Life insurance riders provide policyholders with additional benefits that can be customized based on individual needs. One such valuable rider is the guaranteed insurability (GI) rider, which lets policyholders increase their life insurance coverage at specific intervals without undergoing medical underwriting.

In this article, we’ll explain the purpose, functionality, benefits, and cost of a GI rider in Canada to help you determine if this option aligns with their financial and health planning goals.

What is a guaranteed insurability rider?

A guaranteed insurability rider is an optional add-on to a life insurance policy that allows policyholders to purchase additional coverage at predetermined intervals without requiring a medical exam or proving insurability. This ensures that individuals can secure higher coverage despite potential changes in their health or lifestyle.

The rider is available on certain term and permanent life insurance policies and is particularly beneficial for those who anticipate increased financial responsibilities in the future, such as starting a family or purchasing a home. 

For example, if you suspect you may face future health problems through means like genetic testing or due to a history of family health issues or lifestyle choices, a GI rider might be useful to add to your life insurance policy. 

It’s also beneficial if you currently have a limited budget, but want to ensure that you’ll have the option for purchasing additional coverage later on, as your budgeting flexibility improves over time.

How does a guaranteed insurability rider work?

A guaranteed insurability rider operates on a structured timeline, providing opportunities to increase coverage at specific milestones. Policyholders can exercise their option to purchase additional coverage every few years (typically every three to five years) on the policy anniversary date.

Additionally, certain life events can also trigger the ability to increase coverage, such as marriage, the birth/adoption of a child, or purchasing a home. However, the option to increase coverage must be exercised within a set timeframe (e.g., 30 or 90 days) following the policy anniversary or a qualifying life event. 

Lastly, the typical timeframe to exercise this rider starts five years from the original policy’s effective date.

Who needs a guaranteed insurability rider?

A guaranteed insurability rider is ideal for individuals who anticipate needing more life insurance in the future but want to avoid future medical exams that could result in higher premiums. It is especially beneficial for those with pre-existing medical conditions or a family history of health issues, as it ensures they can increase coverage regardless of any changes in their health.

How much does a guaranteed insurability rider cost?

A guaranteed insurability rider is generally an affordable addition to a life insurance policy and approximately costs between $3 and $21 for people aged 25-45 years, varying based on age.

However, it is important to note that while adding the rider itself is inexpensive, the actual cost of increasing coverage when exercising the option will depend on your age at that time. 

The later you choose to exercise the GI option, the higher the cost of the additional coverage due to increased age-related risk. The table below shows the cost of adding a GI rider to a $100,000 life insurance policy:

When can you buy a guaranteed insurability rider?

In most cases, you must buy a GI rider at the time of applying for your life insurance policy. The decision to include a GI rider is made during the underwriting process, where the insurer assesses the financial risk of offering this option.

A GI rider cannot be added after your policy has been issued, so it’s essential to consider whether you need it at the time of application. Insurers evaluate an applicant’s health and overall risk profile during underwriting, determining whether to approve the rider and set an appropriate cost.

For instance, if an applicant has a medical history of cancer or another high-risk condition, an underwriter may deny the GI rider because the increased risk of future claims could pose a financial liability for the insurer. If approved, the insurer locks in the right to purchase additional coverage in the future, regardless of changes in health.

How many times can you use a guaranteed insurability rider?

Most guaranteed insurability riders permit policyholders to purchase additional coverage every three to five years on the policy anniversary date. This means that you can increase your coverage only at these predetermined intervals. 

Additionally, some insurers allow coverage increases during major life events, such as marriage, the birth or adoption of a child, or purchasing a home. There is also usually a maximum number of times the option can be exercised over the life of the policy. 

For example, an insurer may allow a policyholder to increase coverage up to five times throughout the duration of the policy, up to a certain age (commonly 50 or 55). Each time you choose to increase your coverage, the insurer will offer a predetermined amount based on the original policy terms.

What are the advantages and disadvantages of a guaranteed insurability rider?

