Proportionate Benefit

Published: | Updated: April 15, 2018

Definition - What does Proportionate Benefit mean?

A proportionate benefit is a type of disability income protection that provides financial compensation if the insured acquires a disability that reduces, but does not eliminate, their capability to work. The compensation is proportional to the disability and the corresponding reduction in capacity to work.

Insuranceopedia explains Proportionate Benefit

Proportionate benefits provide a disabled worker with compensation that typically equals the difference between their old, pre-disability salary and their new salary from the work they have picked up after incurring the disability.

For instance, if the insured was making $100,000 per year but can only make $50,000 a year after their disability, their proportionate benefit will equal the difference between the two salaries, namely, $50,000 annually.

Some insurance companies, however, only pay 50$ of the difference between the pre- and post-disability salaries. In the example above, the insured would only be able to collect $25,000 in benefits.

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