What Is a Chronic Illness Rider in Life Insurance?

A chronic illness rider lets you tap into your policy’s payout if you become unable to care for yourself.
Robin Hartill, CFP®
By Robin Hartill, CFP® 
Edited by Katia Iervasi Reviewed by Tony Steuer

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What is a chronic illness rider?

A chronic illness rider is a life insurance add-on that allows you to access your policy’s payout if you’re diagnosed with a qualifying medical condition. It’s a policy "perk" that falls into the category of life insurance living benefits, which you can tap into while you’re alive.

Some insurers include a chronic illness rider in their policies at no extra charge, but in most cases, you’ll need to pay an extra fee for the feature. Depending on the terms of the rider, you may be able to withdraw all of your death benefit or a portion of it.

How chronic illness riders work

Like all life insurance riders, you need to opt into a chronic illness rider when you buy a policy — you can’t add it on later.

To activate the rider, you’ll typically need to be diagnosed with a lifelong illness that interferes with at least two of the six “activities of daily living.” These are basic activities related to personal care:

  • Bathing or showering.

  • Dressing.

  • Eating.

  • Getting into or out of bed or a chair.

  • Using the toilet.

  • Walking.

You can spend the money from your rider however you wish. You may need the funds for medical expenses or other bills, but you could also use the money for a vacation or something else you would enjoy.

The drawback is that your insurer will subtract any money you receive from the final payout to your life insurance beneficiaries. Let’s say you had a $100,000 policy and withdrew 20% of your death benefit — $20,000 — when you were diagnosed with a chronic illness. Your loved ones would only get $80,000 when you die. With this in mind, consider the impact of tapping into your death benefit on anyone who depends on you financially.

Did you know...

The life insurance death benefit typically isn’t subject to income tax. Since the money you’re paid out from a chronic illness rider is part of the death benefit, it usually isn’t taxable, either.

Learn more about life insurance riders

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