Final answer:
The second reason for adding a rider to a term policy is cost savings from the insurance company's ability to secure group rates, and the efficiency in risk assessment and administrative cost management.
Step-by-step explanation:
The second reason a term policy covers additional people with a rider instead of obtaining coverage under a separate policy, aside from convenience, is the cost-saving advantages that arise from the insurance company's ability to negotiate lower rates with health care and other service providers. By adding a rider to a policy, all insured individuals can benefit from the group rates that the insurance company is able to secure due to its large number of clients. Additionally, this approach helps the insurance company save money when it pays out claims, as it is managing one combined policy instead of multiple separate policies.
It is also noteworthy that individuals purchasing insurance or life insurance often have deeper knowledge about their own risk profiles than the insurance company can ascertain, which influences the efficiency of risk assessment and pricing for the insurer. Furthermore, insurance incorporates the concept of actuarial fairness, ensuring average payments cover claims, operating costs, and leave room for profit.