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Residual Disability Benefits in Private Disability Policies: What to Know


If you are suffering from an injury, illness, or other condition that has rendered you incapable of performing the duties of your occupation—even if only partially—then you may be entitled to significant disability insurance benefits under your private disability insurance policy. Depending on the details of your insurance plan, residual or partial benefits may be available.

Let’s look at how residual benefits work.

What Are Residual Disability Benefits?

Not every person with a disability that affects their occupational status is totally disabled. Some people with a disability may be able to work part time, or they may still be able to perform some of their occupational duties while not being able to perform others.

To account for this possibility, some disability insurance policies include a rider for partial or residual disability benefits. A residual benefit provides the policyholder with a part of the total disability outlined in the policy, usually calculated as a percentage of the total monthly benefit.

The availability of residual benefits prevents disability insurance benefits from becoming an “all or nothing” proposition. Usually, people who receive residual benefits either cannot work full time or cannot perform all the primary duties of their occupation to the degree necessary for full compensation. Without a residual disability benefit available, a disabled person in this situation could be left in a “coverage gap” where they neither qualify for total disability benefits nor earn enough to cover their costs.

How Do Insurance Companies Calculate Residual Benefits?

Residual benefits are a rather complex issue in some cases, as there are a number of factors and limitations to keep in mind.

Residual benefits usually pay out a percentage of your total disability benefit. The amount you receive will depend on the loss of earnings that your disability causes. Your loss of earnings is calculated based on the provisions in your policy, but most often are measured by your loss in income when compared to your pre-disability income. For example, if your earnings drop 40 percent due to your partial disability, then you will be entitled to recover residual disability benefits that equal 40 percent of your total disability benefits.

Residual benefits may also be capped out at a maximum percentage, depending on your insurance policy.

Do I Qualify for Residual Disability Benefits?

Not all disability policies come with residual disability benefits included. In some cases, the disability insurance policyholder must purchase a separate rider for residual benefits.

You should review your policy to see if it includes residual disability coverage. If it does not, and if that coverage is available to purchase as a rider, we would generally recommend doing so since it can serve as a vital source of income for people who have a disability that prevents them from working full-time but does not quality them for total disability benefits.

If your policy does include a rider for residual benefits, you would need to demonstrate a certain level of income loss to qualify for those benefits. Usually, the minimum level of income loss to qualify is 15% to 20%, and the maximum level to qualify is 75% to 80% (because at that point an insurance company will typically consider you eligible for total disability benefits).

Can Residual Disability Satisfy My Elimination Period?

Your disability insurance policy includes a waiting period, also known as an “elimination period,” before you are entitled to receive benefits.

Many individual long-term disability policies that include a residual disability provision or rider also provide that a residual disability can satisfy the elimination period.

If your disability policy includes residual or partial disability benefits and you are already suffering a loss of earnings as a result of your medical restrictions and limitations, you want to immediately assess whether or not a disability claim should be submitted before your earnings continue to decrease or your occupation is modified.

Need Help With Disability Insurance in Chicago? Contact Bryant Legal Group Today

Bryant Legal Group, P.C. is a boutique insurance litigation firm based out of Chicago, with attorneys who have decades of experience advocating on behalf of disability insurance policyholders in disputes against their insurers.

We are committed to comprehensive legal representation. From the start of client engagement, we work with medical experts to evaluate the disability claims at-issue and determine how to more effectively approach the dispute (from a strategic perspective). This results-oriented mentality has led to a number of successes over the years, and we have a long history of securing significant and favorable case results for our disability clients.

Call (312) 313-6179 or use our online contact form to schedule a consultation with an experienced Chicago private disability attorney from Bryant Legal Group.

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.