Every long-term disability insurance rider you should consider

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Every long-term disability insurance rider you should consider

At its most basic, a disability insurance policy protects your income while you’re unable to work. But when you’re shopping for long-term disability insurance, you’ll find that you can customize your policy through riders. You can specify when you receive your disability benefit, the definitions of coverage and more. But not all riders are right for all people. Since riders can slightly raise your policy premiums, it’s important to know what your options are, which ones you need and which ones could be an unnecessary cost.

While we know from experience which long-term disability insurance riders work best for most people, everyone’s situation is different. Before you consider any additions to your policy, you should talk to a licensed expert who can help figure out what type of policy you need.

Recommended for most

It’s hard to say any one rider is right for everyone, but there are riders that are useful for the majority of people, whether because they offer the most coverage or provide the greatest price protection. Everyone should consider these riders, because they’ll likely be helpful.

Own occupation
Offered by: All carriers
What does it do? Changes the qualification of a claim so it’s specific to your occupation (if you can do another job, you would still get the benefit). There are several different definitions of “disabled” when it comes to own occupation policies but it’s one of the most important aspects to a policy. Everyone should aim for at least a “modified own occupation” policy, because when it comes time for a claim you want the definition of disability to be as strong as possible.

Non-cancelable
Offered by: All carriers
What does it do? Guarantees the premium and prevents the insurance company from changing the price you pay. Most people should consider this rider, but the re-pricing of policies is rare in the modern disability insurance industry. If you are later in your career, this might be an unnecessary expense, but it’s worth looking into if it’s in your budget.

Partial or residual disability benefit
Offered by: All carriers
What does it do? Pays a benefit if you are still working in your own occupation, but experience a loss of income due to to a decrease in hours or productivity. Everyone should have at least a basic partial disability feature on their policy, and people with a direct correlation between hours worked and earnings (like business owners and attorneys) should consider a more robust partial benefit.

Future purchase option
Offered by: All carriers
What does it do? Lets you increase your coverage in the future with no evidence of medical insurability. (i.e., you won’t have to go through the underwriting process again). Anyone who expects their income to increase should consider this rider, which essentially "locks in" your insurability. This means no matter what happens to you medically, you can buy more coverage if your income goes up. For workers later in their career, this could be an unnecessary rider and could be dropped if you never plan on increasing the monthly benefit.

Student loan
Offered by: Select carriers
What does it do? Allows you to purchase additional coverage to pay student loan balances while on claim. Useful for anyone who invested heavily in their education and has student loans, and for people who start their career with high incomes, like doctors and lawyers.

Retirement protection
Offered by: Select carriers
What does it do? Covers payments you would have made to a retirement account, like a 401(k) or individual retirement account. While most people buy policies to cover living expenses, one overlooked disability risk is lost savings. This rider pays funds into an irrevocable trust while you’re on a claim. This money pays out during retirement. Having some coverage in the event you can't work is the most important thing, but if you have capacity in your budget to protect your retirement, too, this is a great rider to consider.

Default and no-cost riders

There are also some long-term disability insurance riders that are great adds for most people because — well, they’re free. These riders usually are either come standard on a policy, or can be added at no extra cost.

Guaranteed renewable
Offered by: All carriers
What does it do? Guarantees the insurance company can never cancel your policy as long as you continue to pay the premiums.

Waiver of premium
Offered by: Most carriers
What does it do? Waives the premiums on your policy while you’re on claim, until you’re able to work again and resume payments.

Automatic increase benefit
Offered by: All carriers
What does it do? Increases your monthly benefit for the first four to five years you own the policy, with no additional underwriting, to cover normal pay increases without any underwriting needed to justify the increase. This is an optional increase that can be declined annually; if you choose to increase your benefit, your premium also increases.

Presumptive total disability
Offered by: Most carriers
What does it do? Pays out the full benefit immediately if you lose sight in both eyes, hearing, speech or use of hands or feet, regardless of the elimination period (how long you must be disabled before you receive the benefit) or whether or not you’re working.

Family care benefit
Offered by: Select carriers
What does it do? Pays out the full benefit of your policy if you take time off of work to care for a loved one.

Survivor benefit or death benefit
Offered by: All carriers
What does it do? Pays compensation to your beneficiary if you die while on a disability claim.

Good health benefit
Offered by: Select carriers
What does it do? Reduces the elimination period by two days each consecutive year you go without a claim.

Occupational rehabilitation
Offered by: All carriers
What does it do? Helps pay for vocational training after a disability to help you return to work. This can be especially valuable if you have an own-occupation policy, since you can collect the benefit while still working another job.

Recommended for some

While there are a lot of riders that are great for most people, there are some that will serve a more limited crowd. They may be more costly than your typical rider, or they have a more specific use that doesn’t fit most people’s needs. While you shouldn’t completely discount these riders if they work for your individual scenario, they shouldn’t take precedence over the more useful, popular riders mentioned above.

Social Security offset
Offered by: Most carriers
What does it do? Splits the monthly premium between a base amount and a portion that could be decreased if you qualify for Social Security disability insurance (SSDI). You’ll still get the full benefit amount, but some of it will come from SSDI rather than your insurer, so you can lower the cost of your policy. However, without the rider, you could collect your policy’s full benefit and your SSDI benefit.

Cost of living adjustment (COLA)
Offered by: All carriers
What does it do? Increases the monthly benefit paid to you while on a claim, pegged to the Consumer Price Index or other cost measurement. This can be an expensive rider, and the benefit only begins to increase while you’re on a claim. Most people will be better off keeping pace with their earnings with future purchase and automatic increase of benefit riders, but if you’re young and are on a claim for a long period of time, a COLA rider might be worth it.

Catastrophic disability benefit
Offered by: Most carriers
What does it do? Pays an additional benefit amount if you have a catastrophic disability, typically defined as one where you are unable to perform two activities of daily living, like bathing and eating. Unless you are exceptionally risk averse this is most likely an unnecessary addition to your policy and can be expensive.

Unemployment premium suspension
Offered by: Select carriers
What does it do? Suspends premiums while you’re unemployed, allowing you to stop paying premiums but continue to own the policy. However, coverage is also suspended while you’re unemployed, so if you become disabled you won’t receive a benefit. This makes it risky, so it’s recommended that policyholders continue to pay premiums while going through temporary unemployment, so they have protection if they have an injury or illness during that time.

Return of premium
Offered by: Select carriers
What does it do? Returns a certain percentage of your paid premiums when you cancel a policy. That means you’ll receive something back if you never use the policy benefit, but a return of premium rider is usually pretty expensive. You’re generally better off saving or investing the additional rider cost.

At the end of the day, no one will need all of these riders, but it’s clear there are a lot of ways you can customize your disability insurance policy. It’s important to speak with a disability insurance agent or personal finance expert to make sure you have the protection you need.

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