Previous posts in this series discussed why residents should secure disability coverage sooner rather than later and examined some important terms and provisions to look for in choosing a policy. In this final post, we’ll be discussing some provisions that allow you to increase your monthly benefits.
As a medical resident, you likely will not be able to obtain a high amount of disability coverage at first, due to your limited income. Consequently, it is important to look for a policy that offers a way to increase your benefits in the future, as your earning capacity and expenses increase. You can also, of course, just purchase an additional disability policy if you want to increase your monthly benefit amount, but there can be certain advantages to building benefit increases into your policy from the start. For example, if your policy has a future increase option provision, you can typically increase the monthly benefits without undergoing any additional medical underwriting (which could otherwise result in exclusions being added to your policy if you have recently suffered from a new medical condition).
Here are a few of the most common methods of increasing the monthly disability benefit of an existing disability policy:
The automatic benefit increase rider adjusts your monthly benefit on an annual basis to account for anticipated increases in income after you purchase your policy. The annual increases are typically for a term of five years, after which you will generally be required to provide evidence of your increased income in order to renew the rider.
This policy rider guarantees you the right to purchase additional coverage at predetermined dates in the future without going back through the long and tedious process of reapplying for a policy. These riders can be attractive because often no additional medical underwriting is required. Most insurers will not allow you to purchase this rider after age 45.
A COLA rider automatically increases your benefit amount by a certain percentage every year to account for increased cost-of-living due to inflation.
Assuming that you will not face a short or long-term disability until you are older is not a risk you want to take. An individual disability insurance plan is a key component in making sure you are financially stable in the event you are no longer able to practice medicine in your chosen field. However, not all plans are created equal. Take the time to evaluate your financial goals and look carefully at the benefits provided by the basic terms, provisions, and riders of the policy you are considering.