How to Insure Your Income: AMB Riders
The Social Security Administration defines total disability as the inability to perform any substantial work that may exist in the national economy. In addition, the disability must be expected to last at least 12 months or end in death. This is a very conservative definition of total disability.
As a result, the Social Security Administration denies about two-thirds of disability claims filed each year. For that reason, many people buy special disability coverage that will take effect whenever Social Security won't.
This coverage may be called a Social Security rider or simply an additional monthly benefit (AMB) rider. Regardless of the name, the purpose is the same -- to provide additional disability income benefits during the first year of a claim while you are waiting for Social Security benefits to begin.
These AMB riders also are used to complement other disability income sources, such as short-term group disability benefits provided through the employer.
There are two different methods by which a rider may provide benefits:
- All or nothing rider: Under this concept, you will be paid a benefit if Social Security pays nothing. Conversely, if Social Security provides any benefit, then the rider pays nothing.
- Offset rider: The benefit provided by the Social Security rider will be reduced, or offset, by the amount of benefit provided by Social Security.
Example: Jack has a short-term group disability benefit through work. This provides him with a benefit of $1,000 per month for a period of one year, after which no benefit is provided. Jack needs and can qualify for a disability income benefit of $1,500 per month, payable to age 65.
To coordinate his individual plan with the group plan, Jack should purchase a $1,500 total disability benefit payable to age 65 with a one-year EP. This will take over when his group coverage stops.
He also should buy a $500 additional monthly benefit rider with a 30-day EP and a benefit period of one year. This will supplement his group policy.
