The Puzzle of Own-occupation Definitions

5 minute read

5 minute read

What you see is not always what you get, and this is especially true than when it comes to the “own-occupation” clause of physician disability insurance contracts. There are different types of disability insurance and they will all give you different levels of coverage. Unfortunately, merely looking for the words “own occupation” is not sufficient as variations of own-occupation coverage is very common! Keep reading to find out the definitions of each type of disability insurance and how to choose which is right for you.

What are the different types of disability insurance?

True own occupation: Under this type of disability insurance policy, an insured is considered disabled if they aren’t able to perform the duties of their occupation. In the case of a physician, this would be their medical specialty.

The important part of this definition of coverage is that it provides benefits if you aren’t able to work in your specialty without taking away your flexibility to make an income in another occupation.

This definition is the most favorable for the policy owner, and is usually available only with select individual plans. It is almost never provided with employer group plans.

An example would be a surgeon who injures her hand and is no longer able to work in her specialty, but who starts teaching at a university. If she has true own-occupation coverage, she will be able to continue receiving her disability benefits even though she has found work in a different capacity. There is not a limit on the additional income earned in her new profession to offset her received disability benefits.

Transitional own occupation: With this definition, your policy will pay benefits if you cannot work in another occupation and start earning income in a new occupation, but your total new income (including benefits) cannot exceed the total original earned income. If you make more with your new occupation than you did in your medical specialty, your disability benefits will be offset until your total income is equal to the benefits plus your new income and is not higher than your income as a medical professional.

For example, a cardiologist who is diagnosed with a chronic disease that prevents him from working in his specialty is still able to write articles for popular science magazines about the medical field. If his income as an author grows to match his income as a cardiologist, then his benefits are reduced until his total income (benefits plus new income) is equal to his original earned income.

Modified own occupation: According to this definition, a person receives benefits when they can’t work in their own occupation and are totally disabled.

With this kind of disability insurance, benefits do not continue if that person wants to work earning an income in another profession. The options of a totally disabled person with this kind of disability insurance coverage would be to either live off their benefit check and remain totally disabled or return to full-time work in a different occupation.

This type of coverage is usually used as a base level of coverage for company employees. Most executives and other employees with higher salaries will usually get a secondary policy with a true own-occupation definition.

An example would be an emergency physician who injures his back and is no longer able to practice in his specialty. In this case, he has only the employer-provided modified own-occupation coverage. Due to this definition, when he is offered a job working on emergency medicine policy for his state, he has to choose between taking the opportunity or receiving his disability benefits.

Any occupation: This is the most common form of disability insurance, and is usually found in employer-sponsored group long-term disability insurance plans and low-cost individual contracts. In this definition, an insured is considered disabled only if they are unable to work in any occupation for which they are qualified. This is the least beneficial type for the insured and it also provides the greatest leverage to the insurance company for determining claim eligibility. Someone with any-occupation coverage can only receive benefits for a claim if their injury or illness prevents them from working anywhere, not just in their specific occupation or another occupation for which they have qualifications.

How can you tell what type of coverage you’re getting?

Few insurance carriers have maintained true own-occupation coverage, while most have tacked on a clause to the end of their definition that says something like “so long as you do not engage in any other occupation.” That is very different from the definition of true own-occupation coverage which guarantees full disability benefits as long as you do not engage in your primary occupation as a physician.

When you’re a resident or fellow, clearly you don’t have time to read through the many pages of fine print in a disability insurance contract to make sure that it offers the traditional form of own-occupation coverage. It’s important to know exactly what sort of coverage you’re getting, but if you haven’t studied contract law it can be hard to tell! Instead of relying on agents from the individual insurance companies, consider using an independent advisor who can find the best true own-occupation options for you and clearly outline the costs and coverage of each plan.