What is Residual Disability Insurance?
Residual disability insurance is a specialty type of disability insurance that provides financial protection for individuals who can still perform some work duties but face a loss of income due to an illness or injury. Unlike traditional disability insurance, which typically pays a benefit only if you are fully disabled, residual disability insurance covers situations where you are partially disabled and unable to earn your usual income.
This insurance is essential for professionals and business owners who rely on their ability to work fully. If a policyholder suffers a significant reduction in income—typically defined as a loss of 20% or more— they can file a claim to receive benefits. These benefits can help bridge the gap between their current income and what they would earn if they were able to work at full capacity.
Residual disability insurance often includes features such as a recovery benefit, which provides additional coverage if the individual gradually returns to work and their earnings increase but remain less than their previous income level. This type of policy aims to support a smooth transition back to full employment, safeguarding individuals from the financial strain of partial disabilities.
In summary, residual disability insurance is a valuable option for those seeking comprehensive protection against income loss due to work-related impairments. It ensures that part-time workers and professionals can maintain financial stability even when they can no longer contribute fully to their businesses or careers.