Final answer:
The rider that allows for the purchase of additional whole life insurance in the future is the Guaranteed Insurability Rider. It locks in the option to increase coverage without reevaluation of insurability, based on the policy owner's age at initial policy issuance. This can have significant benefits for long-term financial planning and adjusting to life changes.
Step-by-step explanation:
The rider that allows the policyowner to purchase additional amounts of whole life insurance at certain points in the future without providing evidence of insurability is known as the Guaranteed Insurability Rider (GIR). This rider is particularly valuable because it gives the policyowner the flexibility to increase their death benefit as their insurance needs change due to life events such as marriage, the birth of a child, or an increase in income. The rider ensures that the policyowner can buy additional insurance at preset dates or life events, and the premium rates for the additional coverage are based on the policyowner's original age at the time of the initial policy purchase, not their age at the time of the increase.
The cash value that accumulates in a whole life policy can serve as an account for the policyowner's use, potentially enhancing their financial security. It's important for policyowners to be aware of their options, such as the Guaranteed Insurability Rider, to make informed decisions regarding their cash-value life insurance policies.
Using the scenario of dividing 50-year-old men into two groups based on a family history of cancer, it becomes evident that life insurance companies rely on actuarial data to determine fair premiums. If a life insurance company sells policies to each group separately, they would calculate an actuarially fair premium based on the specific risk associated with each group. If, however, they were to offer life insurance to the entire group without knowledge of family cancer histories, they'd have to calculate a fair premium based on the average risk, which might result in adverse selection if the higher-risk individuals are more likely to purchase the insurance.