What is an insurance "rider"?

An insurance "rider" is best defined as an additional provision that modifies coverage in a policy. Riders allow policyholders to customize their insurance contracts to better suit their needs. This could mean adding coverage for specific risks or extending benefits beyond what is typically included in a standard policy.

For instance, in a life insurance policy, a rider might provide additional coverage for accidental death or include a waiver of premium in the event of disability. By opting for a rider, individuals can enhance their coverage, ensuring that their insurance better aligns with their specific circumstances or potential concerns.

In contrast, the other options do not accurately capture the essence of an insurance rider. A type of insurance policy for businesses does not specifically relate to the modification of coverage but rather refers to different insurance products. The fee for processing a claim pertains to the administrative side of managing insurance and has nothing to do with altering the terms of coverage. Finally, a discount offered for annual premium payments is related to payment options rather than adding or changing policy terms like a rider does. Therefore, the identification of a rider as a modification of coverage is critical to understanding its purpose in an insurance contract.