A guaranteed insurability rider does not require medical exams, allows you to purchase more coverage at different intervals and is ideal for life events such as marriage, childbirth, etc. However, it comes with disadvantages like limited availability, extra premiums, and a specific window within which you can exercise this option.

  Advantages and disadvantages of a guaranteed insurability (GI) rider

At what age does guaranteed insurability end?

A guaranteed insurability rider typically expires when the policyholder reaches a certain age, which varies by insurer but is commonly between 40 and 50 years old. Once the rider expires, the option to purchase additional coverage without a medical exam is no longer available.

Most insurers set the cutoff age at 40, 45, or 50, depending on their specific policies. This age limit exists because, as individuals get older, the risk of health issues increases, making additional coverage riskier for the insurer.

A return of premium (ROP) rider in critical illness insurance is an optional add-on that refunds the premiums you’ve paid if you don’t make a claim during the policy term or under specific conditions, such as surviving the term or passing away.

If you’re considering critical illness insurance, adding an ROP rider can help you feel more secure about your investment. This rider ensures that even if you never need to use the coverage, you’ll still benefit financially.

In this article, we’ll explain how the return of premium rider works and benefits your finances.

How does a return of premium work?

In critical illness insurance, return of premium riders are available usually as an add-on. With this rider, you pay your monthly premiums as usual, and the policy provides coverage for critical illness or disability claims.

However, if no claim is made or under specific conditions, the insurance provider refunds a portion or all of the premiums you’ve paid.

There are three common types of ROP:

• Upon death (Return of premium on death – ROPD): If you pass away while the policy is active, the insurer refunds all eligible premiums to your appointed beneficiary
• At the end of the contract (Return of premium on expiry): If the policy term ends without a claim, the insurer refunds the premiums paid
• On cancellation or surrender (Return of premium on cancellation/surrender): Some insurers offer partial or full premium refunds after a set number of years or at specific ages, like 65 or 75

Each provider has unique rules about how premiums are refunded and under what circumstances. To ensure you choose the right option for your needs, we recommend that you schedule a call with our experienced advisors.

What are the benefits of return of premium riders?

Return of Premium (ROP) riders provide peace of mind by refunding premiums, adding value to your insurance, offering flexible refund options, and reassuring risk-averse policyholders.

A return of premium rider:

• Ensures that you get a refund of premiums if no claim is made 
• Turns your policy into a savings tool with either coverage or a payout
• Offers reassurance for those worried about losing their investment
• May offer refunds on expiry, surrender, or death, depending on the rider

What are the disadvantages of return of premium riders?

The disadvantages of return of premium riders are that they come with higher premiums, require long-term commitment, may exclude certain fees from refunds, and could limit potential investment opportunities.

• Higher premium costs: The rider significantly increases your policy premiums
• Long-term commitment: Requires maintaining the policy for the full term to benefit
• Limited returnable premiums: Refundable premiums may exclude certain fees or add-ons
• Opportunity cost: Extra premiums could be invested elsewhere for potentially higher returns

Which critical illness insurance providers offer return of premium riders?

Many Canadian insurance providers such as Beneva, Sun Life, RBC, Industrial Alliance, Desjardins, Manulife, Canada Life, and Empire Life offer return of premium (ROP) riders. 

These riders are offered with different options like Return of Premium on Death (ROPD), Return of Premium on Expiry (ROPX), Return of Premium on Cancellation (ROPC), and other flexible refund features.

What is the cost of a return of premium rider in critical illness insurance?

The cost of adding a return of premium (ROP) rider in a basic critical illness policy costing $79.65 per month could be $117.99 per month.

A return of premium rider significantly increases your critical illness insurance premiums, typically by 30–50%, depending on the rider type, insurer, and your policy details.

