By Travis Christy, White Coat InsuranceShould you purchase the partial/residual disability rider as a physician when buying disability insurance? Let's discuss that topic today.
What Is the Partial/Residual Disability Rider?
Imagine being a skilled physician who is faced with the daunting challenge of managing a prolonged illness or injury, leaving you partially disabled. Despite still having the ability to work, your capacity is diminished.
Let me share a real-life example. During a conversation with an insurance agent, we discussed one of his physician clients who had been diagnosed with cancer the previous year. Initially hesitant to file a disability claim because she believed she wasn't “disabled,” she eventually learned the true value of her policy. With the partial disability rider, she could have accessed financial support to mitigate the income loss caused by her illness. Fortunately, once she grasped the workings of her policy, she retroactively filed a claim and received the assistance she needed.
This underscores the importance of considering partial disability coverage when purchasing disability income protection. Many individuals don't start out totally disabled; instead, they gradually become unwell. Understanding this distinction can be vital in safeguarding one's financial well-being.
Understanding the mechanics of partial/residual disability coverage can make all the difference in navigating unexpected health challenges. With this rider, physicians and other professionals have protections acknowledging the nuances of being a doctor. It's not just about being able to work or not; it's about maintaining financial stability while still working and facing unexpected illnesses or injuries.
Insurance companies typically assess partial disability benefits based on specific triggers—such as an income drop of 15%-20%; the inability to perform certain job duties and/or loss of time; and, of course, a sickness or injury. The example above, where the physician went through chemo treatments, shows the impact something like this can have on one's ability to maintain the same level of income. It’s situations like this that trigger the partial disability benefits, providing essential financial support during a challenging time.
Once these triggers are met, the policy pays out benefits, ensuring that physicians receive the necessary financial support to maintain their lifestyle and meet their obligations. For the physician grappling with something like a hand injury or chronic migraines, the partial and residual disability rider can mean the difference between financial strain and peace of mind. By understanding how these riders work and incorporating them into their disability insurance policy, physicians can better protect their financial future against the uncertainties of life.
What’s the Difference: Total Disability vs. the Partial/Residual Disability Rider?
When it comes to disability insurance, there's a fundamental difference between total disability and partial/residual disability coverage, each offering distinct levels of protection for policyholders.
Total disability coverage applies when you're completely unable to perform the material and substantial duties of your occupation due to injury or illness. A physician suffering a disability preventing the practicing of medicine or working in any capacity altogether would qualify for benefits. This coverage ensures receiving financial support to replace lost income when entirely unable to work. Physicians will find definitions of total disability in the marketplace that include “true own occupation” coverage as well as “specialty-specific” language. This allows a doctor to work in a different medical occupation or a completely different occupation if their disability prevents them from working in their original medical specialty.
On the other hand, partial and residual disability coverage comes into play when you can still work in your occupation but are hindered by injury or illness. For instance, if an OB/GYN suffers a back injury limiting the number of procedures they can perform but they can still perform some, they may qualify for partial or residual disability benefits. These benefits provide financial assistance to compensate for the income loss resulting from the partial disability, allowing the insured to continue working in their occupation despite the limitations.
Moreover, partial disability doesn’t necessarily mean a physician can only work part-time. It could mean the ability to still work full-time but, because of illness or injury, the patient load reduces (as an example) and so does income. This is why every policy should have the partial/residual disability rider. Without this rider, one would have to qualify for total disability, the inability to perform the material and substantial duties of your occupation. In a situation where a disease like Parkinson’s initially allows for greater work capacity, one may not receive payment on a disability contract for some time without the partial/residual rider.
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How Does the Partial/Residual Disability Rider Work on a Physician Policy?
Many insurance companies have a rule where you need to experience a 15%-20% income loss—sometimes along with meeting certain time or duty requirements—to get partial disability benefits. You have to satisfy both the income loss conditions, and you can't work full-time or do all your duties.
It's crucial to pay attention to the policy wording because it determines whether you qualify. While a regular employee might be OK with meeting both income and time/duty loss criteria, the self-employed or those who are on a 1099 should seriously think about getting a rider that covers income loss only.
