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Article 14 of 15 in Sample Disability Insurance Policy and Provisions Review |
Disability insurance automatic benefit increase rider |
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Another rider attached to the sample disability income insurance policy is the Automatic Benefit Increase Rider, which offers the opportunity, for automatic benefit increases on specified policy anniversaries, subject to stated conditions.
AUTOMATIC BENEFIT INCREASE RIDER
This rider is part of your policy. Its effective date is the same date as the Policy Date unless another date is shown on the current Data Page. All definitions, provisions and exceptions of the policy apply to this rider unless changed by this rider.
DEFINITIONS
TOTAL MONTHLY BENEFIT
Total Monthly Benefit means the sum of this policy’s Maximum Monthly Benefits shown on the current Data Page. It includes the Disability Benefit and any Social Security Substitute Benefit. If multiple parts of the Maximum Monthly Benefit period are shown on the current Data Page for the Disability Benefit section, the Maximum Monthly Benefit for the remainder of the benefit period will be used to determine the Total Monthly Benefit. |
COMMENT:
This particular rider provides for automatic benefit increases, subject to the stated conditions. The amount of each increase is based on the total monthly benefit, which is the sum of the Maximum monthly disability benefit and the maximum monthly Social Security Substitute Benefit, if included. If the current Maximum Monthly Benefit is different from that shown on the Data Page, the Maximum Monthly Benefit for the remainder of the current period is used to determine the Total Monthly Benefit.
INCREASE OPTIONS
This rider provides the opportunity to increase the Disability Benefit amount shown on the Current Data Page on the five policy anniversaries following the effective date, provided you are not disabled on the Policy Anniversary and you are not receiving benefits under any Return to Work Rider. The increase is provided without evidence of insurability, but will not exceed our Maximum Issue and Participation limits then in effect. This increase is based on the Consumer Price Index for All Urban Consumers (CPI-U) as published by the United States Department of Labor.
If the index is discontinued, delayed or otherwise not available for this use, or if the composition or basis of, or method of calculating the Index changes so that we consider it not appropriate for calculating further Automatic Benefit increases, we have the right to substitute what we believe is an appropriate index for the CPI-U.
The amount subject to the Automatic Benefit Increase is based on the Total Monthly Benefit on the Policy Anniversary just prior to the scheduled increase unless the Owner has decreased the monthly income benefit amount under the Policy Adjustment Option section. If such a decrease has been made, the amount subject to the Automatic Benefit Increase is the decreased amount.
The increase amount is determined by multiplying your Total Monthly Benefit by an increase factor. The increase factor will be:
- The CPI-U 6 months prior to the Automatic Benefit Increase date;
DIVIDED BY
- The CPI-U 18 months prior to the Automatic Benefit Increase date;
LESS
- 1.00.
The increase factor cannot be less than the Automatic Benefit Increase Minimum Index Percent nor greater than the Automatic Benefit Increase Maximum Index Percent shown on the current Data Page.
If the change in the CPI-U is less than 4%, the increase available will be 4% of the Total Monthly Benefit amount shown on your current Data Page (or $25, whichever is larger).
Any increase to the Disability Benefit (shown on your current Data Page) resulting from this rider will be effective on the Policy Anniversary for which it is offered, subject to the Acceptance and Rejection of an Offer provision below. The adjusted Disability Benefit applies to new Disabilities which start on or after that Policy Anniversary. A Recurring Disability is not a new Disability. |
COMMENT:
This rider offers the opportunity to increase the disability benefit for five consecutive years. Evidence of insurability is not required at the time of increase, the Policy Anniversary, but if you are disabled on the Policy Anniversary, the increase will not go into effect.
The increase is based on a formula that uses the CPI-U, or the next best thing if the CPI-U is not available or changes in the calculation make it inappropriate for use.
The amount to be increased is based on the Total Monthly Benefit just prior to the scheduled increase. If that benefit has been decreased, the decreased amount will be used. Though a formula is used to determine the amount of the increase, the increase, according to the Data Page, will not be more than 10% or less than 4% of the Total Monthly Benefit. If 4% is less than $25, then the increase will be $25.
ACCEPTANCE AND REJECTION OF AN OFFER
An increase offer will be automatically billed. Increases are accepted by paying the new premium. Increases may be declined by notifying us in writing within 30 days of the Policy Anniversary or by not paying the increase in premium. |
COMMENT:
Election of this option could not be easier. The increased benefit leads to an increase in premium. You accept the increase in benefit by paying the increase in premium. If you do not pay the increase in premium, you do not get the increase in benefit.
