Fundamentally speaking, a disability income insurance policy helps to replace your income if you become disabled and are unable to work. When you’re shopping for long-term disability insurance coverage, you will find that you can customize your insurance coverage using riders. You, as the applicant, can designate when you collect your disability payment, the definition of disability and even more. Then again, not every rider is right for every insured. Considering that riders can slightly increase your insurance premiums, it is essential to understand what your options are, which rider(s) you need and which rider(s) could add unneeded cost. Here, we discuss the various disability income insurance riders.
Although we know from our experience which long-term disability riders work best for most applicants, it’s important to note that each person’s circumstances are different. Before you think about adding any riders to your policy, you should speak with a licensed professional who can help you determine which riders, if any, you should add to your policy.
Here is What We Recommend the Most
Own-Occupation Rider
The own-occupation rider alters the criteria for a claim so it’s unique to your occupation (if you can do another job, you would still get the benefit). There are a few distinctive definitions of “disability” when it pertains to own-occupation policies but it’s probably the most relevant aspect of a policy.
Non-Cancelable
The non-cancelable rider guarantees the premium and prevents the insurer from cancelling coverage (other than for non-payment of premium or fraud). Most applicants should choose this rider, even though the re-pricing of policies is rare in the current disability insurance market. If it’s later in your career, this could possibly be an unnecessary cost, but it’s worth considering if it fits within your budget.
Partial or Residual Disability
This option provides for the insurer to pay out a benefit if you are able to continue working in your own occupation, but suffer from a loss of income because of a decrease in the hours you work. Every policyholder should have at least a basic partial disability rider on their disability income policy, and policyholders with a relationship between hours worked and earnings (like physicians or attorneys) should think about a more effective partial benefit.
Future Purchase
The future purchase option allows the policyholder to increase the coverage in their policy at a future date without having to provide evidence of medical insurability. An applicant who expects their income to go up in the future should seriously consider this valuable rider. If, however, you are at a late point in your career and do not anticipate increased earnings, you may want to forgo the additional premium for this rider.
Retirement Protection
This rider is offered by select carriers and will cover the payments you planned to invest in a retirement plan like a 401(k) or an IRA. This rider can be difficult to understand how payments are made so be sure and discuss it with an insurance professional.
Student Loan Protection
The student loan rider allows the applicant to purchase additional coverage that would pay on student loan balances while the insured is disabled. This rider is very beneficial to an applicant who is carrying significant student loan debt like physicians, attorneys, and other professionals.
Built-In Riders
These are riders that are typically built into your standard policy at no additional cost to the policyholder:
Guaranteed Renewable
What it does. This rider provides that your insurer cannot ever cancel your policy as long as you pay your premiums.
Waiver of Premium
What it does. As the name indicates, this rider provides for the insurer to waive your policy premiums while you are disabled and on a claim.
Family Care Benefit
What it does. This provides for the insurer to pay out the full benefit of your insurance policy if you must take time off from work to care for a family member.
Survivor Benefit
What it does. Provides for the insurer to pay a death benefit to your beneficiary if you die while under a claim.
Occupational Rehab
What it does. The rehab rider provides for the insurer to help pay for needed vocational training to help you return to work after a claim.
Other Riders to Consider
These are riders that applicants in select circumstances should consider. They’re not for everybody but are available to those who have unusual circumstances.
Catastrophic Disability Benefit
This is an expensive rider that pays an additional benefit if your disability is considered catastrophic. This usually means that during your disability you are unable to perform typical activities of daily living.
Unemployment Premium Suspension
This rider will suspend the premiums and coverage of your disability insurance while you are unemployed (policy is suspended, not canceled). We consider this a risky situation because if you become disabled while unemployed, you will not receive any benefits.
Return of Premium
This is a rather expensive rider that is offered by a few select insurance companies. The rider provides for the insurer to return a percentage of the premiums you’ve paid to your insurer if you decide to cancel your policy.
Although we acknowledge it is doubtful for an applicant to need all of these riders, it’s important to know they are available to you. Riders provide options that will allow you to customize your disability income coverage according to your individual needs.
