The COLA rider on an individual disability insurance policy is a cost of living adjustment rider.

This optional rider usually is an add-on rider that costs an additional premium.

Cost of Living Riders typically take affect after you have been receiving disability insurance benefits after 1 year. The amount paid depends on your rider. It is important to review your options carefully.

Compound COLA riders will pay increasing benefits while on claim and the amount of increase will compound each year. This is important as inflation compounds as well so it is more likely to keep up with inflation.

Some riders pay a simple increase so the increased benefit will multiply by the original amount only. This will increase your policy less than a compound COLA over a long period of time.

Usually you can choose a 3% or a 6% COLA. Some will pay that amount fixed and some will pay a range between 0-3% or 0-6%, depending on actually inflation that year.

Look at your options closely as some will pay a cost of living adjustment based on the CPI-U which may be less than actual inflation that year.

The COLA rider is especially important if you are younger when you purchase your policy (under age 45) since you have the longest potential period of time on a claim.

For more information about the COLA rider on an individual disability insurance policy or to request a quote, contact Set for Life Insurance today!