Disability Insurance Articles
How A Cash Value Rider Affects Disability Insurance Coverage
2011-12-23
When buying a disability insurance policy, it's important to consider options that might increase the policy's overall value. Many disability insurance companies offer a variety of add-on clauses that can be used to change a basic insurance policy. Add-on clauses can change insurance limits, add additional options for payout and even allow a policy to build value, as is the case with a cash value rider. Cash value riders are especially popular and can add an investment aspect to a disability insurance policy, which can make a standard policy into a solid investment that will provide benefits regardless of whether the policy holder ever makes a claim.
A cash value rider allows a policy holder to build cash value in his or her policy, so that if the policy ends, the buyer can receive a portion of the paid premiums or the total value of the policy. Generally, the cash value of a policy will be limited to the total of the premiums paid into the policy, or in some cases a bit lower. Cash value riders can be applied to a policy in a number of ways and may have riders that affect the way that they pay out, so it's important to understand exactly how a specific cash rider will affect a disability insurance policy before opting in. This will help to determine whether a cash value rider is worth the extra cost.
For instance, most cash value riders will pay out when the policy holder reaches 65, so it essentially acts as a long-term investment that will yield extra money for the policy holder when he or she retires. As many buyers don't need disability insurance after they retire--in fact, many disability insurance policies will automatically be canceled upon retirement--this type of rider can greatly increase the overall value of a policy and can be well worth the extra money.
As with all insurance add-ons, it pays to know how significantly a cash value rider will increase premiums. In some cases, the extra cost of a cash value rider will yield more of a return if it's invested in a 401k or a similar retirement account. Disability insurance buyers should look for as many quotes as possible when considering new policies or when considering riders, as this can be a great way to determine whether a certain company is providing a fair price. It can also be a great way to evaluate insurance limits and other factors that can affect the overall value of a policy, which can allow for a more informed decision and an affordable long-term disability insurance policy that will be a reliable investment.