Thirty-five percent of disability claims are partial/residual. A partial disability due to an illness or injury may prevent a person from performing some of his or her specific duties or working in full capacity which usually results in a partial loss of earnings. Depending on the extent of the partial disability or its duration, it can be as financially crippling as a total disability. The right type of Residual Disability coverage is critical for maximum protection.
The most common type of residual, or partial disability coverage requires a professional to suffer a loss of income and a loss of time or duties. In other words, their disability must cause a loss of income (typically15- 20% or more) and reduction in hours OR the inability to perform specific work duties. This definition typically works well for people who are employed by a company where a loss of time or duties would naturally be followed by a loss of income.
But for a self-employed person, this may not be the case. In fact, there may be a loss of duties or time, before their is a loss of income if there are receivables coming in for a few months. So, it is important to choose the strongest residual contract available–one that does not require a loss of income immediately, but will pay a residual benefit with a loss of duties OR time OR income.
In addition, not all residual benefits have strong recovery benefits that will pay a proportional benefit if the insured is back to work full time, but still experiencing a loss of income. Consider this example, a financial planner is diagnosed with cancer. He is on total disability for a year, while undergoing treatment and surgery. He comes back to work full-time, but he must re-build his client base, so he is still experiencing a loss of income. A strong residual or partial benefit will also have a strong recovery benefit that will pay the insured a proportional benefit based on his loss of earnings for as long the insured’s income loss continues or until the end of the policy benefit period. Avoid policies that limit how long they will pay a recovery benefit.
How a partial disability is defined and covered is just one of the many moving parts in a disability insurance policy that a disability insurance specialist can help you understand. Because a large percentage of disabilities are partial, the definition of partial disability is as important as the policy’s definition of “total disability.”
Key Takeaway: Ask one of Source Brokerage’s independent disability insurance specialist, who are experienced in working with disability income policies, to provide you with disability quotes for your clients. We represent carriers who offer have strong residual/partial definitions of disability. We have been working with disability income for more than a decade and have the expertise and the resources to provide an objective assessment of your clients’ disability income needs.