The Most Popular Riders To Include On A DI Policy?
by Bill Olmsted
We have been focusing on the sale of individual disability insurance since 1997. In that time, we’ve been able to help tens of thousands of clients protect their income. One question that comes up frequently when advising a client on how to design their coverage is – What optional riders should I purchase?
Optional riders on an individual disability insurance (IDI) policy can add further value to an already valuable product. They can help make sure that the coverage keeps pace with inflation; protects against partial disabilities; and, even allows one the opportunity to purchase additional coverage without any further medical questions in the future. Almost all of our clients chose to include certain optional riders on their policies. Below is a list of the most popular optional riders chosen, and why they might matter to you in your search for coverage.
|Most Popular "Optional Riders" People Choose For Their Disability Insurance Policies|
|#||Rider Name1||Percentage of Agency Clients Who Choose This Rider|
|1.||Enhanced Partial Disability Benefit Rider||75.85%|
|2.||3% Compound COLA Rider||67.18%|
|3.||Future Increase Option Rider||57.60%|
|4.||Automatic Benefit Enhancement Rider||26.77%|
|5.||Enhanced Catastrophic Rider||22.30%|
|6.||Basic Catastrophic Rider||14.76%|
|7.||Basic Partial Disability Benefit Rider||14.35%|
|8.||4-Year Delayed COLA Rider||12.37%|
|9.||Student Loan Protection Rider||9.93%|
|10.||Unemployment Waiver of Premium Rider||6.28%|
The Partial Disability Benefit Rider
The above data was compiled from actual sales of individual disability insurance policies to clients from the past decade, and accounts for over 31,000 policies sold during that time. As you can see, almost all of our clients chose some form of the Partial Disability Benefit Rider. In our opinion, this is one of the most important features of any policy. Without one of these riders, you would only be eligible for benefits if you are totally disabled.
By adding the basic or enhanced partial disability benefit rider, your policy can protect you from an illness or injury that doesn't cause a total disability but does limit your ability to work. For basic partial you must suffer a loss of time and/or duties and a 20% or more loss of income. Enhanced partial will pay benefits as long as you suffer a loss of income of 15% or more due to disability. The enhanced partial can even assist you in recovering from a total disability when you have returned to work full time, but continue to suffer a 15% or more loss of income.
The Cost of Living Adjustment Rider - COLA
Another popular rider is the cost of living adjustment rider (COLA). In its various forms, it is included in just about 70% of all policies sold by our firm. The cost of living adjustment rider adjusts your policy’s monthly benefit annually, whether you’re totally or residually disabled, and includes a minimum benefit adjustment of 3%, calculated on a compounded basis.. This helps people who have a long term disability from having a decline of purchasing power over time due to inflation.
Guardian offers three versions of this rider, giving clients a choice as to how they want to protect against the rising cost of living. The most popular COLA rider is the 3% Compound option which starts increasing benefits, after 12 months of total disability, each year by 3%. The 4 year delayed COLA rider is a less expensive option, as it doesn’t begin increasing the monthly benefit by 3% annually until after 4 years of disability. Finally, the 6% Maximum COLA is the most expensive option, but also provides the opportunity for the highest increase possible, allowing for a 6% increase based on the changes in the Consumer Price Index for Urban Consumers (CPI-U).
The Future Increase Option Rider
The Future Increase Option (FIO) rider is the third most popular option clients chose on their disability policies. This rider allows a client the opportunity to purchase additional coverage each year on the policy’s anniversary, up to and including age 55, with no medical insurability requirement. For example, a client who purchases $5000 of monthly benefit today with $5000 of FIO, has guaranteed their potential to exercise the increase option for a total of $10,000 per month of coverage regardless of changes in health. They have to document an income that qualifies them for this increased benefit, but they no longer have to worry about changes in health preventing them from increasing their disability protection.
Buying an IDI policy is an important aspect of financial planning. It’s important to not only get the right amount of coverage, but also to get the right optional riders that add value to the policy, and that meet your needs today and tomorrow.
William Olmsted holds a Financial Representative contract with The Guardian Life Insurance Company of America based out of New York, NY.
Individual disability insurance policy Forms 18ID, 18UD, 18GI, 1400, 1500, and 1600 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. In New York: These policies provide disability insurance only. They do not provide basic hospital, basic medical or major medical insurance as defined by the New York State Insurance Department. For policy forms 18ID, 1400, 1500, and 1600 the expected benefit ratio is 50%. For policy forms 18UD, 18GI, 18UD-F, and 18GI-F, the expected benefit ratio is 60%. The expected benefit ratio is the portion of future premiums that the company expects to return as benefits, when averaged over all people with these policy forms.
1. If you choose to have an optional rider on your policy your premium will increase.
2. This optional rider does not necessarily protect against an increase in the cost of living.
2017-51642 Exp. 12/19