What defines a residual disability income policy?

A residual disability income policy is specifically designed to provide financial support to individuals who experience a reduction in their income due to a disability but are still able to work in some capacity. This type of policy offers benefits that correspond to the percentage of income lost as a result of the disability after the individual has returned to work, addressing the transition back to a full work schedule while acknowledging that complete recovery may take time.

This concept is particularly important in the realm of disability insurance because many people may not experience a total loss of work capability but still face financial hardship due to reduced hours or diminished productivity. By providing income replacement relative to the loss incurred—rather than only for complete inability to work—residual disability policies help bridge that gap, allowing recovering individuals to maintain some financial stability.

In contrast, other options describe characteristics that do not align with the purpose of residual disability income policies. For instance, policies that only cover total disabilities would not provide any assistance for someone who can still work part-time or in a modified capacity. Similarly, not providing any income replacement overlooks the fundamental benefit that such policies are established to offer. Lastly, restricting application to individuals over 60 undermines the broader utility aimed at supporting anyone who might experience a residual disability, regardless of age.