Certified Financial Consultant (CFC) Practice Exam

What is the primary purpose of a rider in an insurance policy?

1. To underscore exclusions

2. To enhance or modify the policy's coverage

3. To limit benefits

4. To increase premium payments

The correct answer is: To enhance or modify the policy's coverage

A rider in an insurance policy serves the primary purpose of enhancing or modifying the policy's coverage. By adding a rider, policyholders can tailor their insurance to better meet their specific needs or circumstances. This might include increasing coverage limits for certain risks, adding coverage for additional types of events or property not originally included in the base policy, or providing extra benefits like waiver of premium in case of disability. In contrast, underscoring exclusions typically doesn't involve a rider; rather, exclusions are built into the standard policy terms to clarify what is not covered right from the start. Limiting benefits and increasing premium payments are also not the primary functions of a rider; while some riders might result in higher premiums due to the enhanced coverage they provide, that is an incidental outcome rather than a primary purpose. Thus, the correct choice emphasizes the role of riders as tools for enhancement and modification of insurance coverage.