South Carolina Life Insurance Practice Exam

What is the primary purpose of riders in life insurance policies?

1. To lower the premium cost

2. To provide additional benefits or coverage

3. To shorten the policy term

4. To limit the insurer's risk

The correct answer is: To provide additional benefits or coverage

The primary purpose of riders in life insurance policies is to provide additional benefits or coverage. Riders are optional attachments or endorsements that can be added to a life insurance policy to enhance its features or adapt it to specific needs of the policyholder. For instance, common riders might include accelerated death benefits, which allow a policyholder to access a portion of the death benefit while still living in the event of a terminal illness, or waiver of premium riders that keep the policy active without premium payments if the policyholder becomes disabled. These additions are designed to customize the life insurance policy according to the insured's requirements, ensuring that individuals can tailor their coverage to better suit their health, family, financial situation, and long-term goals. By adding riders, policyholders can obtain coverage that extends beyond the base policy, enhancing the security and utility of their life insurance plan.