Key Takeaways:
- What is a COLA rider in disability insurance?
A Cost of Living Adjustment rider increases disability benefits over time during a qualifying long-term claim to help protect against inflation. - When does a COLA rider start increasing benefits?
COLA does not increase benefits while you are healthy and working. In the episode’s example, increases begin after you have remained disabled and on claim for at least 12 months. - How are COLA increases calculated?
COLA may use a fixed annual percentage or a CPI-based adjustment tied to the Consumer Price Index. - Is COLA better than purchasing more base disability coverage?
Higher base coverage provides more income immediately at claim, while COLA provides gradual increases later during a long-term disability. - Who should consider a COLA rider?
COLA may be worth considering for younger physicians, those wanting built-in inflation protection, or physicians who have already maximized their base coverage.
Should physicians add a Cost of Living Adjustment (COLA) rider to disability insurance?
A COLA rider, sometimes called an inflation rider, is designed to increase your monthly disability benefit during a long-term claim to help preserve purchasing power as the cost of living rises.
For physicians comparing disability insurance riders, the decision involves more than understanding what COLA does.
It also means considering whether premium dollars are better allocated toward inflation protection or a higher base disability benefit today.
What Is a COLA Rider in Disability Insurance?
A COLA rider in disability insurance is designed to preserve the purchasing power of your monthly disability benefit during a long-term claim.
Housing, food, utilities, and other living expenses can increase over time.
If a physician receives the same monthly disability benefit for many years, inflation can gradually reduce the real-world value of that benefit.
COLA addresses this risk by increasing the benefit while the insured physician remains on claim.
When Does a Disability Insurance COLA Rider Begin?
One important distinction is that a COLA rider does not increase your disability insurance benefit while you are healthy and working.
A physician must become disabled and remain on claim for at least 12 months.
The COLA increase then begins at month 13, depending on how the rider is structured.
This makes COLA primarily a tool for protecting against the financial effects of a long-duration disability.
How Does a COLA Rider Adjust for Inflation?
The episode discusses two primary structures.
A fixed-percentage COLA may increase the disability benefit by a predetermined percentage annually, such as 3% or 6%. A CPI-based COLA instead ties adjustments to the Consumer Price Index, allowing the increase to vary based on inflation.
Both approaches have the same general objective: helping a physician’s disability benefit keep pace with rising costs during an extended claim.
Should You Choose COLA or a Higher Base Disability Benefit?
This is one of the most important questions when designing physician disability insurance.
Every premium dollar allocated to a COLA rider could potentially be allocated toward additional base coverage.
A higher base disability benefit provides more income immediately when a qualifying disability begins.
COLA provides incremental increases later, after the physician has remained disabled for the required period.
In some scenarios, it could take a decade or longer of continuous disability for the cumulative value of COLA increases to exceed the value of purchasing additional base coverage upfront.
When Does a COLA Rider Make Sense for Physicians?
COLA may make sense for physicians who want inflation protection built directly into their disability insurance contract, particularly younger physicians with many working years ahead.
It may also be considered when a physician has already maximized available base disability insurance coverage and wants additional long-term protection against inflation.
Other physicians may choose to address inflation through investments, rising income, or other financial strategies instead.
What Should Physicians Prioritize Before Adding COLA?
COLA should generally be viewed as a secondary layer of disability insurance protection rather than a replacement for the core contract.
The episode emphasizes first evaluating the definition of disability, monthly benefit amount, residual coverage, elimination period, and future purchase options.
These provisions determine how the disability insurance policy performs when a claim initially occurs.
From Scott & Amber’s Desk
A COLA rider for physician disability insurance can help protect purchasing power during a long-term disability by increasing benefits over time.
However, physicians should weigh COLA against the value of purchasing a higher base benefit and consider how they plan to manage inflation risk.
The goal is not necessarily to build the most feature-rich disability insurance policy, but to design coverage that works as intended when it matters most.
Every article in the MD Disability Quotes Knowledge Center is written with one purpose: to help physicians understand insurance contracts before they ever need to rely on them.
To take the next step and build a strategy that supports your career and financial future, download the FREE Medical Professionals Blueprint here.
About MD Disability Quotes
MD Disability Quotes is a nationwide disability insurance advisory firm specializing in income protection for physicians, dentists, business owners, and other high-income professionals.
Founded by Scott Nelson-Archer and Amber Stitt, the firm brings more than 45 years of combined experience helping clients evaluate disability insurance contracts, navigate underwriting, and design income protection strategies tailored to specialized careers.
Scott and Amber are the longest-tenured disability insurance experts featured by White Coat Investor. Their education-first approach has helped thousands of physicians better understand disability insurance throughout medical school, residency, fellowship, and practice.
Whether you’re reviewing an existing policy or exploring coverage for the first time, MD Disability Quotes is committed to helping you make informed decisions that protect your ability to earn an income.
If you would like to schedule a disability insurance strategy session, click here.
If you would like to request physician disability insurance quotes, click here.
You can email us: info@mddisabilityquotes.com
Call 713-966-3932 (9 AM-5 PM Central)
Text 281-770-8080 at your convenience.
Episode transcript
Published 29 May 2026. Transcript generated automatically from the episode audio; it may contain errors.
