What happens if an insured person 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
Professionals Need Income Recovery Disability Insurance
ou’ve worked hard to build a successful career in your chosen occupation over the years. The best way to make sure you’ll continue to benefit from the fruits of your labors no matter what the future might hold is to protect your income with a top quality professional disability insurance policy. Make sure you choose a policy that covers both partial and total disabilities and that determines benefits based on earnings rather than on your ability to work.
No matter how well you are doing in your chosen profession, your income will suffer if you become unable to work, or are forced to work a reduced schedule, due to a disability. Whether you experience a total or partial disability that is temporary or permanent, the only way to make sure your income is protected is with a top quality disability insurance policy that takes into consideration how your income is generated.
Following a disability, it can take a significant length of time for professionals’ incomes to recover, no matter how much time they put in on the job. When your income is based on performance and production rather than on the number of hours worked, a policy that pays benefits only until you can return to your regular work schedule is not sufficient.
The best disability coverage for most professionals includes a residual rider that provides income recovery benefits rather than one that pays only until you’re able to return to a full work schedule with regular duties. With this type of coverage, you’ll receive benefits following a decline in income from a qualifying disability until your earnings recover.
Having this type of small business disability insurance in place can mean the difference between staying in business and declaring bankruptcy following a disability. When you want to make sure that your business can keep going no matter what, business overhead disability coverage is an excellent investment.