Increasing Daily Benefit Rider (5% Step-Ups)
Add 5% Annual Step-Ups to Your Daily Cash
An Increasing Daily Benefit rider raises your hospital daily benefit each year (e.g., 5%) so your cash keeps pace with rising costs.
The Increasing Daily Benefit rider (often called a “5% step-up” rider) lets your hospital indemnity per-day cash benefit grow automatically each policy year. Instead of a flat $X/day forever, the amount increases by a fixed percentage—commonly 5%—so the benefit you receive during a future stay is higher than it was on day one. This is a popular add-on for clients who want their coverage to stay relevant as deductibles, coinsurance, and room charges rise.
How the Increasing Daily Benefit Works
- Annual step-up: Your per-day hospital cash increases by a fixed percentage (e.g., 5%) each policy year.
- Simple vs. compounding: Some designs add 5% of the original daily amount each year (simple). Others apply 5% to the current amount (compounding).
- Caps & limits: A maximum increase, year limit, or overall cap may apply. We’ll confirm your state’s specifics before you enroll.
- Premium impact: Plans with step-ups typically cost more than flat benefits, but many clients value the future-proofing.
Examples: 5% Simple vs. Compounding
Assume an initial hospital daily benefit of $200/day and a 5% step-up.
5% Simple Increases
Adds $10 each year (5% of the original $200).
| Policy Year | Daily Benefit |
|---|---|
| 1 | $200 |
| 5 | $240 |
| 10 | $290 |
5% Compounding
Applies 5% to the current amount each year.
| Policy Year | Daily Benefit |
|---|---|
| 1 | $200 |
| 5 | ≈ $243 |
| 10 | ≈ $326 |
Figures are illustrative; actual designs vary by plan and state.
Design Choices & Trade-Offs
- Start higher or grow faster? You can begin with a larger flat daily amount or choose a smaller base with 5% step-ups. We’ll model both to fit your budget.
- How long you expect to keep the plan: The longer you hold the policy, the more value step-ups can add.
- Cap awareness: Some riders limit the number of increases; others cap the maximum daily amount.
Pairing with Other HIP Riders
Step-ups strengthen the daily hospital amount. Combine with targeted riders for a complete episode-of-care strategy:
- ER & Urgent Care for front-end episodes
- Observation vs. Inpatient coverage clarity
- Outpatient Surgery & Rehab for same-day procedures and therapy
- Skilled Nursing Facility Rider for post-acute recovery
- Travel, Lodging & Pet Care for practical support
Who Should Consider It
- Medicare Advantage members facing rising hospital cost-sharing
- Clients keeping coverage for many years who want inflation-aware benefits
- People prioritizing predictable cash for future hospital stays
FAQs
Does the 5% increase apply to every rider?
No—this rider typically applies to the hospital daily benefit. Other riders (ER, observation, surgery, SNF) keep their own amounts unless specified.
Is the 5% increase simple or compounding?
Both exist. Many designs are simple (5% of the original base). Some offer compounding. We’ll confirm what’s available in your state.
Is there a cap on increases?
Often yes—a maximum number of annual increases or a ceiling on the daily amount. We’ll outline caps before you enroll.
Will my premium change when the benefit steps up?
Premium is usually set for the rider design you choose at issue; the scheduled step-ups themselves don’t typically change the premium mid-term.
Can I add the increasing rider later?
Sometimes, but new waiting periods or underwriting may apply. It’s often most efficient to include it at the start.
Helpful resources
- Hospital Indemnity Insurance: What It Covers & Costs
- ER & Urgent Care: When Hospital Indemnity Pays
- Observation vs. Inpatient: How Cash Benefits Pay
- Outpatient Surgery & Rehab Riders: What to Know
- Skilled Nursing Facility Rider Explained
- Medicare Planning Services
- Why families choose Diversified Insurance Brokers (video)
Quote an Increasing Daily Benefit Rider
We’ll size step-ups to your plan and budget—clear options, no pressure.
Prefer to talk? Call 800-533-5969
