Disability Income Insurance Riders: What to Know

Individual is the best feature of individual disability insurance. Every person has different needs and budgets. Individual disability policies can be built to suit them.

Individual disability insurance comes with a menu of options called riders, but basic features can also be tweaked. Keep reading to learn how they work and what they do.

Contact an independent insurance agent and learn how to protect yourself and your family if a disability keeps you from working.

Lock in Your Premium

Basic individual disability plans are guaranteed renewable. The insurance company can’t cancel your coverage, but they can raise the premium. You can upgrade to a non-cancellable policy where the insurance company can’t cancel your coverage and they can’t raise the premium.

(By the way, if you don’t pay your premium on time, the insurance company can cancel your policy.)

Get Bigger Benefit Payouts

As your career grows you’ll make more money. These riders help your disability coverage keep up:

Automatic Increase

The monthly benefit automatically increases for five years.

Guaranteed Purchase

Extra coverage can be purchased without a medical examination when your salary increases.

Retirement Accumulation

Extra coverage that funds retirement plan contributions.

Cost of Living

Benefits paid increase each year. The increase can be tied to the consumer price index or a flat percentage. The increase begins after a claim.

Benefits Pay Out Longer

Benefit Period

An average disability lasts for 34 months. How long do you want the benefits to pay? Choosing the right benefit period can help keep the cost down. You can select a benefit period of 2, 5, or 10 years. Benefit periods are also available to age 65 and for life. The shorter the benefit period, the lower the cost.

Mental and Nervous Disorder Benefits Limit

Most policies limit mental and nervous disorder benefits to two years. Some companies offer an upgrade to five years or more. If you are in a high-stress profession, you may want to consider this rider.

Benefits Pay Out Faster

Elimination Period

When would you need the benefit to begin? You can select an elimination period of 30 days to one year or more. If you have other coverage or resources ,you can keep the cost down with a longer elimination period.

Insure Your Career

Basic disability plans pay benefits for two years if you can’t work at your specific job. No benefit is paid if you are working at a different job or occupation. After two years, the benefits pay if you can’t work at a similar job.

What if you invested in a professional education like law or medicine? You can upgrade the definition to own-occupation.

Own-occupation disability insurance pays benefits when you can’t work at your job. It doesn’t matter if you are working and earning income from a different job. A disabled surgeon could teach or consult and still receive benefits. Own-occupation disability protects your income and career.

Get Yourself Back to Work

What if you can only work part-time? These options help you get back on your feet financially and career-wise.

Partial or Residual Disability

Partial and residual disability riders pay benefits if you are only able to work part-time. Some policies require that you can’t work full-time and you are earning less money. Other policies only require that you earn less money. Policies that only require a small loss of income to pay benefits are considered to have the best coverage.

The language of the rider is very important. It should be carefully reviewed.

Work Incentive

Benefits are not reduced immediately when returning to work part-time. This benefit is not offered by all companies.

Recovery

Some professionals may experience a loss of income even when they are able to work full-time. They may have lost clients or patients while they were out. A recovery rider pays partial benefits to help the professional rebuild their practice.

Budget Friendly

Social Insurance Substitute

A social insurance substitute rider pays benefits while Social Security disability is not paid. When Social Security disability is received, the policy benefits are reduced. Other programs like workers' compensation and state disability programs are also included.

Adding this rider reduces the cost of the policy.

Long-Term Care

A catastrophic disability like ALS can increase living expenses. Medical equipment and skilled care may be required. 40% of people who need long-term care are working-age adults. The benefit pays up to 100% of the base benefit, and the rider can have different benefits and options. It’s important to review the language of the rider.

Other Riders

Waiver of Premium

This is included with most policies. While you receive benefits, the insurance company does not require premium payments.

Survivor Benefits

A benefit is paid to survivors if you die while receiving benefits. It’s usually three times the monthly benefit, but not all companies include this rider.

Protect Your Most Valuable Asset

Most people insure important assets against loss. Homeowners insurance, auto insurance and umbrella policies all provide protection.

50% of working Americans don't have long-term disability insurance to protect their most valuable asset — the ability to earn income. A college graduate with a bachelor’s degree can expect to earn $2.4 million over their lifetime!

Three Steps to a Solid Plan

How your benefits are taxed makes a difference. If your benefits are taxable, you need more of them to pay your expenses. Here are three simple steps to take for a solid plan for disability:

1. Review your budget. Determine how much money is coming in and going out each month.

2. If you become disabled, what are your sources of income? When do they start and end? Remember, taxable benefits provide less money.

Employer sick pay
Short- and long-term disability
Social Security
Other household income
Savings

Do your expenses exceed your income? If not, great job! If they do, by how much?

3. Build an action plan. Consider buying personal disability insurance to supplement your income.

Why Go It Alone?

Disability insurance is an important part of smart financial planning, and there is a lot to know about this coverage. To get the most out of your disability insurance policy, contact your local independent insurance agent. They can simplify the process for you.