What is Residual Disability Coverage?
Residual disability coverage is a specific type of benefit within disability insurance policies designed to provide financial support to individuals who are able to work, but not at their full capacity due to a disability. Unlike total disability coverage, which pays benefits when an individual cannot work at all, residual disability coverage offers a more nuanced approach to income protection.
This type of coverage typically pays a portion of the insured's lost income, calculated based on the difference between their pre-disability earnings and their current earnings post-disability. For example, if a person earned $80,000 before becoming partially disabled and can now only earn $50,000, the residual disability coverage would compensate for the $30,000 loss.
Residual disability coverage is particularly beneficial for professionals and business owners who may still engage in some work but face challenges due to their disability. This type of insurance can be essential for maintaining financial stability while managing recovery or adapting to new work capabilities.
To qualify for residual disability benefits, policyholders usually need to demonstrate a significant reduction in income and provide documentation of their disability. It's important to review the specific terms and definitions within a disability policy, as coverage can vary greatly among different insurers.
Overall, residual disability coverage helps bridge the gap for those recovering from a disability, allowing them to maintain a degree of financial security while they navigate the challenges of their condition.