Edward E. Graves, author of “McGill’s Life Insurance” says there are three methods a non-disabled person can use to increase disability insurance with income increases.
The general rule of thumb is if you received a raise and your income increases, or your expenses have increased, so should your disability insurance.
An outdated and less ideal method is to increase disability insurance coverage with income increases as supplements to in-force polices in increments.
The downside is that every incremental amount of coverage you buy may require evidence of insurability. If you are in poor health, additional coverage may not be an option.
The second method is by adding a rider that guarantees the right to purchase additional coverage at future intervals up to a specified age.
Every time an adjustment is needed, you simply add more coverage to the existing disability insurance policy. What makes it unique from the previous option, is that you can buy additional disability insurance coverage regardless of your health status.
The most popular method is to use a rider that automatically increases the disability insurance benefit amount, and adjusts to your increased income.
Typically, this comes in the form of a flat-percentage amount on each policy’s anniversary. You still have to buy more coverage and premiums increase along with them and age.
Therefore, disability insurance is crucial to have in cases where you become disabled and cannot generate income. Increase disability insurance with income increases, to ensure you will be able to support the lifestyle to which you’ve grown accustomed.