Certified Financial Consultant (CFC) Practice Exam

What is the benefit based on an insured's loss of earnings after recovering from a disability?

1. Partial disability

2. Residual disability

3. Temporary disability

4. Full disability

The correct answer is: Residual disability

The concept of residual disability refers to the scenario where an insured individual has recovered from a disability but is still experiencing a loss of earnings due to limitations associated with their recovery. This form of disability insurance provides benefits based on the difference between the individual's pre-disability earnings and their current earnings after returning to work. The essence of residual disability coverage is to assist individuals who, while no longer completely disabled, are unable to work to their full capacity or earn the same wages they did prior to the disability. This form of coverage acknowledges the challenges faced in the transition back to full productivity and provides the financial support necessary to bridge the gap in income during this recovery phase. Partial disability typically refers to situations where an individual can still perform some work but may not be able to perform all of their regular job duties. Temporary disability covers situations where the disability is expected to last for a limited time, and full disability indicates a situation where an individual cannot work at all. While these terms are relevant in the context of disability insurance, they do not specifically address the loss of earnings experienced after an insured has begun returning to work, which is the defining characteristic of residual disability.