According to a 2015 study by the Centers for Disease Control and Prevention, one in five adults has a disability.
While government agencies do offer two types of disability coverage, neither are guaranteed and government disability pensions often fall short of what is required to meet an individual's needs. Consequently, many people need to supplement their income with personal disability insurance to cover costs and losses if they should ever become disabled (find out Why You Need Disability Insurance).
Disability coverage is highly customizable. Through riders, insurance companies can provide coverage beyond their basic disability insurance policies. The following are the most notable riders and ones that you may want to consider to protect you and your family.
Accidental Death & Dismemberment Rider
An accidental death and dismemberment rider offers an additional benefit if you die or are seriously injured in an accident. Coverage may include compensation for loss of limb, sight, and hearing.
Your insurance company adds a schedule to your policy which outlines the specific sum paid for each injury. If your policy provides a weekly income, the amount payable is often expressed in multiples of your weekly payment. Otherwise, the insurer will pay a percentage of the death benefit or policy limit.
Automatic Benefits Increase Rider
This rider provides an automatic increase in the monthly benefits for a specified time (usually five years). This has the benefit of keeping your disability benefit aligned with the normal, annual pay raises you would receive if you were healthy and working.
The average increase is 4% compounded annually. But note that most companies increase your premium as your benefit rises each year.
You do not have to provide proof of income during the term, but you may have to do so when you renew. Nor do you have to repay past benefits, regardless of your declared income.
Additional Monthly Benefit Rider
This rider provides assistance while you wait for your Social Security or employer disability income. Approved applicants for Social Security do not receive benefits until their sixth month of disability, but an additional monthly benefit rider can pay you during this waiting period.
You can structure this rider in a few ways. You can have a substitute rider which specifies that you will not receive benefits unless Social Security denies your disability claim, or you can use a supplement rider which lowers your benefits by a prescribed amount or cancels it out if Social Security approves your claim.
A cost-of-living rider protects you against inflation. Once you are receiving payments from a claim, your insurer will adjust your benefits annually based on a cost of living index, a percentage of your benefit, or a combination of the two.
Some insurance companies have maximum increase caps, but the monthly disability benefit you are paid will never be less than the benefit amount listed on your policy.
Future Increase Option Rider
Younger policyholders are likely to earn more as they gain work experience and secure promotions, so they need to know that they can adjust their policy accordingly, regardless of any future adverse health changes.
Insurers base your premium for additional coverage on your age at the time of purchase. Future purchases are usually limited to half the original benefit amount. Insurers often require proof your income increased to merit your request for additional coverage. Most insurers only allow you to include this rider up to age 45.
Hospital Income Rider
This minor rider is not as popular as it once was, because the length of a hospital stay is usually short today. The rider provides either a set payment amount for each day you spend in the hospital or a waiver of your elimination period. If you choose the latter, you will receive your regular total disability benefit during the elimination period. Most hospital income riders last up to one year.
If you have an existing or chronic condition, your insurer may attach an impairment rider to your standard policy. Impairment riders exclude your specific existing condition from the coverage, but still allows you to get coverage for most other risks and for your family members. The insurer will specify your medical condition—such as cancer, diabetes, or heart disease—and this impairment will not affect the coverage of unrelated disabilities.
Lifetime Extension Rider
The lifetime extension rider can extend your disability benefit period throughout your lifetime, provided you’re totally disabled. If you become disabled before the age specified in the rider, you will receive your full benefit; if you become disabled after it, you will receive a reduced amount.
Insurers calculate the reduced amount using your age at the time you became disabled and pay out a percentage of your normal benefit. For instance, if your policy states your total disability must begin on or before age 55, but you’re disabled at 56 years old, they may pay 90% of your benefit for your lifetime.
Partial Disability Benefits Rider
A partial disability benefits rider pays a percentage of your monthly benefit for a specified period (usually three to six months) when you are partially disabled. This usually means you’re under your physician’s care and cannot perform your regular duties, or one or more essential duties, at least half the time.
Benefits for partial disability are normally half of your total disability benefits for a specified period. If your partial disability extends beyond that amount of time, your benefits may drop again for the remainder of your benefit period.
Rehabilitation Benefit Rider
A rehabilitation benefit provides benefits for vocational training when you cannot return to your normal occupation. You will receive benefits as long as you’re totally disabled and in an approved training program.
The return-of-premium rider allows you to recover the premiums you paid when you don't collect your policy benefits. You can choose a rider that reimburses a portion of your premiums at a particular time, or you can opt for a rider that reimburses all of your premiums at age 65. Insurers deduct any claims off your refundable premiums.
The waiver-of-premium rider allows you to stop paying premiums for a specified time if you become totally disabled. You will start paying premiums again if you’re eventually able to return to work.
No one becomes disabled intentionally, but it happens to a fifth of the population so it is important to get good coverage. Discuss your needs with your insurance broker or agent. Disability insurance riders provide an added level of protection that will keep you and your loved ones financially secure.