What Does Future Purchase Option Mean?
A future purchase option is a feature often specified in long-term disability insurance policies. By utilizing this option, policyholders can increase their insurance coverage each year as their income increases. The insurance company enables the policyholder to increase coverage without medical underwriting. However, the policyholder would need to pay a higher premium for the enhanced cover.
Typically, the policyholder can avail of this option regardless of their health condition. So, even if the policy develops a health condition that affects their eligibility for a new insurance policy, the lack of a requirement to pass a medical exam enables the policyholder to purchase additional cover. In many cases, the insurer provides a future purchase option until the policyholder reaches a specific age.
A future purchase option is also known as a future increase option or guaranteed insurability.