Read the full transcript (1,246 words)
Amber Stitt [00:00:00]:
Welcome to the Responsible Resident. I'm Amber Stitt. This podcast takes a common sense approach to financial decisions for physicians, breaking down complex topics into something clear, practical, and usable. Because you shouldn't have to have a finance degree to build financial freedom. In this podcast we break down complex financial decisions into clear, practical steps so you can understand your options early and make informed decisions over time. Today we're answering a common question that comes up when reviewing disability insurance: "Should you add a Cost of Living Adjustment, also known as a COLA, or inflation rider, to your contract?" At a high level, this comes back to one concept: "preserving purchasing power." A COLA rider is designed to increase your monthly disability benefit over time to help keep up with inflation. As you already know, the cost of housing, food, utilities, and everyday living, tends to rise over time. If your benefit stays flat for many years during a disability, its real world value can slowly decline.
Amber Stitt [00:01:03]:
A COLA rider is designed to address that by increasing your benefit while you're on claim. Now here's one of the most important details and one that often gets misunderstood: COLA does not increase your benefits while you're healthy and working, just because you have purchased the feature. It it only activates under very specific conditions. You would need to become disabled and you would need to remain on claim for at least 12 months. After that first year, your benefit will credit at month 13 by usually 3% depending on how the rider is structured. So this feature is specifically designed for long duration disability scenarios and must be purchased upfront. There are generally 2 ways COLA adjustments are calculated.
Amber Stitt [00:01:46]:
The 1st is a fixed percentage, often around 3% or 6% annually, which provides predictable increases. The second is CPI based, meaning it is tied to inflation using the Consumer Price Index. These adjustments can vary year-to-year and the ranges today are 0 to 3% based on the CPI index at the time of claim. Each structure behaves a little differently, but the goal is the to help your benefit keep pace with rising costs over time. Now here's where the real decision comes in and this is where I want you to think a little differently. The question isn't just, What does COLA do?" The better question is, "How are you choosing to allocate your premium dollars?" Because every dollar you put toward a COLA rider is a dollar that could have gone toward higher base coverage today. And those two approaches behave very differently at claim time. Increasing your base benefit gives you more income immediately if you become disabled.
Amber Stitt [00:02:43]:
COLA provides gradual increases later, starting after the first year of being disabled. So this is not just a feature decision, it's a design decision. I'd like to take a second to tell you about a FREE Medical Professionals Blueprint that I created with you in mind. At some point in your career, you realize it's not just about making more money, it's about making decisions that actually support your life. That's exactly why I created "The Pathways Perspective for Physicians". It's a simple, non-technical framework to help you think through your career, your money, your risk, and how everything connects as your life evolves. You shouldn't have to have a finance degree to build financial freedom. You don't need to have everything figured out, you just need a place to start.
Amber Stitt [00:03:30]:
You can download the FREE Medical Professionals Blueprint at: StittStrategies.com/Blueprint Another important consideration is timing. Because COLA only begins after the 1st year of disability, it can take many years for those increases to compound in a meaningful way. In some scenarios, it may take a decade, or more, of continuous disability for the cumulative value of a COLA rider to exceed what you could have received by simply increasing your base benefit upfront. It's also important to recognize that not all disability claims last decades. Some physicians recover and return to work, some transition into other roles, others reach retirement. So the value of COLA is directly tied to how long a claim actually lasts, not just how the feature looks on paper. So when does COLA tend to make sense? It's often considered reasonable for physicians who want built-in inflation protection inside the contract, who are younger in training. Someone who has already maximized their base coverage limits and prefers guaranteed growth within the contract rather than relying on external financial growth should buy this feature.
Amber Stitt [00:04:41]:
On the other hand, some physicians choose not to include COLA because they are building investment portfolios, increasing income over time, or planning to manage inflation through other financial strategies. Both approaches can work. Before deciding on optional features like COLA, it's important to focus on the foundation of your contract. That includes your definition of disability, your benefit amount, your residual coverage, your elimination period, and your future purchase options. These are the features that determine how your contract performs immediately at claim time. COLA is a secondary layer. It enhances long-term outcomes, but it doesn't replace core protection. Here's how I typically guide physicians on this decision.
Amber Stitt [00:05:25]:
If you're unsure whether to include cola, it can be reasonable to include it upfront because you have the option to remove the rider later. That gives you flexibility as your career and financial situation evolve. But you can't always go back and add it later without going through underwriting again and repricing the whole contract. So when you're on the fence, including it initially can help preserve your options while you gather more clarity over time. A helpful way to think about this is to ask yourself, "If I experienced a long-term disability, how would I want to manage inflation risk? Would I prefer guaranteed increases inside the contract, or would I rely on external financial growth and flexibility?" There's no one size fits all answer. The goal isn't to build the most feature rich contract, it's to build one that performs the way you need it to when it matters most. Understanding how features like COLA actually work gives you the ability to make more confident, informed decisions over time. If you'd like help reviewing your disability insurance options, you're welcome to connect with our team.
Amber Stitt [00:06:23]:
My partner, Scott Nelson-Archer and I work with physicians nationwide through MD Disability Quotes, helping you understand how these contracts are structured and how to design coverage that fits your career. Our goal is to provide a clear, independent perspective so you can make responsible decisions about protecting your future income. In the next episode, we'll walk through how a catastrophic disability rider can enhance your coverage in more severe scenarios. Some of our clients buy COLA and CAT together, and some pick just one. Let's find out what is best for you! If this episode helped you think a little more clearly about your next step, that's the goal. You don't need to have everything figured out, but you do need to take ownership and take a meaningful step forward today. Thanks for listening to The Responsible Resident.
Amber Stitt [00:07:22]:
As a reminder, this podcast is for general educational purposes only. It is not legal, tax, or individualized financial advice and coverage options will vary based on your personal situation.
