What happens if an insured is only ‘partially’ disabled? Partial Disability can come in several forms – perhaps he or she can perform some but not all of the major duties of the job, or can work only part-time. Under the definition of total disability, no benefits would be paid.
To solve the partial disability problem, the residual disability concept has been developed. Under a residual disability provision (either in the policy or available by rider), an insured receives a percentage of his or her disability benefit based on the percentage of income loss the sickness or injury has caused.
Relief for Loss of Income
For example, suppose Doctor Jones was earning $10,000 per month prior to his disability and when he returned to his practice, he was earning just $4,000 per month – a 60% drop in income. Suppose also that Dr. Jones had a disability insurance policy that paid a full disability benefit of $5,000 per month. If his policy contained a provision for residual disability, he would receive 60% of his full $5,000 benefit, or $3,000 per month.
The best disability insurance policies do not require any prior period of total disability. In fact, the very best policies do not even require that the insured demonstrate a loss of time from work or loss of specific duties. These policies will pay a residual benefit based solely on the percentage of income lost due to a sickness or injury without any requirement of having been totally disabled. One could have a degenerative illness such as arthritis and never have been totally disabled. In these cases, some policies – often group or association plans – would have required a period of total disability in order to receive partial/residual benefits, so no benefit may be payable. This is obviously a weaker type of disability insurance policy.
Loss of Time or Duties Required?
Also after return to work some policies include a Loss of Time and Duties requirement for residual benefits. That means that you must be out of work a certain percentage of the time and, if you’re back at work your benefits may stop or be related to the amount of time you spend at work. The more favorable method is one which is based on income loss after return to one’s occupation. Why? Here’s an example: A physician, for example, returns to practice after being disabled for 18 months from a severe fall. She goes back to restart her practice and is back full time. Is it likely, though, that her current income will now be 100%? Does one walk in and have a full practice after 18 months? Is it possible that even in good health one’s practice will get fully back to the same income level – maybe, maybe not. The income method will pay residual benefits for income loss proportional to the loss compared to income prior to disability even if back to work “full time.” This is the more favorable method.
Residual benefits are generally payable only if the loss exceeds a certain percentage of disability income, such as 15 or 20%. The best policies offer a flat dollar minimum, payable even if the loss is less than 15% of pre-disability income
Other Policy Provisions:
Own Occupation Definition and other definitions of Total Disability
Waiver of Premium
Capital Sum Benefit
Transplant and Cosmetic Surgery Benefit
Exclusions and Limitations
Request a Disability Quote to view the policy differences.