In the context of disability insurance in Canada, the “future increase option (FIO)” is a policy feature that allows policyholders to increase their disability insurance coverage amount at specific times without providing additional medical evidence of insurability. This option is designed to help policyholders maintain adequate coverage as their income grows, ensuring that their disability benefits will align with their current earnings if they become disabled. It’s the disability insurance version of guaranteed insurability.
Key aspects of the future increase option (FIO) include:
Guaranteed insurability
The increase usually needs no medical evidence. Depending on the policy and the size of the increase, the insurer may ask for proof that your income supports it, for example for larger increases. This is particularly beneficial for individuals who anticipate changes in their health status or who want to avoid the risk of future insurability issues.
Scheduled opportunities
The option to increase coverage is typically available at predetermined times, such as policy anniversaries. The insurance provider outlines these opportunities in the policy contract.
Income growth alignment
The FIO helps ensure that the insurance coverage amount keeps pace with the policyholder’s increasing income, providing a safeguard against potential income loss due to disability.
Policy conditions and limits
There are usually specific conditions and limits on how much additional coverage can be purchased and the frequency of increases. These conditions are defined in the insurance policy, often with a maximum allowable increase per option exercise.
Additional premiums
When the coverage amount is increased, the premiums will also increase accordingly based on the insured’s age at the time of the increase and the additional amount of coverage purchased.