These costs also differ based on the type of return of premium rider:

• Return of premium on death (ROPD): Lower additional cost since it refunds premiums only if the insured passes away during the policy term
• Return of premium on expiry (ROPX): Higher cost as it guarantees a full refund of premiums if no claim is made by the end of the term
• Return of premium on surrender (ROPS): Costs are similar to ROPX but allow partial refunds if the policy is canceled early

Additionally, long-term policies like term-75 or lifetime coverage tend to incur higher premiums for ROP riders due to extended refund commitments.

Is a return of premium on critical illness taxable?

No, the return of premium (ROP) benefit on critical illness insurance is generally not taxable in Canada. When you purchase a critical illness insurance policy, you pay your premiums using after-tax dollars, meaning the money you use to pay for the policy has already been taxed. 

Therefore, when you receive a refund of those premiums through an ROP rider whether upon expiry, surrender, or death, it is treated as a return of your personal contributions, not as income.

Comparison of return of premium riders with traditional critical illness insurance

Return of premium riders enhance critical illness policies by offering premium refunds, unlike traditional plans that provide coverage only. Here’s how these differ:

Premium refunds:

• ROP riders: Refund premiums if no claim is made (on expiry, death, or surrender)
• Traditional CI plans: Do not refund premiums regardless of claims

Cost:

• ROP riders: Typically 30–50% more expensive
• Traditional CI plans: More affordable but lack refund benefits

Flexibility:

• ROP riders: Allow refunds under specific conditions (expiry, death, surrender)
• Traditional plans: Offer no such options

Best suited for:

• ROP riders: Ideal for risk-averse individuals seeking financial security
• Traditional plans: Suitable for those focused on lower premiums

How do I get a return of premium coverage?

You can add a return of premium rider to your critical illness insurance policy while purchasing the plan or during eligible upgrade periods.

To get ROP coverage, you need to consult with your insurance provider to explore available rider options. Typically, a return of premium rider is added when purchasing a long-term critical illness policy. The process may involve assessing your eligibility based on age, health, and other criteria.

To qualify for ROP coverage, you must meet specific insurer requirements regarding age, policy type, and health status.

• Age requirements: Most insurers offer ROP riders to individuals aged 18–65
• Policy type: ROP is typically available on long-term critical illness policies, not short-term plans
• Health status: Eligibility may require passing a medical exam or meeting the insurer’s health guidelines
• Consistent premium payments: Some insurers mandate a history of timely premium payments
• Insurer-specific rules: Each provider may have unique conditions for adding ROP, such as coverage amount or policy terms

As we often say – life insurance is not a one-size-fits-all product. Canadians purchase life insurance policies for a variety of reasons: to cover a mortgage loan or debt, to provide a financial cushion to their loved ones, or to cover the costs of their children’s education – in case the insured passes away. With such diversity in use cases for life insurance, individuals choose different coverage amounts and periods to align life insurance policies with their needs.

But, life insurance can be personalized even further with a life insurance rider.

How do insurance riders work?

A life insurance rider is an optional feature that can be added on to a life insurance policy to enhance and customize it to better address one’s unique needs.

Types of Life Insurance Riders: Quick Reference Guide

Click on any rider name to jump to the full description below.

The coronavirus pandemic dramatically changed the world. In this article, we take a look at how it can impact your life insurance application or your existing policy, if at all.

On May 4, 2023, the World Health Organization (WHO) declared that COVID-19 is no longer a global health emergency.

Remember to always get COVID-19 information from verified sources, such as official government of Canada or provincial websites.

What is COVID-19?

Novel Coronavirus (COVID-19) is a new strain of coronavirus that was first identified in Wuhan City, China in December 2019 and has since been detected in more than 100 countries. The virus has been named SARS-CoV-2 and the disease it causes has been named Coronavirus disease 2019 (COVID-19). Coronaviruses are a large family of viruses that are common in humans and have typically been associated with mild illnesses, similar to the common cold. The novel Coronavirus (n-COV) is a new strain that has not previously been identified in humans.

