Disability insurance is an integral policy that should be incorporated into everyone’s plan immediately they start working. This becomes particularly important for certain professionals with a higher risk of experiencing injuries, illnesses and other forms of disabilities during their jobs. Physicians are not left out of this discussion as it will only be a waste of time, effort and resources if, after rigorous medical school training, they cannot reap the reward of their labor due to disability.
There are different types of disability insurance that physicians can opt for. However, physicians often consider two of the most popular types of disability insurance: total disability insurance and residual disability insurance policies. Therefore, physicians must understand the difference between these two types of disability insurance so that they can file the right insurance applications and save themselves the stress that may occur due unnecessary disputes over insurance claims.
Differences Between Total Disability And Residual Disability Insurance Policies
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What Both Terms Mean And How They Operate
Total disability insurance policy is a type of disability insurance where an insured only receives benefits if he cannot work temporarily or permanently. In residual disability insurance coverage, the insurance company pays benefits when a person can still work but cannot work at the full capacity that he used to. This means that one can receive residual insurance benefits without being completely disabled. However, some criteria must be met before a person is qualified to enjoy the benefits. Total disability insurance can come in different packages – Any Occupational Coverage, Own Occupation Coverage, Presumptive Total Disability Coverage etc.
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Cost And Benefit Payment
Another difference between total disability insurance and residual disability insurance is the cost of both policies and how their benefits are paid. Although a total disability insurance plan provides the greatest level of protection, it comes at a higher cost than residual disability insurance coverage. While total disability insurance is payable throughout the physician or claimant’s lifetime, residual disability insurance only lasts till the age of 65 before it is cut off. In the case of total disability insurance, the benefits are based on the insured’s contribution. Residual disability is calculated based on the percentage of the pre-disability income that the insured loses, in this case, the physician. This is done by calculating the percentage of income earned while working part-time compared to what was earned full-time.
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Forms Of Insurance Policy
Total disability insurance is a long-term disability insurance policy that is often a basic policy. On the flip side, Residual insurance can either be a stand-alone insurance policy or can be added to the basic disability insurance plan as a rider. Although adding residual disability insurance to your basic disability plan will increase the insurance premium, it is well worth the risk, as receiving payments from the residual plan is easier than the basic plan. This is because residual disability insurance requires an insured to have lost at least 20% of their full income before the benefits can be enjoyed. However, this is also dependent on the policies of the insurance company.
Bottom Line
Disability insurance plans are a must-have for physicians. However, having disability insurance plans is not enough, as one must strive to understand which policy best suits them. This will serve as long-term income protection cover and also prevent your insurer from undercalculating the benefits you deserve.
Author – Naomi Olson
I am a CFP® (Certified Financial Planner). I have a severe phobia of bridges and dirty balance sheets.
Hobbies: blogging, meditation, and loving Bull Market (my dog).