Choose One: Residual Riders

August 7, 2019

How do you choose which residual rider to recommend? While we have three riders to choose from, not all occupation classes are eligible for all riders. Occupation classes A and B may only elect the Short-Term Residual Disability Rider. Occupation classes 2A and 2P may choose between the Short-Term and the Basic riders. And Occupation classes 3A/3P and higher may choose between the Basic and Enhanced riders.

Let’s take a look at three features the Enhanced Residual Disability Rider offers beyond the Basic Residual Disability Rider.

Definition of Residual Disability

The definition of residual disability hinges on three potential losses: loss of time, loss of duties and loss of income. With the Enhanced Residual Disability Rider, the insured must lose 20% of only one of those to be considered residually disabled during the benefit waiting period — 20% of duties or 20% of time worked or 20% of predisability earnings. See the call-out to the right for how we determine predisability earnings.


Predisability earnings are the greater of:

The insured individual’s highest average earnings for any consecutive 12 months in the last 24 months before the date of disability began

OR

Earnings for any two full tax years within the three tax years preceding the date the disability began, divided by 24

A client whose income may not be immediately reduced by cutting back on hours or duties could satisfy the benefit waiting period under the Enhanced Residual Disability Rider.  

With the Basic Residual Disability Rider, the insured must lose at least 20% of income, plus either 20% of time worked or duties.

Example: A commission-based mortgage broker has several planned closings spanning over a month’s time. Due to a disability he must reduce his hours, but his income remains level as commissions from his previously set up closings are paid. Under the Enhanced Residual Disability Rider, he could be considered residually disabled during the benefit waiting period due to his reduced hours.

Minimum Benefit Guarantee

With the Enhanced Residual Disability Rider, a policyowner will receive at least 50% of his or her monthly benefit for the first 12 months that benefits are payable. With the Basic Residual Disability Rider, this guarantee is for six months.

Regular Occupation or Own Occupation Recovery Benefits

Both the Enhanced and Basic Residual Disability Riders offer comprehensive recovery benefits. However, with the Enhanced Residual Disability Rider, the insured individual may recover and return to either his or her previous occupation or another occupation. With the Basic Residual Disability Rider, the policyowner must return to his or her previous occupation to be eligible for recovery benefits.

Example: A metallurgist becomes residually disabled and cannot perform all the duties of the position for more than six months, which triggers his termination. He fully recovers, but by then his job is filled and there are no openings for that specific type of job. He then finds employment in another profession. Under the Enhanced Residual Disability Rider, a recovery claim would be considered; under the Basic Residual Disability Rider, it would not.

Recommend the Better Match

The Enhanced Residual Disability Rider may be the better match for someone working in a specialized profession or someone who might not be able to prove an income loss immediately after disability, such as a business owner. For many clients, the Basic Residual Disability Rider provides strong and appropriate residual coverage for approximately 6% less in premium rates.

Help your producers choose the residual choices appropriate for their customers. Talk to them about the key features of each residual rider. And be sure to share the Residual Rider Comparison flyer so they can see how The Standard’s residual riders stack up against other carrier options.

 

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