Symptoms for COVID-19 have included fever, cough, difficulty breathing, and pneumonia in the lungs, with severe pneumonia cases leading to fatalities. Generally, Coronavirus can cause severe symptoms in people with weakened immune systems, the elderly, and those with long-term health conditions like diabetes, cancer, hypertension, and chronic lung disease. On March 11, 2020, the World Health Organization (WHO) declared the global outbreak of COVID-19 as a pandemic.

Since then, over the course of the COVID-19 pandemic, multiple variants of the virus have been identified. The most prominent ones were the Alpha, Beta, Delta, and Omicron strains. The Delta variant was classified by WHO on May 11, 2021, and quickly became the dominant variant circulating globally. Delta spreads more easily than earlier strains of the virus and is responsible for more cases and deaths worldwide. The Omicron variant was reported to WHO later that year, on November 24, 2021, and was classified as a variant of concern by WHO on 26 November 2021, due to its high transmissibility compared to other variants. As of June 2023, Omicron is still the most prominent strain being spread in North America.

As of May 4, 2023, the WHO does not consider COVID-19 a global health emergency anymore. However, it is still classified as a pandemic and a serious, ongoing health issue.

Does COVID-19 affect my existing life insurance policy?

If you already have an existing, active life insurance policy, then the short answer is you will be covered for any claims associated with COVID-19.

In other words, if you were to pass away due to COVID-19 or a Coronavirus-related ailment, your beneficiary will be able to make a life insurance claim. The claim would be treated in the same manner as a death caused by any other natural disease or ailment. Life insurance policies do not treat deaths caused by Coronavirus any differently from those caused by any other flu, infectious diseases, or natural causes.

In 2020, Canadian life insurance companies paid out over $154 million in claims for Covid-19-related deaths (CLHIA). While 2021 data has yet to be released for Canadian insurers, according to US trends life insurance payouts in 2021 were the highest they have been in over 100 years, with Covid-19-related death claims topping 2020 numbers.

Will receiving a COVID-19 vaccine affect my life insurance policy?

Despite what some online rumours may say, receiving a COVID-19 vaccination will not affect your insurance in any way. The Canadian Life and Health Insurance Association (CLHIA) released a statement on March 8 2021 assuring Canadians that no life insurance provider in Canada will be denied coverage or benefits when using a vaccine approved by Health Canada.

From their release:

“Getting the vaccine will not affect your insurance coverage. No one should be afraid and choose to not protect themselves from COVID-19 because they are worried about it affecting their benefits. All of Canada’s life and health insurers are supportive of Canadians receiving government-approved vaccinations to protect themselves from serious illness and death.”

I have a deferred insurance policy. Can a COVID-19 claim be paid out during the waiting period?

If you currently have a deferred life insurance policy, owing to a prior health consideration, then any claims associated with COVID-19, will have to wait out the pre-specified deferral period. However, even in such cases, the claim and death benefit will be treated in the same manner as any other claim for a natural cause of death from an illness or disease.

Will COVID-19 be covered under a new life insurance policy, if I apply now?

Life insurance policies have continued to provide coverage for Coronavirus-related deaths for new life insurance applications, once those have been approved.

However, if you have been recently diagnosed with Coronavirus or are currently awaiting diagnosis or treatment of the same, insurance companies will likely defer the approval, until after such treatment or diagnosis is complete. Such a deferral will be similar to deferrals required for any other ongoing health condition or treatment.

For example, some companies may implement underwriting guidelines at the time of application that state, you must not have had Covid-19-related symptoms in the last month, that your case was only mild, or that you must wait two or three months following the resolution of all symptoms. As the situation evolves, companies may continue to amend their approval guidelines, so it’s always best to check with an insurance expert at PolicyAdvisor for the latest underwriting rules.

Does my travel history to a Coronavirus-affected region affect my life insurance application?

As part of standard life insurance applications, most life insurance companies will ask questions about your recent travels in the last year – as well as ask for information on your travel plans for the next twelve months. If you have travelled to a region that has seen a wide outbreak of COVID-19, particularly in the last 1-3 months, then you can expect the insurance company to ask you additional questions.

