- Flat amount or
- Residual
MR. WATSON: Now, let's talk about Partial Disability , can only work part time.
MR. WATSON: Depending on the policy, partial disability will be paid on either a "Flat Amount" method or on a "Residual Disability " method.
"Flat Amount"
MR. WATSON: If your policy pays for partial disability, they will do it one of two different ways. One is as a flat amount. To be eligible for the benefit,
- you first had to be totally disabled and receiving payments, and
- then we are only going to give you 50 percent of what you were getting (the disability benefit) and we'll give it to you for three months, but no more than 6 months, 3 - 6 months.
MAN: Is that 50 percent fixed, as far as actual, or is that a figure we are just using as an example?
MR. WATSON: Generally it's 50 percent.
MAN: Okay.
MR. WATSON: Ex., An insured hurt his back and can only work half-days. He is partially disabled. What will he receive as a disability benefit? Nothing. Because he was not first totally disabled and receiving payments.
MR. WATSON: That bites, doesn't it?
ALL: Yeah.
MR. WATSON: Example # 2. What if the same condition had caused him to be totally disabled? He would be paid the full benefit. The $3,000 from the example before.
MR. WATSON: Through rehabilitation his doctor allows him to work half-days. Am I totally disabled?
ALL: No. He is now partially disabled.
MR. WATSON: What will he get?
ALL: 50 percent.
MR. WATSON: 50 percent of what he was receiving for up to six months. Benefits would stop. For partial disability. If he never fully recovers, still only able to work part-time, he has a big problem, the benefit stops after three months, no more than six.
WOMAN: So even though you can't work anymore it stops?
MR. WATSON: Yes, if the policy pays a partial disability as a flat amount.
MR. WATSON: But, other disability policies might pay for partial disabilities using a residual disability benefit , a residual rider - residual disability policy. Here's how it works.
"Residual" ****
MR. WATSON: If you suffer at least a 20% loss of income, your policy kicks in. You do not have to first be totally disabled for this benefit to "kick in". Just let it sink in. If you suffer a 100% loss of income, which is more than 20%, then you get 100 percent of the benefit. If you suffer 60 percent loss of income, (partially disabled) we'll pay you 60 percent of the benefit. So let's say you are 100 percent disabled. You're going to get what? $3,000 a month, the full benefit. And then, through rehabilitation, you are back at work 20% of the time; what are you going to get? Follow me.
(Cross-talk.)
WOMAN: 50 percent for three to six months?
MR. WATSON: No, that would be under the flat amount. That part wouldn't come into play anymore. That was a good try. But, we are talking about "residual". Let's say you bought a 10-year disability policy. You with me? You are 100 percent disabled. You are going to get 100 percent of the benefit for how long? Ten years. So now let's say that at the end of year 1, you are back at work 20 percent of the time. What are you going to get?
WOMAN: 80 percent. Because you are losing 80% of your income.
MR. WATSON: 80 percent of what? Say it.
WOMAN: 80 percent of the benefit. The "benefit" is what you receive if you are totally disabled.
MR. WATSON: YES!!! 80 percent of the benefit. Because I suffered 80% loss of income. Now, I would get that for as long as I was only working for 20 percent of the time, up to the remaining nine years on the policy. Now, I'm back at work 30 percent of the time; what am I going to get? 70 percent, of the benefit. Now I'm back to work 70 percent of the time what will I get? 30 percent of the benefit. Now I'm back to work 80 percent of the time, I get 20 percent. One more time. I am back to work 90 percent of the time, what will I get?
ALL: 10 percent. Wrong
MR. WATSON: Nothing! Like lemmings off a cliff. I said you have to have at least a 20 percent loss of income for this benefit to "kick in."
MR. WATSON: It starts at 20, and it ends at 20. You understand? You are back at work 90 percent of the time, you are only suffering a 10 percent loss. Y'all with me?
ALL: Yes.
TRINIDAD: I lost you. When you started with residual, I lost you. Sorry, but that's the truth.
MR. WATSON: Looky here, Trinidad. If I suffer 100 percent loss of income, I'm going to get 100 percent of the benefit. Now I'm back at work 20 percent of the time. I'm suffering how much loss of income?
TRINIDAD: 80.
MR. WATSON: I'm going to get 80 percent of the benefit. Now I'm back at work 60 percent of the time. I'm suffering-
TRINIDAD: 40 per cent loss of income.
MR. WATSON: I will get 40 per cent of the benefit. Whatever percentage of income you lost, you get that same percentage of the benefit. So now you are back at work 70 percent of the time.
TRINIDAD: So you lost 30.
MR. WATSON: And you get 30 percent of what?
TRINIDAD: Of the benefit.
MR. WATSON: Now I'm back to work 90 percent of the time. I get what?
TRINIDAD: You only lost 10 percent, so you don't get anything.
MR. WATSON: Right.
TRINIDAD: When is the residual coming? I missed something.
MAN: It's a rider. When you first bought the policy, you chose which way you wanted your disability income policy to pay for partial disability, either as a "Flat Amount" or on a "Residual" basis.
TRINIDAD: Oh.
MR. WATSON: Right. It is how the policy pays for partial disability. This example showed an own occupation disability policy with a residual rider.
TRINIDAD: That's what I didn't understand.
MR. WATSON: What's the best disability policy in the world? Own occupation with residual rider. Can everybody qualify for it?
ALL: No.
If this is not clear, review it until it is crystal.