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You know that you need a disability insurance policy, but what happens if you become partially disabled. Depending on your policy, you might not get paid a benefit at all if you can do a certain percentage of your required work. This leaves you unable to fully do your job (and get paid) and unable to claim disability benefits.

This is where the residual benefit rider becomes critically important. But you have to have an agent that understands exactly how this works.

In this episode, Billy discusses this additional benefit, how to ensure your policy has it, and a little known benefit related to this that you must have.

Highlights from this episode include:

  • How the residual benefit prevents a financial tragedy when your policy wouldn’t pay otherwise (2:35)
  • The devil is in the details, and why you need to fully understand policy definitions, or you could be paying for a policy that will never pay you (2:58)
  • The rare but vital benefit that saves you from having to return to work before you’re physically capable of doing your specialty (3:09)
  • How insurance companies may include a residual benefit, but still screw you out of the coverage when you need it most (5:45)

To ask questions on insurance coverage or to get a quote, please don’t hesitate to call us anytime at 704-270-2376, and I’d be glad to discuss your specific situation with you.

Read Full Transcript

Hi, I'm Billy Gwaltney and this is the CYA podcast. This show is for the physician who understands the importance of protecting everything you've worked so hard to achieve. Each week I'll bring you tips and advice to help you cut through the clutter and misinformation and show you exactly what you need to preserve your income and way of life. If you're ready to achieve the peace of mind that only financial security can bring. Let's get started.

Welcome to episode number 10. The title of today's program is what is a residual disability benefit and as a physician, do I need it? Great question. I'm happy to discuss this with you today, so let's dive in. The short answer regarding the second part of the question. Yes, you do need it absolutely if possible, have it. Residual benefits are essentially partial disability benefits. They are paid if you can still do one or more of the material duties of your occupation or your specialty.

00:58 In essence, there are two things to focus on when it comes to a properly designed residual benefit. First you want to make sure that there actually is a residual benefit on your policy and that may sound like a no brainer, but there are only a handful of talk to your disability insurance carriers, specialty insurance carriers, but it's very possible to have a top tier disability company and the policy that you have with that company not include a residual benefit. I've seen it happen. I don't know how it happens. I don't know if the agent or broker just forgets or they don't know or what's involved in that, but I've seen that happen. So the first thing you want to do that I don't want to take for granted that that is a given would be to make sure that there's a residual benefit on your policy.

01:41 The second thing is to make sure that the benefit, if there is a residual benefit on your policy that you pay the way you think it would pay the devil is in the details. And so let's talk about what those details are. I'm going to read the residual disability benefit rider definition for one of the top tier disability insurance companies and we'll chat about it. It says we will pay you a residual benefit while you are residually disabled. If you suffer a loss of at least 15% of your net earned income and you are able to perform one or more, but not all of the material and substantial duties of your occupation or your specialty or if you are unable to engage in your occupation for more than 80% of the time. That was usual prior to the start of your disability. So what's happening here is there are two events.

02:31 You don't need both of these events to happen as an either or. The first one is you, you're partially disabled and suffer at least a 15% loss of income or you're partially disabled if you suffer at least a 20% loss of time in your occupation or your specialty. That's the the one of the strongest residual benefit definitions that are available in the marketplace and that's what you would want to have included in this residual benefit if it's done properly, is what's called a recovery benefit and this is vital in some companies call this their enhanced residual disability benefit rider includes the residual benefit for partial disability, but it also includes a recovery benefit and recovery benefit. Again, reading this top insurance company's definition in the month, immediately following a period for which disability benefits have been paid upon recovery and return to your occupation with full time basis, a residual benefit will be paid if you maintain a loss of at least 15% of your net earned income and that losses are direct result of your previous disability.

03:37 This recovery benefit is just so important. We've seen situations where people receive recovery benefits for much longer than they ever expected because they're disabled, they're out for two, three, five, however many years they come, they're medically cleared to go back to work. And when they do, they're just, they returned to work but they're just not as productive as they used to be. Either their patient base is evaporated or you know if they're, they're just not able to see as many patients. They're not as, they're just not as productive and so recovery benefit is really a, it's one of the most important features that very few people outside of insurance specialist or geeks like me would know to think about or to include is something that would be included in a in a strongly worded residual or enhanced residual benefit. Again, both of these are really considered non-negotiable benefits.

04:31 You wouldn't want to go through your career without having either one of these on your policy. Conversely, I'm going to read you the example of a residual benefit that is included on a policy with an association of popular association, but it's worded in a way that we're going to chat about that you would want to avoid if at all possible. And so just reading from their website and document or residual benefits for part time work. This plan allows you to make a gradual transition back to full time employment following a covered total disability. You can receive a residual benefit if you return to work on a part time basis in your own specialty or any other specialty or occupation. If your monthly income is reduced by at least 20% and you first received benefits for total disability, the residual disability benefit is based on a percentage of your total monthly disability benefit.

05:25 What you don't want to have is a residual disability benefit that requires you to be totally disabled first. This would be something that would be, I guess considered an out clause is very possible to be partially disabled without ever having been totally disabled first. And so you would not want to have that definition as part of your residual benefits. So again, it's possible to have a residual benefit on your policy and it not perform the way you would expect it to. And so these are just avoidable gaps that if you know and hopefully you're working with someone that understands the lay of the land in regards to disability coverage, you can make sure you don't get trapped by, again, working with a broker who is a specialist is advisable. Getting this right from a financial standpoint is so vital if an illness or injury keeps you from performing your specialty.

06:18 So hope you found this helpful. Please feel free to text me anytime to arrange a conversation or or with specific questions. There's more detail to these definitions that we can cover in a, in a podcast, but this gives you kind of a, a big picture response to the question of how these definitions are worded. My number if you would like to reach out to me is (704) 270-2376 again, that's (704) 270-2376 again, I'd be glad to discuss your situation. Until next time. This is Billy Gwaltney. Thank you. As always for carving out a few minutes. I'm grateful for that. Take care.

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