Disability Insurance 09 – Understand Residual Disability

As we mentioned in the other articles, the main purpose of disability insurance is to replace a person’s income in the event that they are unable to work, help balance personal earnings and expenses suddenly upset, and the threat of financial disaster it can quickly become a problem. reality as a result of an accident or illness. In this article, we will discuss residual disability in disability insurance policy.

Insurance companies use two methods to determine an insured’s eligibility for residual benefits:

1. The method of loss of income,

2. The method of loss of income and loss of time or duties.

Generally, if the loss of income is less than 20%, no benefit is paid. If it is greater than 80%, the insured is considered totally disabled and the policy will pay the full amount of the benefits.

For the insured to be eligible for residual benefits, they must complete a financial document to prove their loss of income.

A) Residual disability: previous earnings from work

To determine the appropriate amount of income, some insurers use one of the following methods:

1. Average monthly income for 6 consecutive months in the 2 years prior to disability

2. Average monthly income for the 12-month period immediately preceding disability

3. Highest average monthly earnings for 2 consecutive years in the 5 years prior to disability

Once pre-disability income is determined, it is compared to the insured’s income after returning to work.

B) Residual disability: inflation indexation

To protect the Residual Profit of the insured, some insurers will make adjustments using the Consumer Price Index. Some companies will simply index profit based on a fixed percentage.

C) Recurrent disability

When the insured is no longer considered Total, Residual or Partially disabled, their benefits end. However, if the disability recurs (either total or residual) for the same or related cause, the recurrence is considered a continuation of the original disability and a new elimination period is not applied and benefits begin immediately . If the recurrence occurs more than 6 months, the recurrence will consider a new disability. A new period of elimination and benefit would apply.

D) Recovery benefits

If a policy contains recovery benefits, after a claim, additional monthly benefits may be paid to provide financial assistance to the insured once they return to work full time and the benefit amount is based on the proportionate monthly benefit.

There may be some other clauses, such as automatic indexation (this function is designed to protect the monthly benefit against the effects of inflation), presumed total disability (under certain conditions, the insurer will consider the insured to be totally) disabled, rehabilitation benefit ( Insurers will sometimes pay a rehabilitation benefit to help a disabled insured return to work) and a premium waiver (when the insured has been disabled for 90 days, future premiums will be waived, but only as long as the insured remains disabled ).

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