No two long-term disability policies are the same. Every policy will have the same basic structure, but it’s important for applicants to tailor their policy so that it fits their needs.
This can be done through different features and riders. Disability insurance carriers may make some features standard on their policies, while other riders may have an additional cost on top of the policy’s base premium.
In order to get a policy that works for you, consider these features and riders when applying for long-term disability insurance.
Long-Term Disability Policy Features
- Own occupation – Long-term disability insurance is designed to provide income when you can’t work. However, when you’ll be paid depends on how your policy defines a disability as it relates to your job (and, therefore, what it means to not be able to work). An own-occupation policy defines a disability as the inability to work your regular job, even if you’d be able to work another job. This is compared to an any occupation policy, where your claim will be denied if you’re able to work any job. There are several definitions of own occupation, which you can read about here.
- Non-cancelable – A non-cancelable policy has a guaranteed rate that won’t be raised over the life of the policy. Most disability insurance policies are non-cancelable; however, because disability insurance carriers rarely raise their prices, the risk of a reprice is very low.
- Residual benefits – With a residual benefits policy, you will receive partial benefits if you’re able to work some of the time, but it results in either an hours or income reduction when compared to your schedule or pay before your disability.
- Guaranteed renewable – Carriers cannot cancel a guaranteed renewable policy, as long as the premium payments are made.
Long-Term Disability Policy Riders
- Cost of living adjustment (COLA) rider – During the course of a claim, a COLA rider will increase the benefit provided to account for inflation.
- Future increase option rider – If your income has increased since you originally purchased your policy, a future increase option will allow you to increase your coverage without having to take another medical exam.
- Unemployment waiver of premium rider – This rider will allow you to forgo premium payments during periods of temporary unemployment.
- Catastrophic disability benefit rider – Long-term disability insurance typically covers up to 60% of your salary; however, with a catastrophic disability benefit rider, you may receive up to 100% coverage if you 1) are unable to perform two or more activities of daily living (e.g. dressing and bathing yourself, 2) total and permanent loss of sight or hearing, or 3) cognitive impairment.
- Return of premium rider – Like return of premium life insurance, a disability insurance policy with this rider will refund your premium payments after a certain period of time. The amount of premium returned, and when during the life of the policy it is returned, depends on the individual company and policy.
- Social Security disability insurance (SSDI) rider – Provides private disability coverage while you apply for Social Security disability insurance (SSDI) and if you don’t receive SSDI benefits; if you do receive SSDI benefits, the insurer will subtract SSDI benefits from your private benefits.
- Automatic increase benefit rider – Increases the monthly benefit for a certain period of time (usually five to six years). This rider is often added at no cost, but during the years of increased benefit, the premium will rise.
- Student loan protection rider – Depending on your degree and profession, you may qualify for a student loan protection rider, which adds additional coverage to the benefit amount to cover the cost of student loan payments. This goes directly to the student loan provider, rather than the beneficiary.
- Retirement income protection rider – If your policy comes with this rider, it will cover a portion of your retirement contributions.
Don’t quite get long-term disability policies? No need to stress — check out our full explainer on how disability insurance works.
Last updated on Dec 7th 2017