Generally speaking, an insurance policy offers comprehensive coverage. Changes to premiums and deductibles are handled within the original distribution. Nevertheless, there are situations where policyholders can add extra coverage. For this, insurers attach what is called a rider.
An Extra Provision
A rider is a provision. In the insurance industry, it’s an agreement to add benefits to an existing policy. It can also be used to amend certain terms.
Think of a rider as an addendum. For a book, an addendum features additional material that came out after it was published. The same can be said for a rider. It’s used after an insurance policy is activated.
The rider is normally used to add a non-standard provision to an agreement. For instance, the owner of a life insurance policy might want to cover their newborn child. Rather than creating a fresh agreement, the insurance company will add the child via a rider. They’ll continue to do this after the birth of each additional child.
This also applies to other insurance types, particularly when it comes to options that are specific to certain regions. Usually, coverage for tornadoes and floods isn’t covered within standard home insurance policies. Thus, the insured must request it as a rider if they feel the protection is necessary.
The cost of these riders depends on the protection and the insurance value. In some situations, like the rider for a newborn child, there is no additional cost to the policyholder. Others, like tornado insurance, have a higher value because the damage risk is much greater.
There are some situations where coverage built into a rider is duplicated in a regular policy. In turn, the insured can pay a higher premium than they expected. To avoid this problem, the policyholder should go over the rider’s contents to ensure nothing is being multiplied.
Though the purpose of most riders is to add coverage. However, exclusionary riders do the opposite. Mainly found in personal health policies, these can block coverage. For instance, an insurer might exclude an individual’s pre-existing health condition.