Future Purchase Option
With a future purchase option you can have your benefits increase periodically. Of course, each time you buy additional coverage, your premium will go up (the price you pay for the coverage will increase each time). However, if you accept the option regularly and have not become eligible for benefits, you do not have to show proof of good health or proof of insurability to get additional coverage. If you do not accept the option a certain number of times (or even just once with some plans) you may have to show the insurance company proof of insurability or proof of good health in order for you to be allowed to buy additional coverage again.
If you are under this option, your initial premium (or the first payment made) will be lower than the Automatic Inflation Option (which will be explained below) but it will increase whenever you accept the inflation or additional coverage offers. For most plans, the increase of your benefits and premiums will occur only if you accept the offers.
Automatic Inflation Option
When you are under automatic inflation option, the increase of the value of your insurance each year will have a set percentage. This means that if the set rate of your insurance policy is 6% then the value of your insurance will increase 6% every year. The first payment for your policy is likely to be higher because this payment will help fund your automatic future benefit increases that take place to keep pace with inflation. Know your set rate and if the increase is simple or compound, because that is how you will know if you have good protection. A compound increase provides the most protection.
The Benefits of Having Future Purchase Option
Future purchase option is a very practical and convenient option particularly for those who have a hard time getting additional coverage because of their medical conditions. Without the future purchase option it can be really hard for those with medical conditions to have additional insurance policies because of the requirements the insurance companies have. Aside from being able to get additional without having to prove insurability, future purchase option is very convenient because despite premium increase, you effectively get more benefits and in most case premiums increase when income increases.
In order to take full advantage of future purchase option you would just have to take note of the insurance company’s rules regarding plans and the future purchase option. If you want to maximize this option, you would have to know what plans you need to accept or purchase in order to keep your future purchase option effective. Remember, declining even just one plan may invalidate your future purchase option.