If you lose your ability to earn an income, a long term disability policy can provide replacement income that lasts for years – even decades – helping you and your family maintain your lifestyle. That’s why it’s also called disability income insurance.

Riders in a disability insurance policy are optional provisions that can give you extra protection and benefits. However, they come at an added cost, that you may or may not want.

This article can help you decide what’s right for you by covering:

Why disability riders are important

Long term disability policies are designed to provide income for a longer period of time. The longer the benefit period, typically the higher the premiums. That’s why insurance companies make certain provisions optional, allowing you to tailor your coverage to your needs. Why not just include everything, to cover every possibility? Because, at a certain point, premium payments could become difficult to afford. Riders may actually help you save money: You don’t have to pay for coverage and features you may not want or need.

Different policies – even from the same insurance company – will not necessarily have the same riders. An item sold as a rider in one policy might be included as part of the base coverage contract in another policy. And it’s important to know that you have to decide which riders you want when you purchase the policy – they can’t typically be added on after the fact. That’s one reason why it’s so important to have a thorough discussion of your needs with a financial professional or broker who specializes in disability coverage. 

Disability insurance riders and definitions

This is a list of common riders you’ll find in policies from most major insurers. Remember, some may actually be standard policy provisions; but most of these will add to the cost of a policy. Each company has its own way of writing and defining their contract terms, so expect to find at least minor variations in how riders work from one policy to the next – and before you buy a policy or add a rider, be sure to read and understand its exact terms. Sometimes an insurer will also make significant – and advantageous – changes to a standard provision, and we’ll point out how Guardian has done so in a few examples below. 

Basic Partial Disability Benefit

 

This pays partial benefits if you suffer an injury or illness that limits your ability to work – but doesn’t cause total disability.

Enhanced Partial Disability Benefit

 

This specialized rider from Guardian can be particularly valuable for fee-for-service professionals and business owners. It provides benefits when, solely due to sickness or injury, you suffer a loss of income of 15% or more. (Most other carriers require 20%.) For the first 12 months, benefits are equal to the actual loss of income, up to 100% of your monthly benefit; Afterwards, benefits are paid in proportion to your income loss.

After you fully recover and return to work full time, Guardian continues to pay benefits as long as you have a loss of income of at least 15% of your prior income (and the loss is solely the result of the injury or illness that caused the disability). And with Guardian’s superior Waiver of Premium benefit, monthly policy payments are suspended while you’re disabled and receiving benefits — plus another six months after recovery and benefits end.

Student Loan Protection2

 

The Student Loan Protection rider provides extra money to help pay student loan payments. It is particularly useful for early-career professionals such as doctors and lawyers who have invested heavily in their education.

Lump Sum Disability benefit3

Only available through Guardian, this rider provides a “bonus” benefit at age 60, equal to 35% of all the total and/or partial benefits paid until that age to make up for lost savings during a period of disability earlier in your career.

Future Increase Option4

This lets you increase coverage in the future as your income rises, without having to undergo a medical exam or provide proof of insurability. Guardian offers two versions:

  1. Increase Option: Lets you increase coverage – if you choose – annually through age 55.
    1. Purchase Option: It allows you to increase coverage every three years until age 55. You have to apply for and purchase at least 50% of the additional coverage offered at each opportunity to keep the rider in effect.

Retirement Protection Plus5

Protects retirement savings by replacing the contributions you would have made to your defined contribution plan while totally disabled. Some insurance carries also compensate you for matching contributions that would have come from your employer, such as Guardian’s Retirement Protection Plus rider.

Cost of Living Adjustment (COLA)6

This states the insurance company will increase your benefits to account for inflation.

Catastrophic Disability Benefits (CAT)

Provides extra funds – up to 100% income replacement – if you are functionally impaired or irrevocably disabled. Guardian’s Enhanced CAT also adds a compound 3% cost-of-living adjustment.

 

How to decide what you need

A disability policy can be a powerful source of financial protection, but you may not need every rider, and some can  be duplicative. It pays to speak with a financial professional or broker who can help you understand all the terms and options, and tailor a policy to your needs. 

Discuss different coverage scenarios: What happens if you have an illness that takes you out of the workforce for a few years? What if you have a physical impairment that limits your productivity even if you can still do some work? Also, make sure to ask your financial professional to look for a policy that is non-cancelable with guaranteed renewable, so that your terms and premiums stay fixed (as long as premiums are paid on time). 

If you don’t know a professional is familiar with the specifics of buying a long-term disability policy, a Guardian financial professional can help you. And be prepared to tell your financial professional as much as you can about your financial situation and concerns so that he or she can start looking into the plans and options that best meet your needs. 

Disability insurance calculator

Figure out how much you may need and what it could cost
 

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Frequently asked questions about disability policy riders

What is a disability insurance rider?

A rider is an optional provision in an insurance contract that provides added benefits or flexibility. Most come with an added cost, but others the cost is built into the price of the policy.

Don’t I have disability coverage through Social Security?

Social Security Disability Insurance (or SSDI) is a part of your Social Security benefits. However, it is usually much harder to qualify for than a plan purchased individually or through work. Most SSDI applicants are rejected – and the disability income benefits are typically lower than with a private policy. That’s why most experts say you shouldn’t rely on SSDI alone for income protection.

Does life insurance cover disability?

Life insurance does not normally cover disability, but some life insurance policies have a disability rider that can replace a portion of your income if you lose your ability to earn a living due to illness or injury.

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Disclaimer

1. Guardian Income Protection: The Role of Disability Insurance in Financial Wellness Publication

2. The Rider provides coverage for period of 10 or 15 years from the Policy Date. When a qualifying total disability occurs, benefits are only payable during the remaining portion of the 10- or 15-year term that has not elapsed when the disability begins.

3. This publication is provided for informational purposes only and should not be considered tax or legal advice. Please contact your tax or legal advisor regarding the tax treatment of the policy and policy benefits and your particular set of facts and circumstances.

4. Conditions and limitations apply. Medical information is not required when applying to exercise an increase option. Taken into consideration are financial information as well as all disability insurance in force, for which you’ve applied or are eligible to receive.

5. Retirement Protection Plus is not a pension plan, qualified retirement plan or qualified individual retirement account or a substitute for one.

6. This benefit is not necessarily protection against increases in the cost of living.

Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of The Guardian Life Insurance Company of America (Guardian), New York, NY. Product provisions and availability may vary by state. Optional riders are available for an additional premium. Some policy benefits and features are not available to all occupations.

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