What is a rider in an insurance policy?

A rider in an insurance policy is defined as an additional coverage or modification to the policy. Riders are used to customize insurance policies to fit the specific needs of the policyholder. They can provide extra benefits or coverage that are not included in the standard policy, allowing individuals to enhance their insurance protection. For instance, a life insurance policy might include a rider for accidental death benefits, which would provide an additional payout in the event of the insured's death due to an accident.

In contrast, the other options focus on different aspects of insurance policies. The first option refers to a renewal option, which pertains to the continuation of a policy rather than an addition to it. The third option discusses penalties for late premium payments, which are consequences of not adhering to payment terms rather than enhancements to coverage. Lastly, a clause for automatic renewals relates to how a policy may continue without the need for active renewal by the policyholder, rather than adding coverage or benefits to the policy. Thus, identifying a rider as an additional coverage or modification captures its essential purpose within an insurance contract.