Disability Insurance Residual Rider
When people think of using their individual disability insurance policies, typically they think of becoming totally disabled. Something drastic where they can’t work at all. But what if something happens to you and you are still working in your occupation but in a limited capacity? For example, what if you had a back injury and couldn’t work full time since you were getting PT or rehab? How can you file an individual disability claim?
That is where the residual disability rider, also known as the partial disability rider comes into play. This rider can make a significant difference in the level of protection offered, ensuring that you continue to receive benefits even if you can return to work in a limited capacity.
What is a Residual Disability Rider?
A residual disability rider provides partial benefits to policyholders who experience a loss of income due to a partial disability. Unlike total disability benefits, which are only payable when the insured is completely unable to work, the residual rider supports those who can work part-time or in a reduced capacity but still suffer a financial loss. Depending on the policy, you typically need a 15% or 20% or more loss of income to trigger a claim. Your benefit paid is the same proportion of your loss of income and it is calculated month to month. Once your loss of income is 75% or more loss of income, you are considered totally disabled and will receive full benefits.
Basic Residual vs. Enhanced Residual
There are typically two types of residual riders available: basic residual and enhanced residual. While both options provide coverage for partial disabilities, they differ in their definitions, benefit triggers, and payout structures.
Basic Residual
A basic residual rider usually requires a 20% or more loss of income and will pay you that proportion of your benefit. These benefits are often calculated based on the actual income loss and may require the insured to satisfy an elimination period. Basic residual coverage usually provides benefits until the insured returns to full-time work or their income returns to pre-disability levels. Some basic policies only pay up to 50% loss of income.
Enhanced Residual
An enhanced residual rider offers a more comprehensive level of protection and usually starts paying benefirts with a 15% or more loss of income. In addition to covering partial disabilities, it may include a recovery benefit, which continues to pay benefits even after the insured returns to work but has not yet regained their pre-disability income. Enhanced residual coverage often has a more favorable income loss threshold, making it easier to qualify for benefits. This rider may also provide benefits for a longer duration, offering additional financial support during the recovery period.
The Return to Work Provision
Some disability policies also include a return to work provision within the residual rider. This provision incentivizes and supports individuals who are transitioning back to full-time employment after a period of disability. The return to work benefit may provide additional payments to help offset expenses related to retraining, workplace accommodations, or reduced earning capacity during the transition period.
This feature is particularly valuable for professionals in highly specialized fields who may need time to rebuild their practice or regain their client base after a significant health-related setback.
Choosing the Right Residual Rider
Selecting the appropriate residual rider depends on your financial situation, occupation, and risk tolerance. Those with a high earning potential or specialized skills may benefit from the enhanced residual rider, as it offers greater flexibility and extended support during the recovery phase. On the other hand, individuals seeking a more affordable option may find that a basic residual rider provides sufficient protection for their needs.
For more information about the residual rider or to request a quote, contact Set for Life Insurance today!