Rider (Endorsement)

A “Rider” in the insurance industry is used to refer to an optional extra applied to an insurance policy, sometimes referred to as an “endorsement”. Depending on the type of insurance product, this rider may modify the features of existing policy, or build another insurance product on top of the existing “base” plan at a later date.

The most common types of rider are those applied to life protection products:

– accidental death benefit
– waiver of premium benefit
– critical illness benefit

Different plan-specific riders will be available for different types of insurance product. For example, home protection policies offering riders that pay out on damaged caused by neighboring house fires, personal liability policies that have riders covering other household members, and investment policies offering additional investments.

Mrs. Client purchased an investment linked insurance plan via her financial adviser 12 years ago. She has been happy with the investment performance of the plan during this time, and wishes to increase her investments held in insurance products after having learned that life insurance proceeds payable to her beneficiaries on her death do not form part of her estate and as such are not subject to estate tax.

Mrs. Client funds a “new” product from the insurance company that is guaranteed to replicate the performance of the SnP500 index over time, as well as provide a degree of capital protection during market downturns. Although the product is different to her original policy, it is added to her existing policy as  a rider. When she logs in to the online portal of the insurance company she then sees two separate accounts “Base” and “Rider 1”.