How Benefits in a Residual Disability Insurance Policy Work

It’s important to understand the definition of residual disability. In insurance language, residual disability normally refers to a partial disability. Some situations involve a partial disability claim at the beginning and/or end of a temporary disability that may, during the process, fit the definition of total disability. Your injury or illness may, at first, result in a residual disability, move to total disability, and, as you recover, return to a partial disability claim as you become able to resume the duties of some, but not all, of your occupation requirements.

Your benefits in a residual disability claim will be a percentage of the benefits payable in a total disability situation. For example, assume your current or proposed coverage stipulates that you are entitled to a monthly benefit maximum of $7,500 if you are totally disabled, whether temporary or permanent. You suffer a residual (partial) disability that results in a 40% loss of regular monthly income. You may be eligible to receive a monthly disability income benefit of 40% of your policy maximum, or $3,000.

There are often two definitions of residual disability and you should be aware of the difference. One, usually preferred, is the loss of income provision which operates much like the example above. Another, often called the “loss of time and duties”, contains language that relates to your inability to spend time at your specialty and/or your inability to complete some of the duties related to your occupation. This language can complicate the process to calculate permanent partial disability or other form of residual disability benefit levels. Examine your coverage to learn how residual disability is determined. Should you not have this provision, you may be able to add coverage through a rider to your main contract.

Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.

Total Versus Partial Disability

The specific language in your disability insurance contract should outline the factors involved in determining if you are disabled and whether you have suffered a total or partial disability. Here are two brief basic explanations of the difference between the two.

• Total Disability. The inability of the insured to perform any part of their occupation and its required duties is typically the definition of total disability. Sometimes, language will also be added that states that the insured is also unable to perform any other employment.
• Partial Disability. This is typically stated as a disability that prevents the insured from performing one or more functions of their occupation, but does not prohibit the performance of other related duties or, possibly, another occupation.
• Temporary or Permanent. Information provided by the medical community will influence the determination of your condition as being temporary or permanent.

At times, the definition of disability is affected by other language in your disability insurance contract. If you have standard coverage, your policy often includes an “any occupation” definition of disability. Once you are able to perform the duties of any gainful occupation, not necessarily your own, you may no longer be eligible for benefits. Should you have purchased coverage with an “own occupation” disability definition, you are considered to be disabled, partially or totally, until you can once again perform the duties of your specialty. Obviously, this difference could prove to be very important in disability decisions that affect your benefits. Understand the language in your insurance contract and consider upgrading it, if permitted, to improve your protection.

Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.

How Permanent Partial Disability Benefits Work

It is ironic that the one constant surrounding permanent partial disability benefits, and determinations is that there is little consistency of definition. For instance, were you to examine the otherwise similar looking workers compensation coverages for a number of different states, you’d likely find a wide variety of definitions, benefit limits, and terms of protection. If you then compared these with coverage offered by municipalities and private disability insurance companies, you’d have a longer list of inconsistencies.

“What is permanent partial disability?” is a question that can be defined differently because of the many “gray” areas of physical conditions. For example, assume you are an ophthalmologist with a practice divided roughly equally into diagnostic medicine and surgery. You suffer an injury to one or both hands that allows you to continue as an outstanding diagnostician, but you are now unable to perform surgery. If medical experts believe that this condition should continue permanently, you may be declared to have a permanent partial disability rating.

Your disability insurance contract may offer benefits to you based on around 50% of your normal total monthly income being lost. The percentage of lost income your insurance coverage will provide and the length of time you can receive these benefits will be stipulated in your contract. Should you have selected that benefits continue up to the age of 65, this disability income should continue to that date.

This is a simple example but these situations can sometimes become convoluted and much more complex. Because there appears to be a lack of consistency in the language defining permanent partial disability, read your insurance contract carefully to learn how you are covered. Should your terms be insufficient for your needs, you may have the opportunity to enhance this coverage through the addition of a rider to your policy.

Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.

The Common Levels of Disability

There are both medical and insurance definitions of disability. The medical definitions are important if you need to file a total or partial disability claim. The insurance definitions are equally important to answer questions like, “What is permanent partial disability?” and other items that may determine your eligibility for benefits.

Some of the most common categories of disability:

• Total and permanent disability
• Total temporary disability
• Partial disability (often called residual disability)
• Temporary partial disability
• Permanent partial disability
• Presumptive disability (temporary or permanent)

The conditions of your disability will influence how your injury or illness is categorized by your insurer. Sometimes the definition of your particular disability can change during your difficulty. For example, you suffer an injury that, at first, is deemed a temporary partial disability. Over time, it is possible that your injury changes to fit the definition of total disability. In the future, it may again be modified into a permanent partial disability.

Your medical information will dictate which definition of disability applies to you. Should your situation change from temporary partial disability to a permanent definition, your insurance company will calculate permanent partial disability payments and terms to reflect this new definition of your condition. It is important to become familiar with the definitions of disability and benefit levels related to each of those named in your disability insurance coverage.

Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.

How the Definitions of Disability Differ with Private and Governmental Insurance Programs

Private, state, and/or federal disability programs can have different definitions for disability. This language might differ in the terminology and/or measurement of your injury or illness.

For example, the definition of total disability by government insurance plans is a standard provision that applies to all people covered by one or more of these programs. Should you have purchased a private disability insurance policy, tailored to your occupation or profession, you may have a definition of total disability that differs from government plans, like Social Security Disability Insurance (SSDI) or Workers Compensation insurance.

The definitions of permanent versus temporary disability may also differ. In reality, SSDI has no definable provision for any short term disability, which at times hinders one’s ability to qualify for temporary disability benefits with this government program. On the other hand, Workers Compensation coverage is much more temporary disability friendly, so to speak. Yet, the specific definitions within a government program may widely differ from the language you’ve chosen for your individual coverage.

This difference is very important in the area of residual disability (partial disability) coverage. Your private coverage often allows you to add this provision within your contract or by adding a rider to your basic coverage. You do not enjoy this often valuable option with state or federal disability coverage. While everyone appreciates the government’s efforts to protect its citizens, you should consider opting for your own individual disability insurance to best protect your current and future earnings.

Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.

Presumptive Disability Explained

Presumptive disability is another insurance term that has a specific definition of total disability. If certain events occur, even if they result in only a temporary disability, you are assumed to be eligible for monthly income benefits. Should one or more of these events result in temporary or permanent partial disability, you still may be eligible for disability retirement benefits. Here are the more common definitions of a presumptive disability.

• Loss of sight.
• Loss of speech.
• Loss of hearing.
• Loss of the use of two or more limbs.

This provision is included in many standard disability insurance policies. It is often not an extra cost benefit. There may be a difference in one or more definitions, which can range from total, permanent, irrevocable, and/or partial disability. The benefit level or term may be affected by the interpretation of these definitions. Many presumptive disability policies allow benefits to begin immediately, waiving the standard elimination (waiting) period in many cases. In some cases, applying for partial disability could pose a problem. Examine the language in your current or prospective coverage to learn how presumptive disability applies to you.

Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.