Life Insurance
Permanent life insurance can double as a powerful wealth-building tool—but not all policies are created equal. If you're an incorporated Canadian professional or business owner...
How Dollar‑Cost Averaging Is Helping Canadians Build Wealth
Between work, family, and everything else life throws at you—who has the bandwidth to watch the stock market every day? If you're a busy Canadian...
Must-Know Strategies for Business Owners Right Now
Over the past few weeks, our client meetings have shifted into a higher gear. The conversations we're having aren't about the basics anymore — they're ...
Using Life Insurance to Fund a Buy-Sell Agreement
Imagine one of your business partners passes away tomorrow. Suddenly, their spouse or their kids own a share of your company—and you're expected to buy...
5 Mistakes High-Income Canadians Make With Their Wealth Plans
If more money automatically meant more wealth, every top-earning Canadian would retire stress-free. But that's not reality. The gap between earning well and building lasting...
What are Notional Accounts and How do They Work in Canada
If you've wondered what are Notional Accounts and how do they work in Canada, this is the post for you. Most incorporated Canadians are great...
What Canadian Business Owners Are Telling Us Right Now — And What To Do About It
Every week, our advisors sit down with incorporated business owners and professionals across Canada. And while every client's situation is unique, the conversations we're having...
Retire Tax-Free in Canada Using the Insured Retirement Plan
What if your RRSP isn't enough to retire comfortably? And what if there was a way to access tax-free cash flow in retirement—without market volatility,...
How Canadian Real Estate Investors Are Using Whole Life Insurance
What if you could unlock hundreds of thousands in capital—without selling a single property or applying for another mortgage? In this article, we'll explore How...
Use Corporate-Owned Life Insurance to Transfer Wealth Tax-Free
What if your estate faced a $500,000 tax bill after you pass away—on capital gains alone? What if there was a way to fund that...