Although all insurance companies offer a partial/residual rider, not all of them are the same. For business owners or people planning to start their own ventures, choosing a policy with an income-only loss trigger—like the ones from Guardian, MassMutual, Standard, and Ameritas—could be smart.
That's why it's essential to explore the list of WCI-vetted agents. They can help you find the best carrier and rider that suits your specific situation.
Partial/Residual Disability Rider Through Associations
How about the disability insurance plans available through your professional association? What should you look for when it comes to the partial/residual rider?
Professional associations typically offer a partial or residual disability rider as an optional addition to their plans. Take, for example, groups like the AMA; it often stipulates a period of total disability during the elimination period and total benefits be paid before partial or residual disability benefits become accessible. When it comes to conditions like multiple sclerosis, where disability progression is gradual and total disability may not occur, individuals may find themselves ineligible for partial benefits under such association plans right away. This stands in contrast to individually underwritten disability contracts, which generally do not require a period of total disability to qualify for partial or residual benefits.
Recovering from Partial/Residual Disability
What happens if you're no longer sick or hurt but your income continues to be lower following a disability claim? In that case, can you still get paid?
When it comes to bouncing back from a partial/residual disability (and even a total disability), it's not just about recovering physically or emotionally. It's also about getting back on track financially. This is especially true for professionals like attending physicians who run their own practices. While returning to a regular job might ease some financial pressures, it's a different story for those running their own clinics.
For practice owners, getting back to their pre-disability income levels can take a while, possibly spanning several months or even years, depending on how long they were out of commission. During their absence, patients might seek treatment elsewhere, and winning back their trust and business can be tough, resulting in a loss of income for a doctor.
That's where the recovery benefit feature comes in. For entrepreneurs, choosing a recovery (sometimes included as part of the partial/residual rider) benefit that aligns with the full benefit period of their disability policy—whether it extends to age 65, 67, or 70—is a smart move. Even for regular employees, having at least a 12-month recovery benefit offers a safety net as they adjust financially after a disability. This benefit is incredibly important—it's what helps you stay financially afloat after a sickness or injury disability claim.
The good news is that major disability insurance carriers like Ameritas, Guardian, MassMutual, Principal, and The Standard all offer recovery benefits. The key is to make sure your policy includes this crucial feature. Whether you're self-employed or a W-2 professional, never underestimate the value of a recovery benefit, even if it’s for a short time (like 12 months). It's your lifeline when you're navigating through the aftermath of a tough disability.
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The Bottom Line
Considering the partial/residual disability rider is crucial for safeguarding financial stability in the face of unexpected health challenges. This rider acknowledges the nuances of being a doctor, providing essential financial support in scenarios where individuals can work but face limitations due to illness or injury. By understanding the mechanics of partial/residual disability coverage and incorporating it into their policy, physicians can better protect their financial future against life's uncertainties, ensuring they receive necessary support during a stretch of sickness or injury.
Obtaining quality disability insurance is a must for any physician, so you can be sure to protect your hard-earned income. Get a quote from one of our recommended insurance agents and cross this task off your to-do list today!
Have you ever had to use a partial/residual disability rider? What happened? How much did the rider help?
The White Coat Investor may receive compensation from White Coat Insurance Services, LLC; licensed in all states including MA and DC; CA license #6009217; NY license #1758759 (exp. 6/2025); Registered address: 10610 S. Jordan Gateway, #200 South Jordan, UT 84095. This does not affect the cost or coverage of insurance.
As a lawyer who has been representing doctors in long term disability claims and litigation for more than 30 years, I cannot emphasize enough the need for doctors to buy residual/partial disability benefits along with their total disability benefit.
Most disabilities start with restrictions that limit, but do not prevent, doctors from performing their occupational duties. When that happens, doctors who have residual/partial disability coverage can not only get paid benefits, but can lock in their more difficult, high level occupational duties at the time an illness or injury begins to affect their occupational performance. This sets you up for a total disability claim, if needed, with much more ease and simplicity.
Bottom line for me. Buy that residual/partial rider or benefit when you buy your policies.
Evan.
Totally agree. Every policy sold should be sold with this rider.