LIMITATIONS AND CONDITIONS
Increases will not be offered for any Policy Anniversary on which you are disabled or when you are receiving benefits under any Return to Work Rider.
The right to future automatic increases will expire if two Automatic Benefit Increase offers, whether consecutive or otherwise, are declined by the Owner.
Options missed due to lapse of a policy which is subsequently reinstated will be treated as if the Owner declined the Automatic Benefit Increase offer. |
COMMENT:
You will not be given the opportunity to receive an automatic benefit increase while you are disabled in any way. If you miss the benefit increase opportunity because of disability, you will not be considered to have declined the option. However, if you do decline two Automatic Benefit Increases, either by written notification or by not paying the premium increase, your right to future benefit increases automatically expires. The two declinations do not have to be consecutive. For example, if you decline the first and third options, the fourth and fifth options expire automatically. Two declinations not only result in the expiration of any remaining potential benefit increases under the existing rider, but also terminate the right for any future Automatic Benefit Increase Riders to be added to the policy.
INCONTESTABLE
We will not use any misstatement in an application, except a fraudulent misstatement, to void the Automatic Benefit Increase renewal or to deny or reduce a claim after the Automatic Benefit Increase renewal has been in effect for 2 years during your lifetime, excluding any period you are Disabled. |
COMMENT:
This is the basic incontestable provision applied to statements made in the application for renewal of the Automatic Benefit Increase Rider. You can renew the Rider every five years, subject to evidence of insurability requirements. The information to determine whether you meet these requirements is gained from your answers on your application for renewal.
This provision states that the Automatic Benefit Increase Rider renewal can always be voided or a claim denied or reduced if the insurance company discovers, and proves, that you made a fraudulent misstatement on the application. In other words, not only was your statement incorrect, but the company must prove that you intentionally misstated your answer in order to deceive the company and that the company relied on your misstatement to its detriment. If not fraudulent, a misstatement on the application can only be used to void the renewal or deny or reduce a claim during the first two years the renewal has been in effect. If you are disabled, that time does not count toward the two years.
RENEWAL
A renewal anniversary will occur on every fifth Policy Anniversary following the effective date of this rider. On each renewal anniversary while this policy is in force, we will ask for current evidence of financial insurability prior to the Policy Anniversary. If we receive the information we require (which will include an application signed by the Owner and the Insured) within 60 days of our request and you qualify under our underwriting guidelines then in effect, we will renew this rider for another 5 years of Automatic Benefit Increase offers.
This rider will be suspended if you are receiving disability benefits under the policy or benefits under any Return to Work Rider on a renewal anniversary. After your covered disability ends, you may renew this rider by providing the evidence of financial insurability that we require for renewal. A rider that is renewed following a period of disability is renewed only for that portion of the 5-year period that remains until the next renewal anniversary. |
COMMENT:
The only insurability information that will be reviewed to determine your eligibility for another five year renewal of the Automatic Benefit Increase Rider is evidence of financial insurability. The insurance company does not review current health history.
TERMINATION
This rider ends on the first of the following events:
- Financial underwriting information requested for renewal is not received within 60 days of our request;
- You do not qualify for renewal under this rider’s Renewal provision;
- The Owner declines two of the five Automatic Benefit Increase offers within the initial term of this rider or any renewal;
- You reach your age 56 Policy Anniversary (except we will offer an increase in your Total Monthly Benefit on the five policy Anniversaries following the effective date of the rider);
- The Owner sends us a written request to terminate this rider; or
- The policy of which this rider is a part terminates.
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COMMENT:
This rider may terminate in many different ways. The first three have been discussed and the last two are self-explanatory. With regard to the fourth, the insurance company limits rider eligibility to the date you reach your Age 56 Policy Anniversary. If, however, you renewed on your Age 54 Policy Anniversary, the insurance company will allow an increase in your Total Monthly Benefit for all five years, even though some extend beyond your Age 56 Policy Anniversary.
REINSTATEMENT
If this rider terminates under 6, above, it will be reinstated if your policy is reinstated based on a formal application for reinstatement. |
COMMENT:
The only way that the rider can be reinstated is if it terminates because the policy to which it was attached is terminated. |
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