Lecture Notes on Disability Income Policies

Overview

• Discussion on situations of total and partial disability.
• Importance of understanding residual and partial disability features in disability income policies.

Types of Disability: Total vs. Partial

• Total Disability: Unable to perform any job functions due to injury or sickness.
• Partial Disability: Can perform some job functions but not all, or cannot work full-time (e.g., part-time work possible).

Features of Disability Income Policies

Residual Disability Benefit

• Applicable when returning to work post-total disability but unable to work full-time.
• Income Thresholds:
  • If earning less than 80% of pre-disability income, the benefit compensates the difference.
  • If earning between 20% and 80% of pre-disability income, benefit is proportional.
  • If earning less than 20%, full disability claim continues.
  • If earning more than 80%, no benefit.
• Example Calculation:
  • Earn 40% of pre-disability income, get 60% residual benefit.
  • Pre-disability income: $3,000. Earn $1,200 post-return; policy covers additional $1,800.

Partial Disability Benefit

• No need to be previously totally disabled to qualify.
• Eligibility:
  • Partially disabled from the outset.
  • Unable to perform some substantial job duties or full-time work.
• Benefit Details:
  • Pays up to 50% of recovered income for 2-3 years.
  • Aimed at recovery to full-time work capability.
  • Requires being under physician's care for rehabilitation.

Conclusion

• Residual and partial disability features are important components of individual disability plans.
• Understanding these can aid in financial stability during periods of reduced work capacity.