If My Policy Does Not Have Own-Occ Benefits?
The good news is that most major companies offer 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, then 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 allows you to continue practicing 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 occupation, 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, both appear to claim an “own-occupation” definition of total disability. They both do, but there are dramatic differences in how each could and would pay a claim if an individual becomes disabled. The first definition does pay a claim if you can 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 ensure is included in your policy.
True Own Occupation
This definition is most favorable to the policy owner and is generally available only in select individual disability insurance plans and rarely in 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.
Hypothetical Example
A 35-year-old orthopedic surgeon permanently injures their operating hand and can no longer perform their duties as a surgeon because of the injury. 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 become an attorney.
They start working as attorneys and earn a salary of $100,000 per year. 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. If a person is disabled and receives benefits and starts earning additional income in a new occupation, their total new income (benefits from disability + new income) cannot exceed their total old income (original earned income). If the policyholder earns more than they did before becoming 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 in another profession and earn income.
In other words, a person would be eligible for a check if their disability prevented them from working in their own profession and would not require 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 several group LTD plans that use this definition of disability. The definition generally has two periods during which the term of total disability is different.
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 that a person can be considered disabled only if an 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 states that the insured can receive benefits for a claim only if their injury or illness prevents them from working in any occupation, or in any occupation for which they have the qualifications. The plans that typically include this basic definition are very inexpensive and generally focused on blue-collar workers in trucking, construction, and manual labor.
Summary
When I speak to people across the country about disability insurance, they know the term “own-occupation” and know that it 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 The Guardian or its subsidiaries, and such opinions are subject to change without notice.
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