The Amber Stitt Show

Physician's Edition: How does a Residual Rider and What Type is Best for You?

February 28, 2022 Amber Stitt
The Amber Stitt Show
Physician's Edition: How does a Residual Rider and What Type is Best for You?
Show Notes Transcript

In this episode, we discuss what the Residual Rider is, as many don't know this is the Partial Disability Rider on the Own Occupation (Physician Specific) Disability Insurance contracts. 

Now which Residual Rider is best for you? There are two kinds and some offer longer recovery coverage while some don't offer any at all. 

Some specialties don't have a hard time transitioning back to practice after suffering a disability, as their typical base compensation will be restored upon return which is typical of an employment contract. 

But some specialties and subspecialties often have a timeframe that their income needs time to ramp back up and get back on track; especially if that specialty/subspecialty is production-based and/or in a private practice/group setting.  

The "Basic" residual rider sometimes doesn't include help for income loss after transitioning back to work. Some carrier's basic rider does. You may want to inquire about the "Enhanced" version, which allows for recovery of income; after recovering from a disability; all depending on the carrier you are working with.

Today we discuss:

  •  What is a residual rider?
  • What % of your income must be lost before you trigger the benefits?
  • How residual riders are not all built the same
  • If you have a recovery rider built into the residual rider

How to calculate the residual rider payout after triggering your benefits

Please let us know if you have specific questions on these elements and/or would like a review of your current plan. 

To schedule your consultation, please click here:

NOTE: This podcast was transcribed by a free AI transcription tool called Otter. Please forgive any typos or errors.

Amber Stitt 0:00

In this physician edition podcast episode, we're discussing the residual disability insurance writer. This rider is often confused as it's your partial disability insurance rider, and we'll discuss how this works, how different contracts have a different version, and how to compute what kind of income loss determines your partial disability income check. I hope you enjoy it!

Hey, physician friends: This is Amber Stitt. I am a business strategist and financial consultant partner to MD disability quotes. Welcome to my channel. Today we're going to talk about our second video. What is a residual disability rider? This is the second part of our disability basics video series. So the first was covering own occupation and the contract definitions that physicians look into. So that will help you decide what base contract definition you would prefer within your contract. This video will cover the residual writer, which happens to be the partial disability writer. And our third video covers future purchase options. This is going to allow you to buy more when you either transition out of training to an attending status or your income goes up. And now it's time to buy more.

Out of our first of three videos, we've already discussed why we think you need "Own Occupation" coverage. But let's talk about why you do need that Residual Disability Rider, often you'll be looking for this rider inside your quotes and not realize you're skipping right past it because they call this an enhanced residual writer or an extended residual writer, typically, sometimes a "Basic" Residual Rider.

In a nutshell, this is your partial disability benefit, you are qualified to use this partial disability benefit if you have a partial disability and your physicians deemed you partially disabled. But the way to get this benefit to trigger is to prove income loss, some of these contracts are going to have a 15% trigger, some have a 20% trigger, just based upon the contract and the carrier who has what. And also there are a couple of carriers that might give you a little bit more in the first six months to the first year. This is going to cover all the high-level details so that you just know how this, this definition works, how this writer works. So you understand this element of the contract.

Let's think of these contracts in three different parts.
The first element is going to be your contract definition, that's the first part of your contract. Think of this as your second piece this is going to cover in the event, you're not completely out of the game, and you do have income loss, but you're still working in some capacity. The third element would be your purchase option writer, that piece is going to let you buy more coverage when the time is right. Now not all residual writers are made the same. As I mentioned, there are some that will kick in at 15% income loss and some at 20% of income loss.

So how does this work out? Let's give you some perspective using some scenarios.

Okay, let's say that I'm disabled, I'm going through the claims process. And let's assume that I'm at the highest point of my income, maybe because of a great base salary, or that my RV use is triggering, and I'm collecting a consistent increase above my base salary because I'm hitting my bonuses, then I'm going on a claim I'm going through the claims process. And part of that process is to prove the income at the time of disability. So this is important for the partial disability piece of this because we want to show proof of the income sometimes over a two-year average, then let's say you're able to work in some capacity, you're not fully disabled, you're partially disabled, you must go through the triggers of 15% or 20%, depending upon the contract that you have before the benefits would pay. So let's assume you're an attending and that your incomes warranted a $10,000 a month benefit. So the monthly benefit is what you would be paid if you are on full claim. So let's say the base benefit is 10,000. And you've passed through the 15 20% proof of income loss and you're at 30%. In this example, you would get 30% of the $10,000 benefit Okay, so that's going to help supplement while you continue to work, but you have suffered some income loss. In the second example, let's say all of that's happened, but then I'm recovering, and I'm going back to work. And now I'm full-time again. But the reason I use those bonus scenarios is that sometimes when you get back to work, you start a new job, or you're brought back on and have to rebuild your practice, you have to start over the income might not be the same as it was pre-disability. So this Enhanced version of the Residual Rider is going to continue to pay based upon income loss, even though your full time so not everybody is going to have the enhanced or the Extended Residual Rider, partly because they chose not to some of the contracts out there may not offer it. But in general, most of the time, we put the enhanced residual writer on people's contracts unless otherwise told to do so. Some carriers won't let you remove it. And then some carriers only have that basic definition. Some people ask me whether or not they should actually pay for this residual writer, do we need this residual writer, I do think residual writers are important. I think that this could be certainly helpful. If you are on track to go out on a full claim, but you haven't yet. You can at least retain some supplemental benefits while you're going through a partial disability, potentially to a full disability. Or the other way, maybe you go on claim 100%. And then you get better to get back on track. But you need some time to rebuild your practice, then this partial Residual Rider going to help you then supplement your income. And hopefully to get you back to being financially whole as you were pre-disability.

I do want to take a moment to say that this video is covering some of the technical details of the residual writer, there could be some changes over time as contracts do change. And I want you to know the high-level rules. So you know, when you're looking at your base contract, what definition you bought, you buy your Residual Disability Rider what kind to buy and how does it work. And then thirdly, you have your Future Purchase Option.

I want you to know how the second element performs for you so you understand why you're paying for it. Thank you for joining me on this quick tour of residual writers that are offered out there either because you have a plan yourself or maybe you have a plan through your job. We always recommend you purchase your Own Occupation plan while young and healthy. By doing so you can rate lock your plan, be able to buy more coverage as an attending or as your income grows regardless of risk factors. And assuming you have no exclusions on your policies from the beginning, you'll always be able to buy more as long as you're financially eligible. Please let me know if you have specific questions on these plans and this specific writer and we can always do a review of your current plan so you can find out which one you have. We are always happy to help.

Transcribed by

Thank you again for joining me, Amber Stitt, in this episode of The Physician's Edition. I’ll see you next time, podcasters!