Riders Flashcards
When does the inflation protection feature of a COLA rider begin to apply?
When the insured is on claim, and only after at least one year.
How is the COLA applied?
After one year on claim, the COLA is applied based on the trailing 12 month CPI up to the maximum specified by the COLA rider (often 6%).
T or F - COLA riders are among the expensive riders.
True
According to expert Steve Crawford, what is the “cut off” age for considering purchase of a COLA rider?
Age 42. Those younger should consider it. For those over age 42, inflation is less of a threat. This a rule of thumb only, and may not always apply. Note that avoiding or dropping a COLA rider will usually significantly decrease the premium.
What is an Automatic Increase Rider?
It automatically increases the policy benefit, typically by 25% over a five year period after the policy is issued. No underwriting or proof of income is needed.
How is the premium affected by an automatic increase rider?
Each time the benefit goes up, so too does the premium reflecting the higher insurance amount.
Who might be a candidate for an Automatic Increase Rider?
Anybody who wants their coverage to increase, but typically someone who expects their income to quickly increase (like a resident, or a new partner) and who wants to protect that income. Note that rising income also makes it easier to pay the higher premium.
What is a future increase option (FIO)?
Guarantees the right to purchase additional coverage up to a specified level with only proof of income (typically a tax return) and no additional underwriting (i.e. even if insured’s health declines) up to a certain age (typically age 55).
What are the most expensive riders?
Extended age to collect benefits, and especially a Lifetime Benefit
COLA
How can an older physician decrease the cost their disability insurance?
Eliminate the COLA
Eliminate the Future Purchase Option
Switch more of their coverage to group (if available)
What is maximum insurance monthly benefit amount for most single private and group disability insurance policies?
Are there any exceptions?
$10,000
Yes, there are exceptions on the group side. For example, the Kaiser Permanente group policy pays up to $20,000 per month.
