Disability insurance: What is a future purchase option (FPO)?

Your income is likely a key contributor in helping your family cover expenses and chip away at financial goals. And in case you get severely injured or sick, disability insurance can help protect that income while you're not working.

As you get raises or promotions, or if you find yourself with more financial obligations, you may require more coverage. That's where a future purchase option (FPO) on your disability insurance contract can help. This allows you to increase your coverage now without repeating medical underwriting later on—helping your family and financial goals move forward.

A future purchase option is a disability insurance rider, or add-on, that gives you the option to purchase additional coverage every three years without needing a new medical exam. That means you can receive a larger benefit than the one in your original contract if you experience an illness or injury that inhibits your ability to work. This extra benefit amount can be especially valuable if your living expenses—such as mortgage payments or grocery bills—have increased since the contract began.

The amount of additional coverage you can buy is based on the insurer's financial guidelines. Typically, you qualify to buy a future purchase option rider if your income has increased since the contract began. When you add an FPO to your disability insurance, you can expect to pay a slightly higher premium. However, that increase often is less than you'd pay if you were to acquire comparable coverage through a new contract.

With most disability insurance contracts, you can exercise your FPO every three years or whenever you lose employer-sponsored group disability insurance. However, your insurer may set a date after which you can no longer exercise your future purchase option. For example, your last option date may occur on the 15th anniversary of your contract issue date or the anniversary of the contract issue date after you reach a certain age.

Depending on your insurer, you may have the option to increase your benefit as a percentage of your income or by a fixed monthly amount (up to a certain limit the insurer sets). You can increase the amount of coverage without going through additional medical underwriting.

A future purchase option for disability insurance may be a good idea if your expenses, and your earnings, have increased since taking out your contract. These riders provide you with a larger benefit to help you keep pace with rising costs. Purchasing an FPO now can be particularly beneficial later on if you experience a health issue, since you’ll have already locked in a higher amount of coverage that you would not be approved for through a new contract once you’re sick or injured.

You also may want to consider an FPO if you recently lost your job and are no longer eligible for a group insurance plan. The increased payout from your individual contract can help make up for the loss of potential income from employer-sponsored disability coverage.

However, a future purchase option isn't the only way for you to adjust for the impact of inflation over time. If you're in the early to middle stages of your career, a cost of living rider (sometimes called a cost of living indexing benefit) is another solution to protect your income. A COLA rider automatically boosts your monthly benefit each year based on a fixed percentage or changes to the Consumer Price Index if you’ve already been disabled for 12 months. Unlike an FPO, your income doesn't need to go up to qualify for the benefit increase.

Having the right level of disability protection can help you feel more protected no matter what life throws your way. With an FPO rider, you can safeguard your family both now and in the future by thinking ahead and planning for change.

A Thrivent financial advisor can help you choose the right benefit amount for where you're at and customize your disability insurance contract to meet your specific needs.