Disability Cost of Living Adjustment (COLA) Rider

A Disability Cost of Living Adjustment (COLA) Rider is an optional addition to a disability insurance policy that provides for an automatic increase in the benefit amount over time to account for inflation. The COLA rider helps ensure that the purchasing power of the disability benefit remains the same over time, despite inflation.

Here are some key features of a Disability Cost of Living Adjustment (COLA) Rider:

  • The rider typically increases the disability benefit annually, based on a set percentage or an inflation index.
  • The increase in the benefit amount starts after a waiting period, which can range from six months to two years.
  • The cost of the COLA rider is typically higher than a standard policy without the rider.
  • The COLA rider can be beneficial for individuals who anticipate a long-term disability or who want to protect against inflation.
  • The COLA rider is typically only available for long-term disability insurance policies.

For example, let's say John has a long-term disability insurance policy with a monthly benefit of $5,000. He also has a COLA rider that provides for a 3% annual increase in the benefit amount. If John becomes disabled and is unable to work for two years, his monthly benefit would increase to $5,150 per month (3% increase per year x 2 years = 6% increase, $5,000 + 6% increase = $5,300 per month). Without the COLA rider, John's monthly benefit amount would remain at $5,000 per month throughout his disability, even if inflation increases the cost of living.

Next Up

Each month, Mployer collects and presents some of the most relevant and most pressing recent changes in law, compliance, and policy in areas related to employee benefits, health care, and human resources.
The latest economic release from the Bureau of Labor Statistics reports that the U.S. added only 12 thousand new jobs last month, although multiple hurricanes hindered both job additions and data collection, while the unemployment rate held steady at 4.1%.
‍In this piece, we take a look at what kind of job openings are going to be most prevalent between now and 2033, as well as the education level needed to access those opportunities.