Residual disability benefits
Residual disability benefits are partial income replacement payments provided by disability insurance policies when a policyholder, such as an accountant or teacher, can work but earns less due to illness or injury. Insurers like Guardian and Principal calculate residual benefits based on the percentage loss of pre-disability earnings compared to current earnings.
Most policies require a minimum income loss threshold–typically 20%–before paying residual benefits. Residual benefit periods vary; for example, some contracts pay up to age 65 while others limit payments to two years.
Policies often mandate that claimants must be under the care of a physician, such as a primary care doctor or specialist, during the benefit period. Many insurers use formulas that factor both lost income and reduced working hours to determine monthly payouts, as per Your Insurance Info.
Some plans include recovery benefits, which continue payments if post-disability earnings remain lower than before despite returning full-time. Riders enhancing residual coverage may increase premiums by 10–25%, according to MassMutual and Ameritas data from 2023.
What are residual disability income insurance payments based on?
Residual Disability Income Insurance payments are based on the individual’s pre-disability income and the type of residual disability insurance policy that has been purchased. The amount of monthly benefit is typically determined by a percentage, ranging from 50% to 100%, of the insured’s previous earnings before their disability began. Typically, when an individual purchases Residual…
See also Residual income insurances, and Residual income insurance.