Similarly, any imminent plans to travel to any of COVID-affected regions invite additional questions about such travel plans. In some situations, where travel may indicate elevated risks to Coronavirus, insurance companies may choose to postpone the decision around approving a policy. Learn more about life insurance and travelling and applying for life insurance while quarantined.

Will a COVID-19 claim be paid out under Critical Illness Insurance policies?

A critical illness insurance policy is a contract whereby an insurance company agrees to pay out a one-time lump sum amount to the insured, upon the diagnosis of a specified critical illness and the completion of a survival period; usually 30 days.

COVID-19 by itself is not a covered condition as defined in Critical Illness policies currently sold. Therefore critical illness policies will not payout, purely, on a positive COVID diagnosis. The vast majority of people who contract the novel coronavirus are expected to make a full recovery within a relatively short period of time. However, if a claim is presented for a different covered critical illness (such as a major organ transplant, like a lung transplant) that is attributable to Coronavirus, then it will generally be viewed as a covered condition and insurance companies will consider such claims for approval.

If you are unsure what your policy covers, reach out to our licensed insurance experts. We will help explain your current coverage.

Am I covered for COVID-19 under my disability insurance policy?

Disability insurance products are designed to pay a monthly benefit to replace a loss of earnings if you are unable to work due to illness or injury for the length of the policy, or until you return to work. Typically, there is a waiting period before the benefit payments start. This waiting period can be between 1 to 26 weeks for short-term policies or up to 2 years for long-term disability insurance policies. Should a Coronavirus diagnosis lead to a loss of income, the insurance companies will make a payment as long as the minimum waiting period is complete. Some companies may even waive the waiting period in the case of a positive diagnosis. Learn more about Coronavirus and critical illness insurance.

Frequently Asked Questions

COVID-19 has been declared by the WHO to be a pandemic. Are there any exclusions on life insurance policies associated with pandemics that insurance providers may introduce in the future?

A pandemic is a global outbreak of disease. Pandemics happen when a new virus emerges to infect people and can spread between people sustainably. Most life insurance policies currently do not have a disease-related exclusion. The standard exclusions pertain to suicide/self-inflicted harm or criminal activity.

Currently, there are not any exclusions on coronavirus-related deaths. However, insurance companies continue to monitor the outbreak and they reserve the right to make any changes in their product or processes in the future.

Should I be buying insurance on my life or health at this time?

Regardless of this health scare, you should be buying the appropriate amount of insurance coverage to protect you and your family at the earliest time you can. Such coverage only gets more expensive with age.

COVID-19 is a reminder that life events can emerge quite quickly and it is prudent to secure coverage ahead of time. This is just as important a time as any other to protect those that depend on you for financial health. If you would like to discuss your insurance needs, our advisors are available to assist you.

Can I apply for life insurance coverage without having to meet an advisor or undergo a medical test?

When COVID-19 was still a global health emergency, many Canadians practiced social distancing to prevent the spread of Coronavirus to loved ones and community. By now, such restrictions are no longer recommended, but you may still be concerned about limiting your social interactions.

As Canada’s leading online life insurance brokers, the team at PolicyAdvisor has made finding life insurance quotes and buying life insurance an easy, quick and online process for consumers like yourself that seek the convenience of a non-face-to-face meeting to assess insurance needs. Our life insurance needs calculator can help shed light on your specific insurance requirements from your couch or kitchen table.

Our innovative algorithm parses through 100s of insurance products so you can find the best insurance policy and options for your needs. Our licensed insurance advisors are available online to answer any questions, curate your insurance choices, and help complete the application for you – all fully online.

While many life insurance products require a medical test, we have partnered with some of Canada’s leading insurance companies to arrange for life insurance coverage up to $1 million, without requiring an in-person, medical exam. We also have access to several non-medical insurance products; the coverage can be fully obtained without meeting with a medical representative.

You can easily get financial protection from the comfort of your home even if you are still practicing social distancing – like so many of us are – to protect our communities and those most vulnerable.