Life insurance does its task well. It provides a reliable source of income to help families recover from the loss of a loved one without the added burden of unplanned expenses. Riders help to extend the benefits of a policy to include a myriad of situations. And some riders, like a disability income rider, benefit the insured and his family while he’s still living.
A disability can lessen an individual’s quality of life and add a financial burden to the household. A standard life insurance policy without riders won’t cover this type of situation, leaving families with the compounded hardship of a loss of income and mounting medical expenses.
The us of a disability income rider can alleviate the financial worries so the insured can focus on healing
How The Disability Income Rider Works
A disability income rider provides a source of income if the insured can no longer work and earn a living.
Depending on the conditions of the policy, it offers a monthly income for a pre-defined duration and amount. The insured and his family can use it for medical expenses in lieu of his normal wages. Some riders will waive the monthly life insurance premiums as well.
The benefit of the rider is typically paid as a percentage of the face value of the life insurance policy. Most insurers will pay a monthly stipend of 1 to 2 percent.
For a $1 million policy, it comes to $10,000 a month. This amount along with the waived life insurance premium can certainly ease some of the financial burden for the insured and his family.
Criteria for Claims
Like most insurance, a disability income rider has its conditions and terms.
First, there’s the definition of what constitutes a disability.
With some insurers, it is a permanent health condition. With others, there is a time period which must elapse before it will pay. The risk of a disability is higher than one may expect. Therefore, it pays to understand the insurer’s precise definition.
The life insurance policy will indicate if the disability is covered for just an accident or if it will cover it as the result of an illness.
Regardless, most insurance companies will stipulate an initial waiting period before they will begin paying the benefit. It’s essential individuals maintain enough in savings and disposable income to cover the lost income.
Insurers will likely require some type of documentation stating the disability is permanent. Some may accept verification of Social Security disability payments as evidence.
The policy will also spell out the terms of the benefit.
It may include a set monthly amount for a specific duration. If the insured is on Medicare or Social Security, he should research any possible effects on these benefits with the paid claim of the rider. The policy will continue to pay either until a set age limit or for the lifetime of the insured.
Benefits of a Disability Income Rider
The overwhelming advantage of this life insurance rider is the security of a guaranteed income even with a fixed duration. It can go a long way toward maintaining the individual’s quality of life as well as his family.
While the benefit is being paid, the life insurance will not lapse due to nonpayment if it is a condition of the rider.
The cash value of a life insurance policy could continue to accumulate, also. The insured could receive the annual dividends as per the terms of the policy. The insured can take out loans against it if needed. And if the unexpected should occur, the beneficiaries will receive the death benefit to manage any remaining debts and expenses.
Most riders require the insured purchase the rider at the time the policy is issued.
Also, the wise prospective buyer will look into any fees associated with the cancellation of the rider, though it would be atypical. On a positive note, adding additional coverage with a rider is often an affordable alternative to a separate disability income insurance policy.
A disability income rider offers the security of a guaranteed income should a permanent disability keep an individual from working. It prevents the lapse of the life insurance policy so the insured can continue to enjoy the benefits of the cash value and dividends to supplement his income.
It’s a small price to pay for the financial security of the individual and his family.