Disability Insurance riders are extra benefits added to a policy. Riders are similar to extra features when you purchase a car. While it is nice to have all of the available options, it is also important to prioritize which riders are needed. Adding riders add additional costs so it is important to determine which are most important to you.
Riders will vary from company to company. For example, some policies have a built in own occupation definition into the policy whereas some companies add the definition as a rider.
1) Definition of disability. This is the most important part of a policy as it determines how and if the policy will pay your claim. Look for a policy that covers you if you can’t work in your occupation or medical specialty. These are called different names by different companies. Therefore, read the fine print to confirm you have this important coverage. It is call variations of the following:
- own occupation
- your occupation
- transitional occupation
- regular occupation
- own specialty
2) Residual and recovery riders. These riders will pay a partial disability which is very important. A significant amount of claims are partial and this rider will allow you to receive benefits for partial disabilities. These riders vary from company to company. Some will pay for recovery and others will cease payments as soon as you return to work.
3) COLA Cost of Living Riders. This rider only increases benefits after you have been on claim for at least 1 year. There are variations from company to company. Some pay compound, some simple. Some will pay a fixed 3 or 6% and others will pay a range of 0-3% or 0-10%. This is one of the most expensive riders on the policy. The younger you are, the more important this rider is as you have more working years ahead of you and less money saved. As you approach 50, this rider becomes less important, assuming you have paid down debt and accumulated other assets.
4) Increase Options. Companies will have variations of this rider, but it allows you to increase benefits in the future without any future medical underwriting. This is especially important to have on your policy early in your career when you are young, healthy and have a large earning potential.
5) CAT Catastrophic Rider. This rider will pay additional benefits if you are unable to perform specific activities of daily living, similar to a long term care insurance policy. While nice to have on the policy, this rider is optional.
There are various other riders available and may or may not be relevant to you in your situation.
The most important thing you can do as a consumer is to shop around and find the most suitable coverage for your situation and prioritize the most important riders to have on your policy.