Disability Income Insurance: Individual: 101

Just as the definition of total disability varies from policy to policy, the definition of partial disability also varies from policy to policy.

Generally a partial disability occurs when you can perform some, but not all, of the major duties of (depending on the definition in the policy) your own occupation or any occupation for which you're reasonably suited by education, training or experience.

Most plans will pay a percentage of the benefit described in the policy based on the percentage of income lost. For example, if you're only able to earn 40% of your old salary through part-time work, the plan will pay you 60% of the benefit for total disability. The percentage you can earn through partial employment plus the percentage of the total disability benefit you receive will always equal a total of 100% of the benefit specified in the policy.

For example, many policies express Partial Disability benefits in the form of a formula:

In this formula: A = Income prior to disability indexed for inflation. (The longer you are on full disability, the more indexing benefits you.)

B = Current income from partial employment

C = Total Disability Benefit Amount.

For example, Jane had an income of $2,000 per month. Her long term disability plan would pay 60% ($1,200) for total disability. She is able to work part-time and earns $500 per month.

Applying the above formula to Jane's situation:

Jane would receive a total of $1,400 per month, $500 from work (which is 25% of her old salary) and $900 (75% of the total disability benefits) from Partial Disability benefits.

If your policy uses a formula, the clearest way to understanding how it works is to plug in sample numbers, like we did above, and work it through.

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