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      Disability insurance riders can be beneficial. However, they may not be right for every person. It is important to discuss individual circumstances with an agent to determine whether they are appropriate or not. There are several different disability riders that every consumer should learn about.

Residual Disability
      The majority of basic policies provide income in the event of a disability preventing a policyholder from performing reasonable work tasks. If the person is able to return to work later than expected or must take a different type of job, income replacement coverage will be lost. This is the point when residual disability applies. Its purpose is to compensate for the difference between income replacement coverage and what is being earned at a new job. To avoid penalizing workers for continuing employment and facing income reductions, many insurers also include a clause for loss of earnings connected to the definition of disability.

Elimination Period
      This time period spans from when a person first becomes disabled until the first check arrives. Standard waiting periods for checks are usually about 90 days. Policyholders who cannot wait that long will have to pay extra to reduce the elimination period to 60 days. The increase is between 25 -30%. To reduce it to 30 days, the increase is about 50%. By extending the elimination period, policyholders can save extra. If the period is increased to six months, the savings is about 10%.

Own Occupation
      Many professionals prefer this rider, which ensures their policy will pay in full if returning to the same type of work is impossible. For example, a surgeon who lost a hand in an accident would not have to take a physician’s job paying less. The surgeon would receive the full policy benefit instead. Riders usually add about 10% to the price of a policy. However, rates may be higher for some professions. While this type of coverage is desirable, it is not easy to find. If an insurer does not offer this coverage, policyholders can look for disability policies with loss of earnings inclusions.

Cost Of Living Adjustment
      There are two ways that disability policies adjust with inflation. The first way involves a small adjustment, which underwriters blend into policies to permit policyholders to decline or accept. People who accept will see that their benefits and premiums will change in the price index. Before verifying income, insurers will usually make adjustments automatically for five years. A second option is based on cost of living, which applies if extra benefits are used after a full year of collecting disability. Policyholders may increase their benefit checks by a flat rate or a set percentage. A rider based on cost of living may increase premiums up to 40%, so it is important to ask about costs before selecting this option.

Guaranteed Increase
      First-time disability policy buyers must pass a physical exam. If additional coverage is desired later on, another physical exam is required. For those who have developed new medical issues since their last exam, a guarantee of insurability rider should be sought. This will help reduce the stress of possibly being denied based on health status changes. In some cases, insurers may offer the guaranteed increase as part of the standard policy. However, some may charge up to 10% of the policy’s price for the rider.

Lifetime Benefit
      This rider guarantees disability benefits past age 65. It is best to purchase this rider at a young age. As people reach the age of 40, the cost increase exceeds 25%.

Return Of Premium
      This is the most controversial rider. It is meant to make disability benefits similar to cash-value life insurance. In some states, insurers are prohibited from offering this type of rider. It is meant to give some of the money a policyholder invests back to the individual. For example, after a period of several years, a person might get 80% of the premium back if desired. However, the privilege comes with a cost that may be as much as 50% more than the standard policy’s price.

 

Posted 12:00 AM  View Comments

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