In disability insurance, the definition of disability typically refers to the circumstances or conditions under which an individual is considered disabled and eligible to receive benefits from their disability insurance policy.
The specific definition of disability can vary between insurance policies and providers, but it falls into one of three categories:
- Own Occupation Definition: Under this definition, a person is considered disabled if they are unable to perform the duties of their own occupation or job. This means that if the insured is not able to perform the specific job they had when they became disabled, they may be eligible for disability benefits, even if they could potentially work in a different occupation.
- Any Occupation Definition: This definition is stricter. It considers a person disabled only if they are unable to perform the duties of any occupation for which they are suited based on their education, training, and experience. In other words, the insured would only qualify for benefits if they cannot work in any job, not just their current or previous occupation.
- Modified Own Occupation: This combines the two definitions above. Usually, a modified occupation policy will offer the Own Occupation definition for the first two years of disability. If the insured remains disabled after two years, the policy reverts to an Any Occupation definition.
How do you know which disability definition is the appropriate choice for your client or prospect? Premium or cost is one aspect that is important to consider. A policy with an Own Occupation definition is usually more expensive because it provides the insured the ability to continue to work and earn an income in another occupation while continuing to collect disability benefits. A modified Own Occupation or an Any Occupation policy has more restrictive requirements under which they will continue to pay the benefits and allow the insured to work in another occupation.
An Own Occupation definition is better suited to individuals with highly skilled or specialized jobs. A minor injury could inhibit their ability to perform the duties of their job but would not prevent them from working in another occupation that they are educated and trained to perform. A surgeon could hurt their back making it difficult or impossible to perform surgery. However, they could work in other occupations such as teaching. In this case, an Own Occupation policy may continue to pay benefits even though the surgeon continues to earn an income in another occupation. The same back injury to an individual in an administrative job may not be considered a disability at all. Or, if it is, the expectation is that after some rehabilitation, the individual will return to work in the same or a similar role. An Own Occupation is not a bad option, but the insured may be served just as well by a less expensive definition of disability.
It is important for individuals to carefully review the terms and conditions of their disability insurance policy to understand which definition applies, as well as any other specific criteria or waiting periods that may impact their eligibility for benefits. Different insurance policies may have variations in how they define disability and what qualifies an individual for benefits.
An annual review of the disability policy with the agent is ideal, as life events occur, and situations change. Keeping the benefit amount up to date will assist with your future needs.
The definition of disability is just one example of the nuances involved in designing the right disability plan for your clients and prospects. EMG Brokerage can assist you in finding the right company and designing a policy with the benefits and features that provide the best value to the individuals you serve.
If you have questions about Disability insurance, our team of Disability experts is devoted to providing consistent and reliable support. EMG Insurance Brokerage is a full-service brokerage general agency based in Houston, Texas. We know it is essential for advisors to access quality products, expert advice, and cost-effective solutions. We follow market trends and continually update carrier offerings. For guidance on how to grow your business, contact us. We are here to support you.
