How do Insurance Companies Calculate Monthly Loss of Income in Partial Disability Claims?
If you file a partial disability claim, your benefit amount will be calculated each month based upon the monthly income loss for the particular month in question. Often, you must meet a minimal income loss threshold (typically 15-20%) in order to qualify for benefits at all.
Once you hit that threshold, the total benefit often depends on your percent loss for that month. For example, if you have a 50% loss, you receive half of the benefit. Or if you have a 60% loss, you receive 60% of the benefit. Many disability policies also pay you the full benefit, even if you are only medically partially disabled, if your income loss is 75-80% or higher in a particular month.
Generally speaking, most disability policies only count active income in these calculations and passive income, such as investments or rental property, do not count as income. In some instances, if you have true own occupation coverage and can establish that the income is from a different “occupation,” you can work in a different job and still receive your full total disability benefits. Other policies (sometimes called “transitional own occupation” policies) let you earn income from a different job, but reduce benefit payments if your income from your disability policies plus your income from a new job ever exceeds your pre-disability earnings.
These evaluations can be complicated, however, as the disability companies will be looking for any overlap between the new job and the duties you were performing pre-disability.
Accordingly, if you are being paid total disability benefits and considering a new job, it is a good idea to speak with an experience disability attorney first to ensure that you understand how your policy works, and how the new job will impact your benefit amount and total monthly income.
