Disability Insurance Broker Explains Disability Riders You Should Be Aware Of
As a knowledgeable Disability Insurance Broker, I get questions all the time from physicians and dentists about disability riders you should be aware of. I think the most important secondary coverage or rider to place on a policy is a residual or partial disability rider. Most claims are not total. Most claims are not, where you’re not going to be working ever again or you’re not going to be able to work in your specialty. They start out that way, but then they become partial where you’re going back to work a little bit. Maybe you can’t work as long as you did. Maybe you can’t do as many duties, but you’ve lost income. In this case, you want a plan that’s’ going to compensate you for that loss of income.
In a specialty definition of disability, if you go to work elsewhere, you can have all of that money and continue to receive full benefits. If you have a modified definition of disability or if you are working in your own profession with a specialty, then for example, if you lose 50% of your income, they pay 50% of the benefits. That’s very important to have on a policy. The next most important thing is to have options to be able to obtain additional coverage. Most of us don’t buy all of the disability coverage that we’re going to require for the rest of our lifetime. We may be prohibited to do so either by our income or our lack of funds to pay for that coverage. These options will allow you to increase coverage and they may be every year in a lump sum, they may be available every two years in a very limited amount, or they may be available in their entirety every three years. This is unless you have a trigger event, such as more than a 50% increase in your income or a loss of group coverage.
The next most important thing, especially for a long term disability policy, is a cost of living provision. This rider will allow the benefits to increase every year by some percentage. Usually it’s 3% and that could be either compound interest or simple interest. If you don’t have that, let’s say you have a $5,000 benefit paid today and that same $5,000 benefit is being paid 10, 15, 20 years from now. Obviously it’s not going to mean as much for you. It’s not going to be able to buy the same goods and services or handle the expenses. You want to have that benefit increase just to keep pace with inflation.
As proficient Disability Insurance Broker, I would say the next thing to consider is a catastrophic benefit. This is an entirely different definition of disability. It’s the inability to do two activities of living; eating, bathing, dressing, transference, or cognitive impairment. In this case, that injury or illness is so severe that your pre-disability expenses are going to go up having to deal with this very severe injury or illness. You need additional funds. These benefits would be paid tax-free in addition to the benefits that you have under either your own occupation definition or your residual policy. That would account for things like getting a house handicapped accessible or handling other types of medical services that need to be provided for you.
There a number of other smaller riders. They’re not really critical. When you meet with an agent or broker, he can talk about the others. Be careful! Sometimes they’re used as sales gimmicks.
If you have questions about disability riders you should be aware of, contact our professional Disability Insurance Broker for guidance. Let our experience work for you.
This educational blog was brought to you by Disability Insurance Broker Michael J. Bruno, seasoned Chartered Financial Consultant, Chartered Life Underwriter and Registered Health Underwriter. Specializing in financial planning and disability insurance for physicians and dentists for over 30 years.