If My Policy Does Not Have Own-Occ Benefits?
The good news is most of the major companies are offering own-occupation benefits in today's marketplace in some form or another. Just understand that not all own-occ definitions are the same by any means. The Provider Choice policy as an example has the best own-occupation definition specifically for physicians. You just need to read the definition of total disability in order to understand the differences between policies because no two policies will have the same definition. If you are relying on Group LTD, association coverage, or just a really bad plan than you may not have own-occupation at all.
The Ideal Definition of True Own-Occupation:
Total disability means that solely due to injury or sickness you are unable to perform the substantial and material duties of your regular occupation. You will be deemed totally disabled even if you are gainfully employed in any other occupation, as long as you are unable to work in your regular occupation due solely to an injury or sickness. Your occupation means the occupation in which you are gainfully employed during the 12 months prior to the time you become disabled.
If you have limited your occupation to the performance of the material and substantial duties of a single medical specialty or to a single dental specialty, that specialty would be considered your regular occupation.
This is important because it enables you to continue to practice medicine if you want. A surgeon may consider working as a general practitioner if disabled, and will still be able to receive his or her disability benefits.
More than any other occupations, physicians and dentists need a true own-occupation disability insurance policy, especially if you have narrowed the scope of your practice to a specialty or sub-specialty.
There are Two General Versions of “Own-Occupation” Disability
- Because of injury or illness, you are unable to perform the material and substantial duties of your regular occupation, and you are not gainfully employed in another occupation.
- Because of injury or illness you are unable to perform the material and substantial duties of your regular occupation.
As one reads the above definitions, it appears that both claim to have an “own-occupation” definition of total disability. They both do, but there are dramatic differences in how each could and would potentially pay a claim in the event that an individual becomes disabled. The first definition does pay a claim if you could no longer work in your regular occupation. However, benefits would be reduced or discontinued if you chose to work in any other occupation.
In the second definition (the better “true own-occupation definition”), if you choose to go to work in any other occupation, the policy would not reduce your disability benefits.
Both policies use the same term “own-occupation”, but they have two totally different definitions and restrictions. The second policy is known in the insurance industry as a true “own-occupation” policy. It is the latter that you want to make sure you have in your policy.
True Own Occupation
This definition is the most favorable to the policy owner and is generally only available within select individual disability insurance plans and rarely found within employer group plans.
Total Disability or Totally Disabled means that, solely due to injury or sickness, you are not able to perform the material and substantial duties of your occupation. You will be Totally Disabled even if you are gainfully employed in another occupation so long as, solely due to Injury or Sickness, you are not able to work in your occupation.
A 35-year-old orthopedic surgeon permanently injures their operating hand and can no longer perform his duties as a surgeon because of the injury suffered. He begins to receive benefits as a totally disabled individual under their policy of $20,000 a month. While they receive benefits, they decide to go to law school and change their profession to be an attorney.
They start working as an attorney and earn a salary of $100,000 annually. Since this individual’s policy has a true “own occupation” definition of disability, they will still be eligible to receive their annual disability benefits of $240,000 in addition to their new salary of $100,000 for as long as they remain totally disabled and unable to return to work as a surgeon, or until the end of the contract benefit period-- whichever occurs first.
Transitional Own Occupation
This form of “own occupation” definition mirrors the definition above with one important difference. In the event a person is disabled, receives benefits, and starts earning additional income in a new occupation, their total new income (benefits from disability + new income) cannot exceed the total old income (original earned income). If the policyholder makes more than they did before they became disabled, their disability benefits will be reduced to align with their old salary.
Modified Own Occupation: Disabled and not working in another profession.
Certainly, this is the most common form and is usually found in the employer-provided group long-term disability insurance plans and low-cost individual contracts. This definition provides benefits when a person cannot work in their own occupation and is totally disabled. Unlike the noted “own occupation” definitions above, there is no continued benefit if that individual or person under the group plan wants to work earning an income in another profession.
In other words, a person would be eligible for a check if their disability was preventing them from working in their own profession, and would not force them to work in another profession if they were qualified. They could not, however, get another job while on a claim or make any earned income. They must simply live off their benefit check and remain totally disabled, or return to work full time.
Adjustable Own Occupation: Modified Own Occupation Turns to Any Occupation
There are a number of group LTD plans that utilize this definition of disability. The definition generally has two periods where the term of total disability holds different terms.
The first period (which sometimes lasts between the first 2 or 3 years of a disabled person’s claim) is commonly called “modified own occupation.” However, if the person continues beyond that first period as a disabled person, the contract changes its definition to what qualifies for total disability. The second-period definition alters the contract language to infer the person can only be considered disabled if that injury or illness prevents them from working in ANY occupation, not just their specific occupation.
Any Occupation: Gainful Occupation (Any OCC)
This is the least beneficial definition to the insured and provides the greatest leverage to the insurance carrier for determining eligibility for a claim. This definition determines that the only way the insured can receive benefits for a claim is if their injury or illness prevents them from working in any occupation, or any occupation they have the qualifications in which to work. The plans that typically hold this basic definition are very inexpensive and generally focused on blue-collar workers within the fields of trucking, construction, and manual labor.
When I speak to people all over the country about disability insurance, they know the term “own-occupation” and they know that is the policy they want. I can also say with certainty that most people do not understand the difference between a true “own-occupation” definition of disability and other policies that claim “own- occupation” (some insurance companies even have “modified own occupation definitions of disability”). If you are looking to buy disability insurance, and you want to have the ability to work in another occupation without restrictions, ask your agent to show you policies with true “own-occupation” only.
1. Life Health Pro Article
This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.