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The Future Increase Option Rider

Berkshire’s disability insurance policy offers many optional riders1, and on this website you can see what the most popular optional riders are for Berkshire’s policies. The second most common rider chosen by consumers today is the Future Increase Option Rider2, with over 62% of applicants selecting to have it on their policy. 

So What Does It Do? 

The theory behind this rider is simple; most people who purchase a personal policy have not yet reached their peak earnings potential. Hopefully at some point in the future their income will be much more than it is today. In order to buy a policy, an applicant has to go through the entire disability insurance underwriting process, which is not easy to do. There is blood work, medical records have to be reviewed, and quite honestly you have to be in pretty good health just to get a policy issued. 

Even if you are in good health, there is better than an average chance your policy may be issued with pre-existing condition exclusions if you have any medical history like back problems, or some other condition which could potentially disable you in the future. 

My point is, today is most likely the healthiest you will ever be. As the old saying goes, “It’s all down hill from here” when it comes to your health. The Future Increase Option Rider allows you to guarantee your ability to purchase more disability insurance in the future regardless of any adverse changes in your health history. So not only can you go through underwriting now to protect your $100K salary today, you could also add this rider to guarantee that when you are making $250,000 you could have full disability coverage on that amount even if you were diagnosed with diabetes at some point after you originally purchased the policy so long as your income went up. 

Give Me Some Examples of Why I’d Want This! 

Many people buy disability insurance in their late twenties or early thirties. We sell a lot to people in the medical profession, as well as other white-collar occupations, but most medical professionals see enough people go through disabilities that they don’t have that false sense of immunity that many people in other occupations have. So let’s say you are a new dentist buying a policy at age 33 for the first time. When you are evaluating the optional riders to choose for your disability insurance policy you decide to take the maximum future increase option you can. 

You buy a monthly benefit of $5,000, and you buy an additional $10,000 of future increase option. Once the policy is approved, you know that no matter what happens to you medically in the future, so long as you have the higher income to justify it you will be able to purchase up to $15,000 a month of personal disability insurance. If that same new dentist did not select the future increase option when they first bought the policy, and grew a successful practice where he was making $300,000 a year 10 years down the road, but had a melanoma removed 5 years ago he would have to continue working knowing that if he ever became disabled he would only ever get $5,000 a month because no insurance company is going to give him more coverage because of the melanoma history. 

 A Less Drastic and More Common Scenario

Many people see chiropractors to get cracked and loosen their back or neck up. Well that same chiropractor gave you a diagnosis in order to get paid from the insurance company. One of the more common diagnoses we see shows the word “degenerative” in it. Meaning that without the future increase option rider on your policy, and new additional disability insurance policies to cover your higher earnings today would have a pre-existing condition exclusion on your back, neck, or spine. 

Or let’s say that you went through a divorce later in life, and during that divorce you sought some counseling, or had your personal physician provide you an anti-anxiety medication for awhile. Now it is likely that any new disability insurance policies issued on your attained higher earnings would have an exclusion for mental and nervous disorders3 because you now have an anxiety history. If you had the future increase option rider on your original policy any new additional coverage would have full protection for any mental or nervous disorder. 

The Summary and Reason I Wrote This Article 

The future increase option rider is something a little too close to my own personal situation. I have been very fortunate in life, and have become quite successful owning this business. I bought my first disability insurance policy when I was a year out of college, and just starting in the insurance business. I bought $2,000 a month with a future increase option rider of only $3,000. 

I remember thinking to myself that if I had a total of $5,000 a month in coverage (which is about the amount somebody making $100,000 a year would get), that I would be fine. Well to make a long story short $5,000 wouldn’t cover my monthly mortgage today, and when I was 25 years old I was diagnosed with Type 1 diabetes just a few years after playing lacrosse at Dickinson College. I was an avid rock climber, played collegiate lacrosse, and was in excellent shape. It came out of nowhere, and once my income passed $100,000 I had to live knowing that if I ever became disabled I was up a certain creek without a paddle. 

We buy disability insurance to protect our lifestyles, our families, and our ability to earn an income. The future increase option rider is relatively inexpensive as a percentage of the overall cost of your policy. Don’t make the same mistake I made and short change yourself. You should always purchase the maximum amount of future increase option that you possibly can to protect your future earnings, not just the annual income you have today.

Steven Crawford, General Agent, The Guardian Life Insurance Company of America (Guardian) New York, NY. 

1. If you choose to have an optional rider on your policy your premium will increase.
2. Restrictions and limitations apply. While medical information is not required when exercising a future increase option, applications to exercise an increase option will be financially underwritten, taking into consideration both the applicant’s then current income, as well as all disability insurance which is then in force, or for which the insured has applied or is eligible to receive. 
3. A twenty-four month mental and/or substance-related disorders limitation is included on all policies issued to anesthesiologists/anesthetists (MD, DO), emergency room physicians, pain management physicians, and nurse anesthetists. Limitation also applies to all new policies issued in the states of California and Florida, however, the limitation does not apply to policies issued as a result of a future increase option or future purchase option where the policy from which the option is exercised does not contain such a limitation. The limitation does not apply to any policies issued in the state of Vermont, regardless of occupation. 

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