Setting up some sort of disability insurance is the first step in ensuring you are covered in case of an unexpected accident, but recent studies suggest it might not be enough.

Some standard disability insurance policies can leave large gaps in coverage which could end up costing you thousands of dollars depending on your income and how the policy is written.

The majority of disability insurance policies will replace around 60% of your income in the event of you becoming unable to work, but policies vary greatly in how they define disability, whether or not benefit increases over time and how long the policy will last. However, the studies show that there are a number of disability insurance riders which can help secure your future finances.

A cost of living adjustment rider (COLA) will make sure that your disability benefit will rise in line with inflation. Financial adviser James Holtzman explains that,

It adds about 15% to the cost of the policy, but it protects your benefit from decreasing in the future.

There are two main types of cost of living adjustment riders available.

There is a flat rate increase of a few percent every year or a rider linked to the consumer price index. The value of a cost of living adjustment rider increase the longer a policyholder draws disability, so it is more important for a young worker with many years of work ahead of them than it is for someone close to retirement age.

Another useful rider is the own occupation rider. Most policies will only provide cover if you are unable to return to any type of job. So for example, a surgeon who becomes physically unable to perform surgery, but can still work in a coffee shop would not be eligible for benefits regardless of the huge salary reduction he might be forced to take.

An own occupation rider will provide coverage if you cannot return to your specific job. This type of rider is the most beneficial for individuals with very specialized occupations. It is specifically designed for high income occupations requiring years of training. Own occupation riders can cost up to 20% of your standard premium and provide coverage for your specific occupation.

There are many other riders available including lifetime extensions, future increases and return of premium. Each is suited to a different situation or concern. It is important to research where the gaps are in your disability insurance policy and look at the available riders to find the best way to bridge such gaps.