5 Facts You Should Know About Residual Disability Benefits

Disability income insurance replaces a portion of your income if you are ill or injured and unable to work. Some disability insurance plans offer residual benefits even if you are sick or injured but can still work part time. What is residual disability income? And how are payments calculated?

1. What Is a Residual Disability Income Payment?

A residual disability income payment is a reduced benefit based on a percentage of your lost income if you can only work part time due to an illness or injury. Your insurer may offer an add-on feature, called a partial disability rider, that allows you to purchase the option to receive partial income replacement if you can still work part-time.

According to Bureau of Labor statistics, in 2019, 32 percent of workers with a disability worked part time, compared with 17 percent for those with no disability. So, for many families, a residual disability rider is worth considering.

2. How Are Residual Disability Income Payments Calculated?

Residual disability income payments are calculated based on the income you are losing if you can only work part time. You will receive a percentage of the total monthly disability benefit stated in your policy. In many cases, if your income loss is greater than 75%, the insurer will pay you 100% of your monthly disability insurance benefit.

For example:

  • Your disability income insurance payment is $3,000 per month for full-time disability.
  • You purchased a residual disability income rider.
  • After an illness or injury, you can only work 40% of your full-time schedule.
  • Depending on your policy, the residual payment will be approximately 60% of $3,000 (total monthly benefit) or $1,800 per month.

3. Do You Qualify for Residual Disability Income?

Infographic of five facts about residual disability benefits

You might qualify for residual disability income if your disability insurance automatically includes residual disability benefits or if you purchased a rider for it.

Although you must read your policy and contact your insurer to confirm eligibility, you might qualify in these circumstances:

  • Loss of income: As a result of your disability, your work schedule is reduced, and you lost income.
  • Unable to perform all duties: You are unable to complete some of your job responsibilities.
  • Unable to work your full schedule: Your disability prevents you from working the same number of hours as before your illness or injury.

4. What Are Your Options for a Residual Disability Rider?

Many insurers that offer a residual disability rider have at least two options to choose from—basic and enhanced. As expected, the cost of the rider increases with the level of benefits it provides.

  • Basic – A basic rider usually requires a significant percentage of lost income before you can receive partial payment.
  • Enhanced – An enhanced rider reduces the percentage of lost income you must experience before benefits are paid. And an enhanced rider offers more benefits overall.

5. Do You Need a Residual Disability Rider?

Whether or not you need a residual disability rider depends on your unique circumstances.

Some factors to consider:

  • Amount of your savings
  • Number of your dependents
  • How a disability would affect your work performance and the physical or mental requirements for your job
  •  Your living expenses and any debt
  • How much disability income insurance you need or already have

Interested in NC Disability Income Insurance?

If you live in North Carolina and are interested in disability income insurance, contact Hunt Insurance of Raleigh. We will give you personalized service and thorough answers to help you decide if disability insurance is right for you.

At What Age Can You Drop Disability Income Insurance?

Disability income insurance replaces some of your income if you become ill and unable to work. But how long do you need to keep it? When you reach a certain age, do you no longer need disability income insurance?

Should You Drop Disability Income Insurance Based on Your Age?

Self-employed wooden instrument maker carving a violin; for information on Raleigh disability income insurance from Hunt Insurance.

Several factors influence when you might discontinue disability income insurance—and your age when the events occur varies by individual circumstances. Disability income insurance supplements your employment income, so regardless of your age if you’re still working, you might need the coverage. Consider a few scenarios.

  • Your retirement age – When you fully retire, you don’t have employment income. And you might not need disability income insurance if you become ill after retirement. If your retirement benefits are enough to supplement your income, you can consider discontinuing the insurance. Still, if you retire and are under age 62, you might decide to keep disability income insurance until you receive social security benefits.
  • Your employment type – If you’re self-employed, consider if you have enough savings to cover an extended illness that prevents you from working. Otherwise, it may be wise to keep the policy until it expires.
  • Social Security income benefits – If you think your Social Security benefits are enough, and you don’t think you’ll need extra income if you become disabled, it might be time to drop your policy. If you are disabled, you can find out if you qualify for social security disability benefits.
  • Policy expiration – Most disability income insurance policies end at age 65 when you begin to receive retirement benefits, social security benefits, or both. Many policyholders decide to keep disability insurance until the policy ends.

Is Keeping Disability Insurance a Waste?

Although it may seem that keeping disability insurance is a waste of money, consider some statistics from the Centers for Disease Control and Prevention (CDC):

  • Each year about 43 million people have emergency room visits.
  • Six in ten U.S. adults have a chronic disease.
  • Four in ten U.S. adults have two or more chronic diseases.
  • The leading causes of death and disability include heart disease, chronic lung disease, cancer, stroke, Alzheimer’s disease, diabetes, and chronic kidney disease.
  • Lifestyle risks for chronic illness include smoking, excessive use of alcohol, poor nutrition, and lack of exercise.

A healthy lifestyle helps prevent chronic illness, but there’s no guarantee. An accident or unexpected illness can happen to anyone. Disability income insurance eases the stress of being unable to work and losing your income.

What If Your Job Provides the Insurance?

If your employer provides disability income insurance, you may not need to purchase insurance from an external source. But consider your circumstances, financial responsibility, and family size with the factors below:

  • Amount of coverage – What percentage of income replacement is available with your employer-sponsored insurance?
  • Coverage period – When does coverage begin and end if you become disabled and cannot work?
  • If you’re no longer an employee – If you leave the company or lose your job, what happens to your disability income insurance? Will you lose it?

On average, disability insurance premiums are three to four percent of your income. You can customize coverage to match your needs. Read our disability income insurance page for information on what a policy can cover.

At Hunt Insurance, we’ll give you a free, no-obligation quote. We communicate openly and honestly to prevent you from being over- or under-insured. Call or e-mail us to start the conversation.