California Life and Health Insurance Practice Exam 2026 – Complete Test Prep

Residual disability income insurance payments are designed to assist individuals who have experienced a reduction in their income due to a partial disability. Instead of providing a benefit based solely on total disability, which means being unable to work at all, residual disability income insurance focuses on situations where the insured can still work but at a decreased capacity, resulting in lower earnings.

The payments are calculated based on the amount by which the insured’s income has been reduced due to the disability. For instance, if an individual typically earns a certain amount but can now only earn a lesser amount because of their condition, the insurance benefits will compensate for the difference between the pre-disability income and the post-disability income. This approach ensures that individuals receive financial support that reflects their actual loss of income, rather than just a flat amount for total disability or other factors unrelated to their earning capacity. This is particularly essential for individuals who can still contribute to their work environment but have incurred a substantial reduction in their income due to their condition.