The correct answer is decreasing term rider. A decreasing term rider is a type of insurance rider that can be added to a whole life insurance policy to provide additional coverage. This rider is designed to address specific financial needs and can be a valuable addition to a whole life policy. Let’s explain in detail why this answer is correct and why the other options are not:

Decreasing Term Rider:

A decreasing term rider is a supplementary feature that can be attached to a whole life insurance policy. This rider is typically used to provide additional coverage for a specific period or to cover a particular financial obligation, such as a mortgage or a loan.

The key feature of a decreasing term rider is that the coverage amount decreases over time, usually in line with the reduction of the insured’s financial obligation, such as a loan balance.

For example, if an individual has a mortgage and wants to ensure that the outstanding mortgage balance is covered in the event of their death, they can add a decreasing term rider to their whole life policy.

As the individual pays down the mortgage, the rider’s coverage decreases in tandem with the decreasing mortgage balance. This makes the rider a cost-effective way to ensure that the financial obligation is covered, without the need for a level or constant coverage amount.

Why the other options are not correct:

a) Payor Rider:

A payor rider is a type of insurance rider often associated with juvenile or child insurance policies. It is used when a parent or guardian purchases a policy on a child’s life and wishes to ensure that the premiums are paid in the event of the parent’s death or disability.

This rider does not provide additional coverage but rather helps maintain the existing policy by covering premium payments. It is not typically used with whole life insurance policies for adults.

b) Accelerated Benefit Rider:

An accelerated benefit rider, also known as a living benefit rider, allows the policyholder to receive a portion of the death benefit in advance if they are diagnosed with a terminal illness or a specified critical illness.

This rider provides a financial benefit to the policyholder while they are still alive and facing a severe medical condition. It does not add additional coverage but rather accelerates the payment of a portion of the death benefit.

c) Automatic Premium Loan Rider:

An automatic premium loan (APL) rider is designed to prevent a life insurance policy from lapsing due to non-payment of premiums. If the policyholder fails to pay the premiums, the APL rider activates a loan against the policy’s cash value to cover the unpaid premiums.

This rider does not add additional coverage but instead ensures that the existing policy remains in force even if premium payments are missed.

In summary, the correct answer is the decreasing term rider because it allows policyholders to add supplementary coverage that decreases over time, aligning with the reduction of specific financial obligations like loans or mortgages.

The other options do not provide additional coverage; instead, they serve different purposes, such as maintaining premium payments, offering living benefits in case of illness, or preventing policy lapse due to missed premiums. The choice of a rider depends on the specific needs and goals of the policyholder and can vary widely based on individual circumstances.