The way an insurance company defines a disability is SUPER important when buying a disability insurance policy.
The 3 most common disability definitions are any occupation, modified own occupation, and own occupation.
3 Common Disability Definitions
1. Any Occupation
“Any occ” policies have the most common and strictest disability definition. They are usually found in employer group plans and low-cost individual policies. You will receive benefits if you can’t work in any capacity for which you are reasonably suited to work in. An any occ policy will deny claims if you can work in another profession, but choose not to work.
An any occ policy may say:
You are unable due to illness or injury to perform all the substantial and material duties of any occupation for which you are fitted by education, training, and experience.
It only pays benefits if you can’t perform work “reasonably suited” to you.
What does “reasonably suited” mean?
The insurance company will assess whether you can find a job that:
- You’re qualified to perform, based on skills and education.
- Pays a minimum percentage of what you earned prior to the disability. A typical level is 60% of your pre-disability wages.
- Is it located within a reasonable distance from your home?
- Will the new job allow you to attend scheduled appointments and treatments?
- Your doctor will sign off and allow you to perform the new job.
They are great starter plans with affordable rates, but often the only way to receive your income benefit is if you’re unable to work, period. Any occ policies typically cost less than policies with other disability definitions and offer the least amount of coverage.
Who should consider an any occ policy?
People who work in lower-paying jobs that don’t require specialized skills. That’s because a disability that prevents them from working their normal job will likely keep them from working at all. This could include professions in retail, customer service, hospitality, or janitorial industries. People in highly-skilled, high-paying professions should NOT get this type of policy because a disability that prevents you from working in your chosen field won’t necessarily keep you from performing other work.
2. Modified Own Occupation
“Modified own occ” aka “own occupation, not-engaged” means you receive benefits when you can’t work in your own-occupation, are totally disabled, and you choose not to work in another profession. If you decide to work in another profession, benefits do not continue. You would live off your benefit check OR go back to work full-time in a different occupation without your benefit check.
A modified own occ policy may say:
The insured is totally disabled when both unable to perform the principal duties of the regular occupation and not gainfully employed in any occupation. If the insured can perform one or more of the principal duties of the regular occupation, the insured is not totally disabled.
3. Own Occupation
“Own occ” is the broadest definition of a disability that a policy can have and offers the most protection. It pays you the full benefit if you can’t perform your specific duties or specialty, even if you’re employed somewhere else.
An own occ policy may say:
You are not able to perform the material and substantial duties of your occupation, even if you are gainfully employed in another occupation. If you meet the definition of totally disabled and you become employed in a new occupation, your total disability benefit will not be affected by any income from the new occupation, regardless of the amount.
Who should consider an own occ policy?
True own-occ policies will be the most expensive, but for those with high-paying and/or highly-specialized careers like a doctor, attorney, or financial professional, having a policy with this definition is essential.
If you’re a doctor and an injury or illness prevents you from performing the primary tasks of your job, you will likely be eligible for benefits under your disability plan. You’ll also be able to get another job, maybe as a medical director or a professor, and still be considered disabled and eligible for benefits.
Some insurance companies offer hybrid policies that combine own-occ with any-occ coverage. If you become disabled under the total disability provision, you may be eligible for own-occ coverage only for a period of time and then the coverage switches to any-occ. The length of time before the policy switches over is defined in your policy.
The Bottom Line
The definition of disability in your policy is incredibly important and varies depending upon the insurance company, so be sure to read your policy carefully and ask questions. The own occ definition is the most desirable, but most expensive and the any occ definition is the strictest, but the least expensive.
If an injury or illness prevents you from working, your disability definition could be the difference between receiving the benefits or not receiving any at all. No matter what job or income you have, it’s important to consult an independent disability insurance agent to help you find the best definition of disability for your coverage needs.