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Residual Disability Insurance

Residual - You can still perform the material and substantial duties of your occupation, but you have a loss of income of at least 20%.

A large percentage of all disability insurance claims either start or end in a residual claim. The basis of a residual claim is that a person is still actively engaged in their occupation, but because of a sickness or injury is:

  • Suffering a loss of time and duties
  • Suffering a loss of income of at least 20%

As you can see there are two major types of a residual claim. One is based on a loss of income only, and one is based upon a loss of time and duties. I am under the impression that a residual disability provision which is based on loss of income can be better. I want the bottom line to my residual claim to be that the insurance company will continue to pay me until my income is back up to what it was before I was disabled. Under a loss of time and duties claim they generally stop paying a residual claim once you are back to work full time. Some carriers will move you to a recovery benefit once you are back to work full time under the time and duties claims, but this is only for a specified period of time. A residual disability provision based on income is like having an unlimited recovery benefit, and protects a person from a claim like the following:

Let's assume this person is in sales, or a small business owner. Assuming they are totally disabled for a period of six months to a year, does anybody think that when they come back to work their income will jump up to what it was before they were disabled? The answer is likely to be no. They may have to come back to work for longer hours, and work even harder to get back the clients they lost while they were away, get new business in the hopper. Then maybe several months later they could hope to increase their income towards the previous level. The bottom line is that people may be residually disabled for a much longer period of time than they are totally disabled.

These are the personal views of the author and do not necessarily reflect the views and opinions of The Guardian Life Insurance Company of America or its subsidiaries and affiliates thereof.