Barbara’s policy includes a rider which allows her to purchase additional insurance at specific dates or
events without evidence of insurability. This rider is called a(n)
Guaranteed insurability rider
Payor rider
Endowment rider
Family income rider
The Correct Answer and Explanation is :
The correct answer is Guaranteed insurability rider.
Explanation:
A guaranteed insurability rider (sometimes called a “guaranteed purchase option” rider) allows the policyholder to purchase additional insurance coverage at specific points in the future, often at designated ages or life events, without the need to provide evidence of insurability (such as undergoing a medical exam). This type of rider is typically added to life insurance policies and is especially beneficial for people who may develop health issues later in life, making it more difficult to obtain additional insurance coverage. It essentially ensures that the policyholder can increase their coverage even if they experience changes in their health status.
The rider is valuable because it provides flexibility and peace of mind. It gives the insured the option to purchase additional coverage at certain times, such as when they are about to enter a new stage of life (e.g., marriage, having children, or purchasing a home). Since the insured does not need to show evidence of insurability, they are guaranteed to be able to increase their coverage regardless of their health condition at the time.
For example, Barbara’s policy with a guaranteed insurability rider allows her to increase her coverage on predetermined dates, without the need to undergo a medical examination. This could be particularly important if she develops a health condition that could otherwise make it difficult or impossible to buy more life insurance coverage in the future.
Other riders mentioned in the question are different in their functions:
- Payor rider: This rider is typically used in policies for minors and waives the premium payment if the policyholder (usually the parent) becomes disabled or passes away.
- Endowment rider: An endowment rider provides a lump-sum payment if the insured survives the policy’s term, essentially creating an endowment policy.
- Family income rider: This rider provides a monthly income to the beneficiary in the event of the insured’s death, often for a specified period.
The guaranteed insurability rider, however, is the one that gives Barbara the ability to purchase additional insurance without proving insurability.