The Vital Optional Rider - Residual Disability Rider
There are many optional disability insurance riders to choose from with all of the major DI carriers. There is one that should not be considered optional, the Residual Disability Rider. The residual disability rider can be thought of as coverage for partial disabilities, but it can be much more than just coverage for partial disabilities depending on the carrier you choose for your policy. Typically a residual disability rider will pay a portion of your total monthly benefit if a sickness or injury prevents you from being able to work full-time, or if you suffer at least a 20% loss of income. These provisions vary from policy to policy, however one thing remains the same, without a provision in your policy to protect against residual disabilities, you don't have adequate income protection.
Some residual disability riders also act as an unlimited recovery benefit for the life of the policy. Some start with a 15% loss of income, some don't require a loss of time or duties to pay a claim, and much more. There are differences between carriers, however there is one reason above all else to have a residual disability rider on your DI policy. Most claims are illness claims, and most illnesses don't start overnight, they take awhile before you are totally disabled. A residual disability rider will allow you to trigger benefits sooner while the illness progresses, and may also enable you to receive benefits longer when you recover from a claim.
Important Riders - COLA, Future Increase Options
The Cost of Living Adjustment rider is a very important, but not always vital rider for you to have. It is more important in my opinion, the younger you are. If you are in your 30's or 20's I would call it vital, if you are in your late 50's or 60's I would say it may be the first optional rider to drop to save money on your policy.
The COLA rider can be thought of as inflation protection that only kicks in when you file a claim. After you have been on a disability insurance claim for one year, the COLA rider will increase your monthly benefit to keep pace with inflation. One can expect somewhere around 3-4% for a COLA increase, and you can find them as high as 8% in the industry. If you become permanently disabled, you are going to wish you have the COLA rider on your policy. If you are buying a policy to protect against the worst case scenario than you want the COLA rider. If you are young, and have a long way to go before you can retire, then you want the COLA rider. If you are fairly well funded towards retirement, then you may be able to go without this rider. Most disabilities are resolved inside of one year, in which case the COLA rider will never help you. The average length of a claim is 3.2 years, leaving only 2.2 years of possible benefits from the COLA rider on average.
The average however is not a real number, because most disabilities are resolved inside of one year, it is the permanent disabilities that stretch the average out to 3.2 years. The real world answer is that you are most likely to have a disability that never sees benefits from the COLA rider, or you'll have a permanent disability that will need to have the COLA rider.