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Disability Income Insurance: Individual: 101

Riders: Guaranteed Insurability, Social Security Offset, Cost Of Living

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Several optional riders (additions to the policy) are available with an individual disability income policy for an additional premium.

Guaranteed Insurability

This rider guarantees that the amount of the disability benefit will rise as your income rises.

The rider usually provides several specified times during the existence of the policy when the insured will have a right to increase the amount of the benefit regardless of health condition. For example, every two or three years, this rider may allow the insured to purchase an additional amount of benefit such as $200 or $500 per month. Many policies will allow you to advance an increase date in the event of a named life event, such as marriage or birth of a child, or purchase of a home.

Although the insurance company must offer these increases regardless of the insured’s current health condition, the insured must generally show that income has risen enough to justify the additional benefit.

The charge for the increased benefit will be based on the insured’s age at that time of the increase.

There is usually a maximum amount of benefit and/or number of purchasing opportunities under the rider.

Social Security Offset

A Social Security Offset rider protects you in case you don’t qualify for Social Security Disability Insurance (SSDI). While a person collecting benefits under a private disability policy may also collect under SSDI, the definition of disability to qualify for SSDI is much more restrictive than most Disability Income policies

The rider is subject to the same waiting period as the policy to which it is attached. After the waiting period, the rider will pay what you would receive from SSDI if you received SSDI benefits.

Once Social Security approves the SSDI claim, the offset rider stops paying benefits. If SSDI is never approved, you keep collecting. Of course, you have to make a good faith application to obtain SSDI.

To learn more, see: Social Security Disability Insurance (SSDI).

Cost of Living

This rider provides for a set percentage increase in benefits, usually annually after the first year of disability, to approximate the rise in the general cost of living.

The amount of increase is frequently tied to the Cost of Living Index with a maximum cap of anywhere from 4 to 15%.

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