Bryce purchased a disability income policy with a rider that guarantees him the option of purchasing additional amounts of coverage at predetermined times without requiring to provide evidence of insurability. What kind of rider is this?
The Correct Answer Is:
a. Guaranteed insurability rider
b. Additional Coverage Rider:
An Additional Coverage Rider is a general term used in insurance that can apply to various types of insurance policies, including life insurance, health insurance, and property insurance. It allows policyholders to add extra coverage for specific risks or events that may not be included in the standard policy.
For example, in a life insurance policy, an additional coverage rider might provide coverage for accidental death or critical illness.
However, in the context of Bryce’s disability income policy, the term “Additional Coverage Rider” is not specific enough. It doesn’t explicitly indicate the provision of the option to purchase more coverage at predetermined times without the need for evidence of insurability.
Without this specific feature, it does not align with the characteristics of Bryce’s policy, making it an incorrect choice.
c. Paid-up Option Rider:
A Paid-up Option Rider is commonly associated with permanent life insurance policies. This rider allows the policyholder to use accumulated cash values or dividends to fully pay up the policy, typically before the original maturity date.
Once the policy is paid up, no further premium payments are required, and the policy remains in force for the rest of the insured’s life.
However, this rider is not relevant to disability income insurance. Disability income insurance is designed to provide a regular income in the event that the insured becomes disabled and is unable to work.
The concept of “paid-up” status does not apply to this type of insurance, as the coverage is typically provided on an ongoing basis as long as the policyholder continues to pay premiums.
d. Extended Insurability Rider:
An Extended Insurability Rider, also known as a Guaranteed Insurability Option, is similar in concept to a Guaranteed Insurability Rider. It allows the policyholder to purchase additional coverage at specific intervals, often in response to significant life events, without the need for additional evidence of insurability.
While this rider provides a similar benefit to a Guaranteed Insurability Rider, the specific terminology “Extended Insurability Rider” is not as commonly used in the insurance industry. The more widely recognized term is “Guaranteed Insurability Rider.” In this context, the provided option (d) is not the best choice, as it may not be as familiar to insurance professionals or policyholders.
In summary, the Guaranteed Insurability Rider is the most appropriate choice for Bryce’s disability income policy, as it precisely describes the provision that allows him to increase his coverage at predetermined times without having to provide evidence of insurability.
The other options, while relevant in other insurance contexts, do not accurately capture this specific feature of Bryce’s policy.