Becoming a physician is a significant investment. It takes years of training, and you’ll likely accrue many financial obligations along the way, including student loans.
While your hard work may pay off and provide a fulfilling career, life doesn’t always turn out the way we plan. Disability is a genuine threat to all workers, especially those in high-paying fields that involve a significant financial investment.
Physicians experience an increased risk of disability because of the fine motor skills and expertise needed to provide hands-on patient care. It’s why disability insurance is one of the most critical forms of insurance for physicians.
Disability insurance provides substantial protection against the financial hardships you would otherwise sustain if an illness or injury left you unable to work. But your policy is only as good as the riders you choose.
What if your income and financial obligations increase significantly throughout your career? That’s when a future increase rider comes in handy.
What Is the Future Increase Rider?
A future increase rider allows you to increase your disability insurance coverage in the future, even if your health has changed. In exchange, the premium will increase as you increase your monthly benefit. A future increase rider is offered by most insurers but they will have their own unique terminology.
How is the Monthly Benefit Calculated when I use the Future Increase Rider?
Although medical underwriting will be waived when using a future increase rider, financial underwriting is still required. To qualify for an increase in monthly benefits, the company must perform a calculation based on your annual gross income and any other long-term disability benefits you currently have. For example, if your income is $200,000 but you have an employer-sponsored long-term disability policy for $5,000, you will likely be eligible for approx. $5,000-$6,000 total monthly benefit through the private policy. Individual policies need to perform this calculation to make sure you are not being over-insured based on income and other disability benefits you are expected to collect if you become disabled.
Benefits of the Future Increase Rider
The benefits of a future increase rider include the following:
- The ability to increase your disability insurance monthly benefit when needed
- No new medical underwriting or additional medical assessments when requesting an increase using this rider
- Coverage even if you develop a serious health condition
While each insurer has different terminology, they may differ on how often you’ll be allowed to increase your policy monthly benefit.
When to Add the Future Increase Rider to Your Policy
A future increase rider is beneficial to have within a policy if you expect your income to increase as an Attending physician, or you are currently a resident or fellow. The reason is that even if there is a health change since initially obtaining the policy if you have a future increase rider you’ll be able to increase your monthly benefit as long as you are still working full-time and not disabled. For example, if you develop Type 2 Diabetes after obtaining a policy with the increase rider, you could still increase your plan’s benefits even though you are now at a higher risk of disability. This is why it’s important for young attendings, residents, and fellows to consider buying disability insurance and secure their health.
Insurers That Offer Future Increase Riders and Their Terminology
How do these insurance companies differ when it comes to the future increase rider? Explore five of the top insurers offering this benefit to make an informed decision for your disability insurance policy.
Guardian has two different increase riders that you could select from, the Benefit Purchase Rider (“BPR”) or Future Increase Option Rider (“FIO”).
With Guardian’s Future Increase Option rider, you can increase your coverage at any policy anniversary date. You could choose to request an increase every year, or you could wait 5 years to increase the plan benefits for the first time. This decision is entirely up to you, however, this rider will only be attached to the policy up until age 55. Additionally, you will not be required to undergo another medical exam or provide proof of your current health status to increase your coverage in the future. This rider is considered to be a flexible increase rider, therefore there is an additional cost to have the rider attached to your plan.
Guardian’s Benefit Purchase Rider comes at no additional cost and can be built into policies. Like the Future Increase Option Rider, there will be no medical underwriting when using the rider and this can only be used up until age 55. However, the Benefit Increase Rider allows you to increase the plan at specific intervals.
- You will get one increase at the end of each 3rd policy anniversary date. In order to “renew” the rider for the next 3 years, you will need to request an increase and if you qualify for an increase (based on income), you must accept at least 50% of any additional benefit you qualify for. This way, you renew the rider at the end of each 3rd year but it’s a continuous 3-year cycle. If there is a 3rd year period where you do not request an increase or accept at least 50% of any additional benefit you qualify for, you will lose the rider forever.
- This rider will also allow you to increase the benefit within the 3-year period but only if you have a significant jump in income or you change employers and lose group long-term disability coverage.
These two riders represent the two options available within the industry. Most companies will have one type of future increase rider available. However, Guardian allows you to customize and select which rider you want to attach to the policy. The Future Increase Option Rider will be the most beneficial but it comes at a slightly higher premium.
Ameritas has one future increase rider available for all applicants, the Future Increase Option Rider (“FIO”). This is the same as Guardian’s FIO rider, explained above. You can choose to increase your benefits on each anniversary date of your policy.
There is one unique feature with Ameritas compared to Guardian. If you are using the Future Increase Option Rider from ages 40 to 55, you will be limited to a certain maximum benefit increase. For example, if you initially obtain the policy for a $5,000 monthly benefit and request to increase the benefit at age 41, the maximum annual increase would be the lesser of:
- Half of your original base monthly benefit amount ($2,500); or
- The amount you qualify for is based on your annual gross income and other long-term disability benefits.
Standard has the Benefit Increase Rider (“BIR”), which is the same as Guardian’s Benefit Purchase Rider. This allows you to increase your benefit amount once every three consecutive years.
Principal offers the Benefit Update Rider at no additional monthly premium. This rider will work the same as Guardian’s BPR and Standard’s BIR. You may increase your policy benefits every three years through age 55.
MassMutual is similar to Guardian where there are two different types of increase riders available to choose from. MassMutual has the Future Insurability Option Rider (“FIO”) or the Benefit Increase Rider (“BIR”). These will be similar to Guardian’s riders.
By adding the Future Insurability Option Rider to your MassMutual plan, you’ll have the option to increase your coverage benefits every year.
Find Out Which Future Increase Rider is Right For You
You have several options for adding a future increase rider to your disability insurance policy. Fortunately, we’re here to help make the process easier for you.
Contact us today to learn more about your future increase rider options. We can help you build the policy that best suits your profession, income, and needs