Disability Insurance and Riders

Overview

Disability insurance is not a one-size-fits-all solution.
Standard provisions exist, but policies can be customized with riders to cater to unique customer needs.
Riders vary by insurance company.

Future Purchase Option (FPO) Rider
- Allows policyholders to buy additional coverage without medical evidence.
- Guarantees future insurability, regardless of health changes.
- Coverage increase depends on financial qualification (60% of current income).
- Cost of additional coverage based on the policyholder's attained age.
Cost of Living Adjustment (COLA) Rider
- Addresses inflation by providing annual increases in monthly disability benefits.
- Begins indexing benefits in the second year.
- Two methods: Simple (flat percentage) and Compound (CPI-based with annual maximums).
Accidental Death and Dismemberment (AD&D) Rider
- Pays benefits in cases of death or specified injuries from an accident.
- Death or loss must occur within one year of the accident.
- Standard exclusions apply (self-inflicted injuries, dangerous hobbies).
Return of Premium (ROP) Rider
- Refunds premiums if the total claims do not exceed the premiums paid by the policy's expiry.
- Refund is tax-free as premiums were paid with after-tax dollars.
- Terms vary by company; expensive (40-60% more than base premium).

Not a separate rider; built into the base premium.
Eliminates premium payments if the insured becomes disabled.
Premiums during the waiting/elimination period may be refunded upon claim approval.

Terms and clauses of riders vary by company; it's important to understand these before adding to a policy.
Riders can be costly but offer valuable customization to meet specific needs.