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Learn How You Can Customize Your Disability Insurance Policy
When you select a basic disability insurance policy, it pays if you are unable to work due to a sickness or injury. However, not all disabilities are considered total. Sometimes you can return to work on a limited or partial basis, either working less hours or performing limited duties. Either of these scenarios may leave you with a loss of income.
When you work with a disability insurance broker, you’ll learn about all of the additional features available across the “Big six” insurance companies to customize a policy that will protect you in any situation.
The most common types of add-on riders available include:
Enhanced Residual Disability Benefit
Basic Residual Disability Benefit
Catastrophic Disability Rider (CAT)
Future Increase Options (FIO) or Guaranteed Insurability Option (GIO) Rider
Student Loan Repayment Rider
Other features and benefits of disability insurance that usually come at no charge include:
Built-in Recovery Benefit Feature
Non-Disabling Injury Benefit
Good Health Benefit
COBRA Premium Benefit
We’ll go into more detail about each option below.
Your Add-On Rider Options
1. Enhanced Residual Disability Benefit
This benefit is payable if you suffer a partial disability that results in at least a 15% or 20% loss of income based on the insurance carrier. The rider pays a percentage of the monthly benefit according to the percentage of your loss of income. At most insurance carriers, if you suffer a 75% loss of income, that benefit is payable at 100%. This benefit can be payable up to the maximum benefit period.
2. Basic Residual Disability Rider
This rider is a cost-saving option that is payable if you suffer a partial disability that results in at least a 20% loss of income. The maximum benefit payable is 50% of your base monthly income.
For example, this applies if you are totally disabled for a period of time and return to work on a part-time basis. Since you are not earning a full paycheck, the residual rider can help fill part of this loss of earnings. Say you are a family medical physician making $250,000 prior to disability. You start working full-time after being out of work, you will receive your pre-disability income minus your current income. You will receive a residual disability insurance benefit even if it takes you two years to get back to your pre-disability income of $250,000.
3. Catastrophic Disability Rider (CAT)
The Catastrophic Disability (CAT) benefit can be purchased up to your base disability insurance coverage. It will provide an additional monthly benefit. If you cannot perform, or need assistance with, two out of the six activities of daily living (eating, bathing, continence, transferring, getting dressed, toileting).
4. Future Increase Options (FIO) or Guaranteed Insurability Option (GIO)
Most insurance carriers let you purchase up to three times your base benefit, but not to issue the maximum issue and participation limits. One issue to watch out for when it comes to FIO or GIO is most carriers guaranteed that all future benefit increases under the FIO or GIO Rider will include the original policy definitions, riders, pricing and discounts. Your premiums will be based on your age at the time of increase.
5. Student Loan Repayment Rider
Most disability insurance carriers offer this rider. Student loans from banks, lending institutions, educational institutions or governmental programs will be considered for this rider. You are able to purchase up to $2,500 a month in benefits to help repay your student loans.
Other Features and Benefits Available
1. Built-in Recovery Benefit
Offered by most providers, this benefit is payable if you recover and return to your occupation on a full-time basis, yet continue to experience a loss of income that is directly related to your previous disability.
2. Non-Disabling Injury Benefit
This hard to find feature can pay benefits multiple times throughout your working years. If you suffer an injury that does not disable you, but requires medical or dental treatment, this feature reimburses the cost of treatment, up to half of your base benefit, but not to exceed $3,000 per injury.
3. Good Health Benefit
This feature waives two days off of the elimination period for each consecutive year you don’t receive monthly disability benefits under your policy. However, your elimination period will not be reduced to less than 30 days.
4. COBRA Premium Benefits
If you lose your employment due to your disability, this feature will reimburse that cost of COBRA premiums (individual or family) up to $1,000 per month for a maximum of 18 months so that you can continue your medical insurance.
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