Both individual and group long-term disability (LTD) policies offer "riders," or optional terms that expand or limit the amount of coverage you receive. A major difference between individual and group plans lies in who actually decides which riders to purchase. Group LTD plans are generally employer-provided, and thus it is the employer who decides on the extent of coverage to buy. Individual long-term disability (LTD) policies, on the other hand, may be specifically tailored to the individual requirements of the person buying the policy.
Though there are exceptions, most employers who provide LTD insurance for their workers don't take advantage of the wealth of optional benefits available for purchase through riders, perhaps because employees rarely examine their LTD policies closely until they consider filing a claim. The good news is that workers with bare-bones LTD insurance (or none at all) can purchase individual disability policies on the open market.
Understanding the optional riders offered by insurance carriers will allow you to design an LTD policy to suit your specific needs. Here are a few of the most common riders found in LTD policies.
Catastrophic Disability Rider
This rider provides extra benefits for disabled individuals who are unable to perform two or more activities of daily living (ADLs), including the following:
- eating, or
- transferring (getting into and out of bed, a chair, or wheelchair).
Those with cognitive impairments who require supervision from others may also be eligible for additional benefits under this provision, sometimes referred to as an Assisted Living Benefit rider.
COBRA Premium Rider
If you stop working and choose to continue receiving medical and/or dental coverage through COBRA, with this rider, your LTD carrier will partially reimburse the costs of your COBRA premiums.
Cost-of-Living Adjustment (COLA) Rider
This optional benefit protects against inflation by increasing your monthly disability payments each year according to a formula derived from the Consumer Price Index (CPI). A cost-of-living rider is available as an optional extra in virtually every individual LTD policy, and it's one of the few riders that is sometimes provided with employer-provided group plans.
Child Care Benefit
If you have a dependent child enrolled in a child care center, this rider will reimburse most or all of those expenses for as long as you remain disabled. Note that some LTD carriers pay child care benefits only if you're participating in a vocational rehabilitation program or trying to return to work.
Dependent Child Continuing Education Benefit
If you have a child enrolled in a full-time post-secondary education program, this optional LTD benefit will pay a portion of those educational expenses. Like the child care benefit (above), you may be required to participate in a vocational rehabilitation program to qualify for this benefit.
Extended Earnings Protection Rider
If you return to full-time work after a total or partial disability, but your earnings are substantially lower than your pre-disability income, this optional rider allows you to continue receiving a portion of your monthly LTD benefits.
Future Increase Option Rider
This provision automatically increases the amount of your LTD coverage, regardless of your health, to keep pace with your increased earnings.
Non-Cancelable and Guaranteed Renewable Rider
If your LTD policy is non-cancelable and guaranteed renewable, your carrier may not alter the terms of your coverage, including your premium amounts, for as long as you pay your premiums within the grace period.
Pension Contribution Rider
This rider pays for continued contributions into a 401(k), 403(b), or other qualifying retirement plan for as long as you receive LTD benefits.
Relocation Expenses Rider
If a disabled individual must relocate (usually more than 50 miles) to return to full-time employment, this optional benefit will reimburse his or her for moving expenses, up to a set amount.
Return of Premium Rider
With this rider, a percentage of your premiums are returned to you, minus the cost of any claims paid, after a specified period of time. For example, your LTD carrier might refund from 50 to 80 percent of your premiums paid, less any claims, after 10 years.
Workplace Modification Rider
Often found in employer-provided group LTD plans, a workplace modification rider provides reimbursement to employers who must make special accommodations to allow a disabled employee to return to work. Typical expenses an employer might incur include ramps, handrails, adjustable desks, or ergonomic chairs. Reimbursement may be capped anywhere from $1,000 to $50,000 depending on the terms of the policy.
To learn more about LTD plans, visit Nolo's section on Long-Term Disability Insurance.