Last week, we had an in-depth look at the different definitions of total disability and how it affects your claim and the price of a disability policy. But not all injuries or illnesses result in total disability. Sometimes, your ability to perform the duties of your occupation may only be partially hindered. You may not be able to perform some of the tasks, or may only be able to do them for a shorter duration. You may even suffer a loss of income because of your partial disability. Does that mean your disability insurance policy won’t pay you any benefits? It depends on the partial disability clause in your policy.
Partial versus residual disability
Under the umbrella of partial disability, there are two ways for you to make a claim: partial and residual. Partial disability provides fixed benefits based on a loss of time or duties. You will be considered partially disabled if due to an injury or sickness, you are unable to perform one or more important duties of your regular occupation, or you cannot work for more than half the usual time. Usually, the disability insurance policy will pay out 50% of the monthly benefit for the first 24-36 months, and 25% of the monthly benefit for the balance of the claim.
An example of loss of time is a chef that is unable to cook for more than half the time due to prolonged wrist pain due to arthritis. An example of loss of duties is an office worker who is unable to type but can still write due to the loss of use of an arm.
Residual disability provides benefits that are proportional to a loss of income. For example, if you experience an income drop by two-thirds, you would receive two-thirds of the maximum monthly benefit. If the maximum monthly benefit for total disability was $6,000, you would receive $4,000 for the amount of time you suffered an income loss. The minimum amount of income loss to receive the benefit is 20% and for losses greater than 80%, the entire monthly benefit will be paid out.
Similar to the definition for total disability, claimants must be under the regular care of a physician for the duration of the claim.
Partial disability is sometimes included in the base package of an individual disability insurance policy and sometimes found as an optional rider. This depends on the insurance company and its line of disability insurance products. It’s also rare for it to be found within group disability plans, whether that’s because the employer chooses not to include it, or because the insurance company does not offer the option.
Insurance companies offering partial disability benefits usually allows the choice of partial or residual to the insured. Those who cannot perform one or more important duties of their occupations but suffer an income loss of less than 50% would benefit more from choosing the partial disability option, and those who lose more than 50% of their income would be better served with the residual disability option.
If not included in the base plan, the rider costs anywhere between 10-35% of the base plan, with lower costs associated with younger individuals and higher costs with older insureds.
It’s important to note that disabilities often goes through several phases. One could be partially disabled at first, move to total disability as the condition worsens, and return to partial disability as recovery progresses. These phases have varying lengths, and without adding partial disability to a disability insurance plan, you could suffer a loss of time, duties or income and not receive any benefits for a lengthy period of time.
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