disability insurance is not a one-size fits-all proposition there are standard Provisions inherent in almost all disability insurance policies but the circumstances of individual lives insured may require special benefits or restrictions the insurance industry accommodates these special circumstances by adding writers to policies which really can be special Provisions that are unique to that policy Let's uh take a look at three or four of the more common writers that are added to disability insurance plans so as I indicated writers enable customization to fit a client's unique needs and unfortunately uh writers and the terms and the Clauses in the various writers they tend to vary by insurance company so you know even if you got say a future purchase option Rider at one company uh it may not be exactly the same as the future purchase option at another company so we have to be careful that we are clear about the terms of these Riders when they're added to a policy let's take a look at uh four common Riders now as I said uh many companies have different types of riders but uh these ones tend to be the most uh uh uh common ones that are used uh we're going to look at the future purchase option uh Rider uh then we'll look at the cost of living adjustment or the cola Rider accidentally death and dismemberment and then something quite unique referred to as the return of Premium writer now you'll see on this list I don't have uh a waiver of premium on disability writer which you know if we're talking about life insurance that would certainly be on the list of the most common types of riders that uh applicants would uh add to their life insurance policy but uh let me spend a couple couple of minutes before we get into a discussion about these four different types of writers uh I want to touch uh spend a few minutes on the waiver of premium on disability writer for a disability insurance uh policy now the first thing I will say is that it is actually not a writer you cannot add a waiver of premium on disability writer to a disability insurance policy uh the reason for that is that this uh waving of the premium if the life insured becomes disabled uh this is an automatic as part of a disability uh insurance plan now obviously a disability insurance plan I'm B you know I'm buying this because uh I want to be covered in the event I become disabled so if now I become disabled uh probably doesn't make a sense to keep charging me for my disability insurance Insurance uh premium and so buying a waiver of that premium uh makes no sense and so uh if I become disabled and I have an individual disability income policy uh the uh ongoing payments that are required on the policy are actually waved it's part of the contract I don't have to buy this separate type of a rider it's built into the uh indiv idual disability income policy uh no additional premium is charged for this and so you know if I become disabled that during my uh time of claim then uh I'm not going to have to pay any disability income premiums uh which just uh makes sense now there's some situations where uh during the waiting period And so remember we have uh on disability income plans we have a waiting period or an elimination period which can run anywhere from 30 days all the way up to one year depending on what the applicant uh or the policy owners has selected and so sometimes what happens is if you put in a claim and it has been approved and you're now in that waiting period uh you might find that uh your premiums are going to be continue to be build you have to continue to pay uh your premiums during that waiting period however as soon as you start receiving your benefits in other words you are still disabled beyond the waiting period then they will usually refund those premiums that were charged to you during that waiting period so uh waiver of premium uh key Point here uh it's different than a waiver of premium on disability on a life insurance policy uh because on a disability insurance policy it is included uh in the base premium okay so let's uh move on to uh these other common writers the first one I want to cover is the future purchase option riter and just as it says uh this future purchase option allows you the policy owner to buy additional coverage in the future and so it's simply the type of uh Rider that allows you to buy additional coverage in the future without having to provide any additional medical evidence and so uh you have the right to additional coverage in the future regardless of any changes in your health so you're really with this option guaranteeing your future insurability now in these fpo Riders are they're usually annual maximums in other words they can they say you can buy EX % of the base plan more or it maybe a flat dollar amount uh and uh usually they have an annual uh maximum this is the amount you can buy each year and they then also have an overall uh total maximum of the amount of increases you can buy as long as you have owned that policy now the important thing is that your coverage uh your new coverage is going to have to be based on your same occupational class in other words the occupational class you had when you originally purchased that uh policy if somehow along the way you have changed your jobs and you're no longer in the occupational class that uh the original policy was issued under then this additional coverage is not necessarily going to be an automatic process uh you may have to go back to the insurance company and indicate to them that you're no longer you know they may say uh they may ask you at the time that you want to uh exercise these options they want to confirm that you're still in the original occupational class if you're not then they may say to you here's some of the additional information they may require if you want to uh get that increase in coverage given that your occupational class has changed now uh remember this is primarily uh uh ensuring your future health uh insurability and you may recall that on disability insurance plans uh there are two conditions your health is one but also you must be able to demonstrate that you are still qualified on a financial basis uh the benefit as you know is has a limit of 60% of your current income and so if in fact an option to increase coverage comes up but your income is still at the same level as it was in other words just 60% of your current income doesn't allow you to get an increase uh then unfortunately you won't be able to get that increase so uh the increase is available uh without any uh medical uh evidence of insurability but you still have to qualify financially under the 60% income rule the additional coverage that you will get under this riter obviously it's going to be uh cost you some more money because you now have increased coverage and it'll usually be at your then attained age so the rider primarily simply guarantees your insurability in the future uh this is again similar to you've seen this uh guaranteed insurability option or guaranteed insur insurability benefit GI i o or giib which is on life insurance policies so same uh concept here the ability to buy more Insurance in the future without any medical evidence required okay let's move on to the second uh common rider that we find on disability insurance policies and this one is the cost of living adjustment Rider or Cola again you should be familiar with this we see this option also on uh life insurance policies we even see this on certain payout annuity types of policies so it is a writer that certainly addresses the cost of living increases due to inflation and uh you can understand that you know if it's a short-term disability claim not going to be as much of an issue but obviously if you have