Over the last ten years, there have been many changes to the disability income protection market. Insurance companies have been overwhelmed with claims due to liberal policy declarations and underwriting policies, many of which were related to hard-to-justify nervous or mental conditions.
In the past, there were multiple carriers offering disability income products. Now, thanks to consolidation, e not even ten companies offer competitive disability products. “Own occupation” policies, by the traditional definition, are also tough to find.
That said, there are still some variations of disability products available in today’s market. Insurance applicants generally have the option of “loss of income,” “any occupation,” “own occupation,” or a hybrid version of all three types.
A typical current policy has a dual “own occupation” and “any occupation” definition. In other words, after disability, the first two to five years of benefits will be determined by the liberal “own occupation” definition. If the insured person remains disabled after the initial period covered by the “any occupation” definition, then the less liberal definition of “any occupation” would be applied to determine benefits.
The liberal definition of “own occupation” will define disability as the person unable to perform every and any duty related to their occupation. Of course, it will cost more than the restrictive language in “any occupation.” It’s also usually used for those in a professional field of work. When considering disability income protection, the occupational definition is a vital element. Let’s take a look at some examples.
A cardiovascular surgeon has undergone multiple years of education and training and is now at the top of his profession and earning potential. A car accident resulted in several of his fingers being fractured on his left hand. With multiple surgeries and long-term physical and occupational therapy, he has regained some mobility in his fingers. However, the dexterity in his fingers will never meet his professional standards, and he will never be able to practice his surgical profession again. Suppose the surgeon has an “own occupation” policy. In that case, the language will allow him to receive total disability still if he opts to apply his professional knowledge in a different capacity, such as teaching. Conversely, other policies would mean that he might only have access to limited short-term benefits if he opts to return to the workforce in a different profession.
On the other hand, a job, such as a sales representative, typically wouldn’t have any daily job duties that would create a need for the “own occupation” type of policy, as there isn’t any single job duty that defines this particular occupation. Therefore, an “any occupation” or “loss of income” policy type would suffice coverage in most situations.
Even those that are self-employed or are business owners should consider the right disability coverage for their occupation. Let’s say that the owner of a small pet store has two employees. He becomes disabled for seven months, but the business never actually suffers with the two employees operating the business. In this case, a “loss of income” type policy will likely never pay out benefits since the insured never suffered a loss of income.
The above three examples prove that the occupation must be considered when determining the right disability coverage. Those considering disability insurance should take great care in selecting the most appropriate occupational definition. Remember that while a more restrictive purpose of “any occupation” policy is generally much cheaper, it might be useless for some workers and can substantially reduce or eliminate payable benefits. So, proceed with caution.