Certified Financial Consultant (CFC) Practice Exam

What type of policies provide income coverage when returning to work part-time after total disability?

1. Long-term disability policies

2. Short-term disability policies

3. Residual income policies

4. Life insurance policies

The correct answer is: Residual income policies

Residual income policies are designed to provide income coverage for individuals who have experienced total disability and are returning to work on a part-time basis. These policies recognize that an individual may not be able to return to their previous full-time work capacity and therefore offer a benefit that compensates for the difference between their pre-disability income and their current part-time earnings. This feature is particularly beneficial as it supports a smoother transition back to the workforce, allowing individuals to regain their full earning potential over time rather than facing financial hardship during their recovery and partial return to work. Other types of policies, such as long-term and short-term disability policies, primarily provide benefits for complete disability rather than addressing the nuances of transitioning back to part-time work. Life insurance, on the other hand, is unrelated to income coverage during periods of disability. Therefore, the specificity and intended function of residual income policies make them the appropriate choice for covering income when returning to work part-time after total disability.