No one likes to think of the worst happening, but catastrophes happen every day. Protecting yourself with the right disability insurance and riders, such as the catastrophic disability benefit rider, is the best way to protect yourself financially.
Here’s everything you must know about it.
What Is a Catastrophic Disability Benefit Rider?
Disability insurance replaces a percentage of your income if you become disabled and cannot work to the same level you did before.
Sometimes, though, your disability is so severe that you cannot function daily. Most insurance companies define a catastrophic disability as someone who becomes disabled and cannot do two or more daily living activities.
For example, if you need assistance getting dressed and eating, it might qualify as a catastrophic disability. Other activities under this heading include needing help to go to the bathroom, going from Point A to Point B, and bathing.
How It Works
Catastrophic disability benefit riders cover up to 100% of your income if you are disabled to the point that you can’t handle your daily activities.
Catastrophic disability benefits aren’t separate insurance policies. Instead, they are a rider you add to your regular disability coverage. Therefore, you must first qualify for standard disability benefits and then can apply for additional coverage if you’ve had a catastrophic disability.
What It Covers
Like any insurance, what catastrophic disability benefits cover varies by the insurance company, but most agree that this rider only covers the most disabling conditions that render you unable to handle your daily life.
- Loss of cognitive abilities
- Loss of speech
- Loss of eyesight
- Loss of hearing
- Loss of use of a limb, such as hands or feet, that is essential to your position and daily living
Typically, to qualify for catastrophic disability benefits, you must have extensive medical evaluations and testing completed to prove you cannot handle certain daily living activities.
However, most insurance companies have strict requirements, including specific ages they’ll allow catastrophic benefits (50 is usually the limit). There are also typically strict benefit limits, ensuring you don’t receive more than three times your base benefit, on average.
Proving you qualify for a catastrophic benefit is usually much more complicated than proving a standard disability.
Basic vs. Enhanced Catastrophic Disability Benefit Rider
Each catastrophic disability policy has different benefits depending on the company; however, most have a basic and enhanced disability benefit rider.
- Basic: A basic rider usually covers cognitive impairments, such as being unable to make decisions, remember things, or focus, and requires extensive supervision. It may also include a total loss of sight, hearing, the ability to talk, or the use of both hands or feet.
- Enhanced: An enhanced rider may cover all of the above plus the loss of the ability to handle two or more daily living activities, such as dressing, feeding, toileting, and moving.
Catastrophic Disability Insurance Cost
Like any disability insurance riders and policies, the cost of catastrophic disability insurance varies by provider
However, if you’re already paying high premiums, usually 5% to 6% of your income, chances are you have catastrophic disability insurance in your coverage.
If not, you’ll pay around $1,000 to $1,500 per year for the additional coverage, but again, it varies by provider and your qualifying factors.
Top Catastrophic Disability Benefit Providers
The following providers offer a catastrophic disability benefit on their disability insurance, each with different coverage options.
Principal offers catastrophic coverage of up to $5,000 in addition to your basic coverage. To get benefits, you must meet one of the following:
- Be unable to perform two or more activities of daily living
- Proven to be cognitively impaired
- Prove to be disabled (no sight, hearing, or use of hands or feet)
Ameritas offers a catastrophic disability rider for up to $5,000 or 5% of your base policy. The coverage is available through age 65 and begins 365 days after your disability begins.
Guardian offers catastrophic disability insurance that helps you get up to 100% income replacement if you cannot function every day or have an irreversible disability. There’s also the option for an Enhanced CAT plan that pays an additional 3% cost of living adjustment.
MassMutual’s CAT rider offers up to 100% of pre-disability income replacement. To qualify, you must be severely cognitively impaired or be unable to perform at least two daily living activities, such as dressing, toileting, getting around, or making decisions.
Benefits of a CAT Rider
You might wonder if you need a catastrophic disability benefit rider on your disability policy. After all, you’re already paying high premiums for disability insurance; is the rider necessary?
- You’ll get 100% income replacement, making it easier to afford the medical care and supervision you need based on your disability
- The rider is usually pretty affordable compared to the overall cost of disability insurance
- You can use the funds for services your health insurance won’t cover
Who Should Purchase a Catastrophic Disability Benefit Rider?
Anyone who doesn’t have a large amount of money saved for a catastrophic disability should pay for the CAT rider. It increases your premiums slightly but protects you immensely should the worst happen.
Consider what you would do if you couldn’t talk, walk, or go to the bathroom alone. You probably wouldn’t put the burden on your family. Of course, you’d want proper medical care and supervision to help you through the difficult times.
However, without financial support, it would be impossible for most without a CAT rider.
A catastrophic benefit disability rider is another layer of protection for your investment in your medical career. Here are some more questions people ask about it.
Does Everyone Need Catastrophic Disability Insurance?
Everyone should consider a CAT rider; if it’s within your budget, consider adding it. If you must use it, the benefits will more than pay off.
Can I Purchase a Catastrophic Disability Benefit Rider at Any Time?
Each insurance company has different policies. Ask your insurance agent about adding a CAT rider if you can’t afford one when you buy the policy.
Are Catastrophic Disability Benefits Ever Included in Your Policy?
Every insurance company offers different policies. Ask about everything in each policy to determine if a CAT rider is already in your coverage.
The Bottom Line
A catastrophic disability benefit rider protects you in your time of need. A disastrous accident or disability can render you unable to work, bathe, dress, talk, or even walk.
In these worst-case scenarios, you need more than 60% income replacement and 100% income replacement to ensure you can get the proper care.