A guaranteed insurability rider, also called a GI rider, is a life insurance rider that allows the owner of a life insurance policy to buy additional life insurance with no underwriting.  A rider is an additional benefit to a life insurance policy beyond the death benefit.  Riders are sometimes added at a cost, or sometimes they may be a free benefit included with the contract.  The guaranteed insurability rider is usually available at a small additional charge.

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What Does Guaranteed Insurability Mean

A guaranteed insurability rider is particularly valuable to the insured person because it allows the owner of the policy to increase the death benefit of the policy without any kind of proof regarding their insurability.

Insurability refers to the absence of a large amount of risk for the insurance company to provide coverage to the insured, making the insured person eligible for life insurance coverage.  If, for instance, a person has terminal cancer, they will likely not be considered insurable by the insurance company because a death benefit payout is almost certain to be made before the insurance company covers their costs.

The GI rider grantees that additional coverage can be added, without any proof of insurability for the insured person.  This is a risk to the life insurance company and the reason that this rider is included in a policy for a small charge.

How the Guaranteed Insurability Rider (GI Rider) Works

The guaranteed insurability rider gives the owner of a life insurance contract the opportunity to add death benefit coverage to the policy at certain points in the insured person’s life.  The amount that can be added is limited to an amount such as the face value, or a given amount such as $10,000.  The owner does not need to add coverage at the option date, and they may have the option to add less than the full available amount.

Usually, the option to add death benefit coverage through the GI rider occurs at certain pre-determined ages (which may vary by company) throughout the insureds life, but may also occur during special life events such as marriage or the birth of a child.  Usually, there is a cap to the amount of total coverage that can be added or a cap to the amount of qualifying events to increase coverage.

Why the GI Rider Is So Valuable

The GI rider is valuable because life insurance underwriting can be a very stringent process.  Many illnesses can disqualify someone from receiving life insurance coverage such as diabetes, heart disease, cancer, and other serious diseases.  If there is a GI rider on a policy, the owner is able to increase the coverage regardless of the health of the insured person.

If an insured person has a serious illness, they will want more life insurance protection because the risk of them passing away is much higher than it was when they were healthy.  They will want their beneficiaries to receive the highest protection possible. The guaranteed insurability rider allows the owner to maximize the death benefit of the contract.

Cost of Additional Coverage is at Previous Health Rating

Another advantage of the guaranteed insurability rider is that all additional insurance coverage added to the policy through the GI rider will be priced at the original health rating of the contract.  As people age, even if they do not have a serious illness, it is normal to gain weight, experience some health problems, and generally, people are less healthy when they are older than when they were younger.  Any decrease in health will likely decrease the assigned health rating for a new policy, which increases the cost of insurance.

Even if an insured person can obtain additional insurance coverage, they may pay a lot more money per unit of coverage than with an older life insurance policy unless they have remained in perfect health throughout their entire life.  With the GI rider, they will be able to add coverage at the original health rating, usually for a lower price than they will pay for the equivalent new life insurance contract.

To clarify, adding death benefit through the GI rider will increase the annual cost of the life insurance policy, however, the additional life insurance is priced at the original health rating, which will save the owner of the policy money in annual premium when the price is compared to a new policy with the equivalent benefit.  It also guarantees that coverage can be added, which is not always the case if the insured person is no longer considered insurable for a new policy.

How Much Does the GI Rider Cost?

The guaranteed insurability rider is not an expensive rider to add to a life insurance policy.  While costs vary between companies, it can usually be added to a new policy for a few dollars per month.  You will not be able to add the GI rider after the contract is issued, so we encourage you to consider if it will be valuable to you before you purchase your policy.  Usually, the GI rider is only available on permanent forms of life insurance (whole life, universal life, or variable universal life) but you may inquire if it is available on a term life insurance policy before you make a purchase.

The guaranteed insurability rider is a common rider and a valuable rider for many people.  You may want to consider adding the GI rider to your policy if you think you may have the need for additional life insurance coverage in the future.

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