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Guaranteed Insurability Rider

A rider is a provision which enhances the benefits offered by a life insurance policy. Life insurance needs, as you know, tend to differ from one person to another.

If you have specific needs which are not covered by a standard term life insurance policy, you can add a rider to meet those needs. Insurance providers offer a variety of different riders, one of which is the guaranteed insurability rider.

What is a Guaranteed Insurability Rider?

A guaranteed insurability rider, commonly referred to as a GI rider, allows you to increase your policy’s death benefit at certain points in the future – without going through an exam or answering any health questions. In other words, you can buy additional coverage without proving your insurability.

How Does it Work?

You can add a GI rider to your life insurance policy at the time of purchasing the policy. As is the case with all life insurance riders, a GI rider too comes at an additional cost.

Once you have a GI rider in place, you can increase your policy’s death benefit amount (if you want to) at specific points in the future, which are called option dates. A vast majority of insurers offer up to eight option dates – usually at three-year intervals – starting from the age at which you purchased the policy.

For example, if you buy a policy at the age of 25, you can choose to increase your coverage at seven different option dates – 28, 31, 34, 37, 40, 43, and 46. If you buy a policy at the age of 35, you will only have four options dates – 37, 40, 43, and 46.

It should be noted that insurance companies generally do not allow you to enforce the guaranteed insurability provision beyond the age of 50.

Similarly, you are also allowed to increase your coverage in the event of a special occasion like buying a new home, getting married, or the birth of a child.

Every option date usually comes with a 90-day window, within which you can exercise your right to increase your life insurance coverage. For example, if you choose to increase your coverage at the age of 37, you have 90 days – starting from your policy’s anniversary date – to get it done.

Some insurance providers have a much shorter window and require you to exercise your right to buy additional coverage within 30 days from the policy anniversary date.

How Much Additional Coverage Can You Buy Using a GI Rider?

Insurance companies generally place a cap or upper limit on the amount of life insurance coverage you can buy using a GI rider. With most insurers, the upper limit is set at $125,000.

You can also increase your life insurance coverage in a gradual manner with a GI rider. For example, if the GI rider allows you to buy additional coverage worth $50,000, you can choose to add $10,000 at the age of 34, another $10,000 at the age of 37, another $10,000 at the age of 40, and so on.

It should be noted that if you choose to buy additional coverage on a special occasion (marriage or childbirth), you cannot buy more coverage at the very next option date.

For example, if you have a baby at the age of 34 and choose to buy additional coverage, you cannot exercise the same option again at the age of 37, which is your next option date. You have to wait until you turn 40 to be able to add more coverage via the GI rider.

The specific terms and conditions, however, might differ from one insurance provider to another. So, you should carefully read the policy documents related to the GI rider before adding it to your policy.

Why is a GI Rider Needed and How Does it Benefit You?

Your life insurance needs do not tend to remain the same throughout your life. When you buy a house or start a family, your responsibilities increase considerably, as do your life insurance needs.

With a GI rider in place, you can increase your policy’s death benefit as and when your life insurance needs change and ensure that the coverage amount is sufficient to meet your family’s needs in your absence.

The best part is that a GI rider allows you to increase the death benefit of your policy without proving your insurability. It means no health questions, no blood tests, and no medical examinations.

What is even better is that the cost of the extra coverage is determined based on your original health rating, which was assigned to you by the insurer at the time of buying the policy.

For example, if you manage to qualify for the ‘preferred best’ rate class at the age of 25, you will be charged the same rate for the coverage you buy at the age of 40, regardless of your health condition.

This is important, because in the absence of a GI rider, you have no choice but to go through an exam in order to be able to buy additional coverage. If you have serious health conditions, you might find it hard to get approved by the insurer.

Even if you get approved, you will certainly be charged a much higher rate for the increased of coverage you buy, compared to what you originally paid for the policy.

Other Aspects of Guaranteed Insurability to Consider

Here are some additional aspects you should consider about the GI rider and how it may impact your policy.

Premium

Because of the additional benefits the GI rider will offer you, your premiums will go up. Even if you do not use it during the period when the rider is activated, you will have to pay for the privilege of including it in your policy. The principle is similar to any other riders you may have on your policy.

Contestability

The insurance company gets a “contestability period” of two years with all policies and riders, including the GI rider. This means, the insurer retains the right to question or investigate the details you have furnished.

The 2-year period typically begins from the day the GI rider is issued. Once this period of two years is over, the insurer cannot challenge the GI rider’s validity.

Suicide

The GI rider comes with a “suicide exclusion period” of two years. If the insured person commits suicide within this period, no death benefit will be paid to their beneficiaries. (Normally, the insurance company refunds the premiums in full in this situation.)

The 2-year suicide exclusion period starts from the day of the issue of the GI rider. If a change is made later on to the Rider Option Amount, the countdown will be refreshed.

In most situations, the two-year exclusion period will apply after all substantive changes to the rider.

Terminating the GI Rider

Your guaranteed insurability rider will remain active until the year of your last option. At this point, the rider will automatically get terminated. The rider would also automatically end if you terminate the policy or reduce the face amount of the policy.

If you believe you no longer require the rider, you can request the insurance company to have it removed. The rider will cease to exist from the date of your next monthly charge, and you will lose all the benefits associated with it.

The Bottom Line

A guaranteed insurability rider can be a valuable addition to your life insurance policy, as it allows you to increase your coverage amount according to your changing life insurance needs.

While it does come at an additional cost, the money you spend on a GI rider can translate into huge savings when you buy additional coverage, as you will be charged at your original rate class – irrespective of your age or health condition.

If you are planning to buy life insurance coverage and wondering if a GI rider is worth adding to your policy, get in touch with us at noexam.com. We can assess your life insurance needs accurately and tell you whether or not you need a GI rider.

Contact NoExam.com to Learn More about GI Rider

If you still have questions about the guaranteed insurability rider or if you are not sure if it is something you need, the insurance specialists at NoExam.com can help you. Speak to us today to find out more about life insurance riders and how you can achieve more value by adding them to your life insurance policy.

Another popular rider to consider is the waiver of premium rider.

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Jonathan Holloway
September 9, 2019
Jonathan is a licensed life insurance agent at NoExam.com that writes about insurance, personal finance, lifestyle, and sports. See our pages on term life insurance, life insurance rates and life insurance companies for more.
Disclaimer: We make every attempt to make sure our information is up to date, but since things change often it is best to double check the data. This review is an opinion. Clicking on links may result in NoExam.com being compensated.