Waiting periods of six months or a year could be considered if invested assets could provide income protection for these periods and beyond. It may be discovered, however, that with existing coverage purchased at a much younger age, the difference in premium between a 90-day wait and six months may not be sufficient to warrant the change. But, if new coverage is being purchased, the longer waiting period will provide a significant premium savings. This coverage pays a partial benefit when the insured is not totally disabled. Residual benefits pay a percentage benefit based on the amount of income loss.
Residual benefits are very important for two reasons.
First, the incidence of partial disabilities with a loss of income is significant. How significant this risk is is difficult to judge because insurance companies are reluctant to give much information. Residual benefits remove this dilemma. When evaluating the residual benefits of a disability income policy, two features are very important. The first is the method of calculating pre-disability earnings.