OWN-OCCUPATION DISABILITY INSURANCE EXPLAINED

Own-Occupation Disability Insurance Explained

By : Gary Fegan

(301) 917-2310
gfegan@disabilityquotes.com

Woman working on laptop at homeWhy is Own-Occupation so Important?

The goal here is to help you understand the importance of an important feature that should be on a disability insurance (DI) policy: the True Own Occupation Definition of Total Disability

A disability insurance policy is the best way for anyone to protect their income. Statistics say nearly 3 in 10 working adults will suffer an accident or illness of 90 days or longer at some point during their career.A DI policy with own-occ benefits can help protect professionals in your own occupation. It can provide a benefit when you are unable, due to injury or sickness, to perform the material and substantial duties of your own occupation. 

The Ability to Double-Dip During a Claim

Yet you still have the flexibility to work in another occupation without having that decision impact your policy benefits. You could even make more money doing something completely different and collect 100% of your total monthly benefit so long as the disability prevented you from performing the material and substantial duties of your regular occupation.

This is such an important feature for a highly motivated professional who is likely to work in some other capacity. Whether you are an executive, doctor, or attorney, there is no doubt that such a provision would be important to have.

Most people do not want to sit around the house in the event of a disability. What we do for a living is a large part of how we define ourselves. The True Own-Occupation feature allows you to continue to work in another capacity without fear of losing your disability insurance benefits during a claim if you want to.

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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.
 

1True Own Occupation

Man working on computerThis 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.

Hypothetical Example

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.

2Transitional 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.
 

3Modified Own Occupation: Disabled and not working in another profession.
 

Structural Engineer Working at ComputerCertainly, 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.
 

4Adjustable 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.
 

5Any Occupation: Gainful Occupation (Any OCC)
 

Truck DriverThis 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.

Summary

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 

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 9200 Corporate Blvd, Suite 390, Rockville, Maryland 20850. Securities products/services and advisory services are offered through PAS, a registered broker-dealer and investment advisor, (240) 683-9700. James Fegan, Financial Representative. The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Financial Balance Group is not an affiliate or subsidiary of PAS or Guardian. PAS is a member of FINRA, SIPC.

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.

2019-90488 Exp: 12/1/21