Insurances are provided for the purpose of safeguarding the financial interest of an individual for future losses. One of the most important types of insurance that the working population should have is the disability insurance. This type of insurance pays for any lost of income in the event that the person insured is not able to work because of injury or sickness. Disability insurance are commonly offered by companies to their employee and rates as well as coverage vary from one insurance provider to another. There is a particular insurance feature in the disability insurance which specializes in covering partial disabilities and this feature is called residual benefit.
What is residual benefit?
Residual Benefit is an insurance feature which provides payment for loss of income if the insured individual is unable to perform the duties and responsibilities or incapacitated to work fulltime due to the disability suffered. Residual benefit s is provided for partial disability claims from insured persons who need to be financially protected from income loss due to illnesses or injuries. This insurance feature is one of the most important benefits in a disability insurance coverage.
The residual benefit is payable if the person is under the care of a physician and if he or she suffers more than 20% of income loss as a result of the disability. This insurance feature typically requires that the person insured suffer income loss before he or she can become eligible to take advantage of the disability payments. However, some insurance providers require that there is both a loss of time or duties and loss of income.
It should be noted that the amount of benefits awarded to the insured individual should be directly proportional to the loss of income. If for example, the insured person suffers a disability which prevents him or her to work full-time and upon returning to work the person receives 30% less than the regular wage before the disability, the residual benefits will cover the 30% loss suffered by the insured person. Almost all of residual benefits offer a minimum rate of 50% of the overall monthly benefit. It is important to remember that some insurance providers have different benefit structures during the first 6 months to one year of a claim. There are insurance companies who have a minimum of 50% benefit payment in the first 6 months even if the income loss is below 50%. Other insurance providers, instead of covering the proportionate benefit, pay the total income loss plus 100% of the covered compensation.
The disability payments of residual benefits should cover at least six months. Unlike partial disability which is payable for 12 months or less, residual benefit could last for years as it is designed to be payable for the entire duration of the benefit period. There are insurance policies with residual benefits that cover recovery benefits for the entire policy benefit period. Although some insurance providers impose certain limitations with regard to recover benefits anytime from 1 year to 3 years.