were on a long-term disability claim uh this this is going to have a bigger effect on you because if you're on for you know years in the future and we have uh inflation eroding the purchasing power of our uh income then it's going to be uh more uh effect on those that are in a long-term disability claim so the cola uh Rider provides an annual increase in the monthly disability income benefits starting in the second year year so if you're on claim now and let's say you have a benefit of 3,000 a month well that's the current year uh if you're still on claim a year later uh they'll then look at the rate of inflation or whatever is stated in the policy and that indexing or that increasing coverage will only become uh effective starting in the second year second and third year Etc going forward now now how do we calculate the amount of increase well there are two methods there's a simple method and a compound method the simple method simply says your benefit is going to be indexed by a flat percentage might be 2 3 4% whatever is in the policy and so each year they'll look at what was the coverage in the previous year and then they're just going to increase that by 2 to 4% so it'll be you know the same amount of uh increase each year the second method is something called compound and you can you know you can relate this to sort of compound interest but the compound method of uh Cola Riders basically says that the benefit is going to be indexed to the Consumer Price Index on a compound basis usually with annual maximum so you know if inflation was 2% this year next year your benefits going to go up by 2% if the inflation was at uh 3% the following year in the fourth year your benefit is going to go up by 3% more of the previous year so you have the indexing uh the increases that are compounding each year so those are the two types of calculations for the increase levels and so again uh you're going to have to look at the terminology under the writer offered by that specific specific company to determine how they calculate the increasing indexing or the increases in cost of living adjustments related to inflation let's take a look at the third uh common writer and I'm sure you're familiar with this accidental death and dismemberment uh we saw this on life insurance policies and so the accidental death and dismember bit Ben sorry dismemberment uh Rider pays benefits over and above the disability benefit in the base policy so obviously you know if uh as a result of an accident you died uh uh there would be a death benefit payable under this Rider uh you do have situations where people may be in an accident they become disabled and then you know within a few months they don't recover and uh then they uh Unfortunately they pass away so again in that scenario uh this death benefit portion of the ADD and Rider would come into effect so primarily the ADD and uh is to cover any death or spec specified injuries due to an accident so you know someone could have become disabled uh as a result of also losing a limb they got they were in an accident they lost the limb and now they're disabled and so now in addition to being able to claim under the disability based policy for disability income they may also be able to claim under the dismemberment feature under the ADD and D writer so uh this is a scenario where this would apply now uh one key important Point here is that death or loss must occur within one year of the accident and it must be as a result of the accident so you know some people in an accident May not die right away they may be injured they may be hospitalized uh and uh uh you know in in recovery uh mode but in other situations if the accident is serious uh and the person dies in order to collect the death benefit under the ad and d uh death or the loss loss of a limb must occur within one year of the accident and must be as a result and must be attributable to the accident uh you don't need to provide any additional medical underwriting information when this uh add and writer is added and uh usually on these uh ad and writers just as you would have under a base plan these standard exclusions would apply so you know you can't claim because of a self inflicted wound attempted suicide or you have these dangerous Hobbies or sports that maybe you participate in uh flying in an airplane other than as a passenger so obviously if you're a pilot or uh flight attendant or something of that sort uh then these would be uh excluded under this add and D Rider so these are the key features of the ad and D Rider on disability plans let's look now at the return of Premium writer this is quite uh uh unique and I think an interesting writer because uh the common concern uh many people with uh disability income policies uh you know relate is that oh I've had this policy and in fact I've never put had a claim in other words I bought it when I was age 40 uh now I'm age uh 65 I am ready to retire I'm no longer going to work uh I never ever put in a claim uh I've never received any money back from the policy and I paid in all of these premiums so I don't get anything back so it's kind of like uh you know term insurance which is pure risk where if in fact uh you survive to the end of the uh term period for the term insurance then you don't get anything back you just covered yourself during that period for the risk in uh disability insurance plans uh you can purchase something referred to as the return of Premium writer r o and so what this writer does is that you will receive a tax free refund of any premiums you've put in if at the time the policy expires the total claims paid out do not exceed the total premiums you put in so it's an opportunity for you to get back back some of the money that you've put into the plan uh and the reason it's taxfree uh is because when you bought the policy uh you paid for it with after tax premium dollars and so the benefit if you were to get any money back under this return of Premium riter it would be tax-free now again you're going to have to look at each individual company and what are the terms of their return of Premium Rider and here's uh here's a common uh example that you will find for example one might say if no valid claims have been made by age 65 70% of the premium is going to be refunded at the expiry of the policy so in this example if you haven't put in a claim by 865 at which time as you know disability policies expire and at that point in time this example would give you back 70% of all the premiums you paid uh it may also have a clause which said if the total claims do not exceed the total premiums paid the difference is returned when the policy expires so again uh you bought the policy you put in a claim but you didn't you didn't have it for a long time and so if we added up all the premiums you paid in minus all the benefits you might have received if you paid in more than you received then that difference may be refundable in this example other plans will return a portion of the premium uh if if no no claims are paid after 8 to 10 years so you have to look at the um return of Premium feature offered by that individual insurance company uh but this is really quite an uh interesting option uh unfortunately the complaint about this is that it tends to be very expensive and so you know it can cost you anywhere from 40 to 60% of the base disability income premium just for this Rider and so while the features are uh you know if you look at this you say that's a pretty good idea uh you know and I think that that's attractive uh the cost of this tends to be a deterrent to many uh potential uh policy owners so that's a look at the four common uh riders that are placed or added to individual disability insurance plans