A physician's income often increases as their career progresses. Unfortunately, stable career progression and higher income levels don’t always translate to financial security. When illness or disability strikes, the time and effort you put into career advancement go down the drain. For this reason, many physicians invest in disability insurance policies to protect their future.
When choosing a disability insurance policy, it is important to make sure your benefits keep pace with your growing income. Major disability insurance companies offer riders that let policyholders improve their policy specifics to fit their needs. Physicians, especially those just beginning their careers, should take the time to learn about different policies and the varying rider options offered should disability strike.
This guide looks at the automatic increase benefit rider and how it can help you protect your financial future.
What is the Automatic Increase Benefit Rider?
After purchasing a disability insurance policy, you can add on the Automatic Increase Benefit (AIB) rider, which automatically modifies your coverage to account for any increases in your income. Annual increases are provided for a specific term, typically in the first five or six years. You won’t need to provide evidence that your income has increased during this period. The benefit would typically increase by approximately 4% each year for the first five or six years of the policy, however, it may be more depending on the policy. Also, you will naturally pay for what benefit amount you hold. Therefore, the rider does not cost any additional premium to have on a policy however the premium will increase if your monthly benefit increases. For example, if your benefit increases 4% at the first policy anniversary date, your premium will likely increase by around 4% as well.
Does the Automatic Increase Benefit Rider Require Proof of Health to Purchase More Coverage?
No, there is no medical underwriting when your benefit increases due to the Automatic Increase Benefit Rider. However, because there is a corresponding premium increase when your benefit increases, some insurance companies allow you to decide whether to accept or reject the AIB each year.
The terms, restrictions, and rules for renewing AIB may differ depending on which insurance company you choose. Therefore, exploring your options is essential when selecting the best policy for your needs.
Benefits of the Automatic Increase Benefit Rider
As a physician, having a policy with an automatic increase benefit rider can give you peace of mind. Here are some of its major advantages.
- Protects Your Income as It Grows: Without requiring additional medical underwriting, AIB increases your base coverage, for the first few years of your policy, to account for salary increases and inflation.
- Provides Financial Security: As your career progresses and your income increases, you’ll have peace of mind knowing you will have adequate financial support with AIB.
- Conveniently Customizes Your Coverage: With an automatic increase benefit rider, you won’t need to qualify for increases based on income or other coverage. This may be beneficial for specialties that have stable income, or a group disability coverage, limiting the amount of benefit available through your private insurance.
When Is the Best Time to Add the Automatic Increase Benefit Rider?
The automatic increase benefit rider is an excellent choice for physicians who need a certain amount of monthly benefit but cannot qualify due to their income or a large group disability policy. There is no financial underwriting, therefore you qualify for these automatic increases even if that means you’ll technically be over-insured. This rider is free on policies so the best time to add the automatic increase benefit rider is when you first purchase a policy.
If this is your first time looking for disability coverage, it is also helpful to know that most insurance companies offer discounts on policies for residents, fellows, and interns. For example, Ameritas offers a 20% discount for all residents and fellows. Graduating residents and fellows can choose the highest level of policy coverage to make the most of these discounts. Most companies will also lock in the discount even for increased benefits when you are no longer in training.
Insurers That Offer the Automatic Increase Benefit Rider
While most major insurers offer riders for their disability insurance coverage, each company may provide different eligibility criteria, terms, and stipulations for AIB.
Let’s look at the five major disability insurance companies and their options for getting the automatic increase benefit rider.
Guardian's automatic benefit enhancement rider is a no-cost rider added to eligible policies and gives a 4% benefit increase every policy anniversary for six years. No proof of income is required at the time of underwriting, and each increase will include an additional premium based on the client’s age.
Ameritas offers the automatic increase rider(AIR) as an optional rider for their insurance policies. It raises the policyholder's base monthly benefit by 4% each year for up to five years without asking for proof that the person can be insured. After the fifth year, the policyholder must reapply for another five-year term.
With The Standard, fully underwritten policies include the automatic increase benefit rider at no cost. No medical or financial information is needed to boost the policyholder's monthly payout by 4% for up to six years.
Principal offers the future benefit increase rider to help policyholders keep up with inflation and increase their monthly benefits to match their higher income levels. A minimum increase of 4% compounded is guaranteed but you could be eligible for a maximum increase of 10% compounded. This will increase the benefit each year for up to six years, with no proof of insurability required. This rider is eligible for renewal by the end of the sixth year with financial underwriting.
MassMutual offers its automatic benefit increase rider as an optional rider to enhance the overall benefits of policyholders. It features a 3% increase in monthly benefits each year for five years without needing to prove insurability.
Do You Need an Automatic Increase Benefit Rider?
Protecting your future financial security is just as important as managing your current income. Investing in disability insurance can provide physicians with peace of mind, knowing their income is protected even when the unexpected happens. Automatic increase benefit riders help policyholders gain greater control over their insurance protection by ensuring their coverage matches their income level.
With different policies to choose from and several ways to tailor your disability coverage, choosing a policy can seem overwhelming. Fortunately, we’re here to help you choose the best disability insurance that suits your needs.
Reach out today to explore your options and learn which disability insurance policy is right for you!