New Jersey Life Producer Practice Exam

A modification to a life insurance policy that adds benefits without changing guarantees is known as what?

1. Policy adjustment

2. Endorsement

3. Rider

4. Supplement

The correct answer is: Rider

A modification to a life insurance policy that adds benefits without changing guarantees is referred to as a rider. Riders are additional provisions that can be added to a base life insurance policy to enhance or customize coverage without altering the fundamental guarantees of the original policy. For instance, a policyholder might add a rider for critical illness that provides a lump-sum payment if they are diagnosed with a specified illness, without affecting the death benefit or other inherent guarantees of the policy. This is a common practice in the insurance industry, as it allows policyholders to tailor their coverage to better meet their individual needs. Riders are particularly advantageous because they enable enhancements without going through the process of purchasing an entirely new policy, making them a flexible option for policy modifications.