Understanding the Value of a COLA in LTD Contracts
LTD insurance pays a percentge of salary in the event an employee becomes disabled and can no longer work. A typical LTD plan pays 60% of pre-disability income until the employee returns to work or reaches Social Security Normal Retirement Age (SSNRA).
Since many employers purchase Long Term Disabilty insurance (LTD) for their employees, purchasing a Cost Of Living Adjustment (COLA) rider is an important consideration when buying or renewing a LTD policy.
Because Long Term Disability claims may last for many years, a policy without a COLA rider will see the value of the monthly benefit erode due to inflation.
Let's look at the following examples:
« Back to the Communications home page.
« Back to Disability.