If you become disabled but can still work, you can still claim disability benefits under the partial disability definition. These benefits are called residual disability benefits.
The residual disability benefit for partial disability may pay the full amount of benefits you’d receive if you were totally disabled for a limited time, after which you’ll receive a percentage based on your monthly earnings. The calculation factors in the loss of responsibilities, income, and time and pays out to replace those losses.
You may be able to receive a residual disability benefit as part of your base disability insurance policy, or it might have to be purchased separately as a rider.
What is a definition of disability?
Your eligibility to receive disability insurance benefits after you become disabled hinges on your insurance policy’s definition of disability. Most policies have provisions that cover all these types of definitions, although sometimes you may have to purchase extra coverage via a rider.
How to claim the residual disability benefit
The residual disability benefit is paid to you when you claim disability insurance benefits under the partial disability definition. Some policies will distinguish between partial disability benefits and residual disability benefits, the former referring to loss of responsibilities or time and the latter referring to the loss of income. But other policies put all three types of loss under one provision.
You can claim residual disability benefits if you’re not totally disabled and can continue working at your job, but lose some portion of your income or duties. The benefit amount will be the same as that you receive from total disability benefits.
After the initial period ends, if you’re still disabled your policy may allow you to extend your coverage partial disability coverage, but the amount you receive will be dependent on your monthly earnings.
You have to reach a certain threshold – defined in your policy – of loss of earnings to keep receiving partial disability coverage.
Qualifying for a residual disability benefit
There are three ways disability insurance companies measure a partial disability: loss of duties, loss of time or loss of income.
Loss of duties — When you can work but can’t accomplish duties that make up 20% or more of your work.
Loss of time — When you can do all of your duties but can’t do them for more than 75% to 80% of the time you previously spent doing them.
Loss of income — When you experience at least a 15% to 20% loss of income because of injury or illness.
If your loss is 75% to 80% of your income or higher, most carriers consider you totally disabled and pay the full benefit amount.
What happens if you become totally disabled
If you’re receiving residual disability benefits under the partial disability provision, you may eventually qualify for total disability benefits. This can happen if your injury or illness progresses to such an extent that you can no longer continue working at your job (or, when the policy is any-occupation, if you can’t work at any appropriate job).
Since you already waited out the elimination period, you won’t be subject to another one. And because you’re now covered under the total disability definition, you’ll receive full benefits until you either recover from your disability or the benefits period ends. With a long-term disability insurance policy, that could mean five years after benefits or begin or even until you retire, depending on the policy you purchased.
Recovery benefits
Recovery benefits are also provided with most residual benefit provisions. After you recover from a partial disability and return to working at full capacity, you may still not be at full income. For example, if you’re a small business owner who lost some clients while you were disabled, you might need more time to build back up to your pre-disability income. Recovery benefits can cover the gap while you do so.