The most important part of any disability insurance policy is the definition of Total Disability. There are three main categories:
True Own Occupation
True Own Occupation is the best definition of disability available – it allows the insured to be paid the full value of their monthly disability benefit even if they are working in another occupation, regardless of the income earned from the new occupation.
An example of a True Own Occupation definition would be “You will be considered totally disabled if, solely due to injury or sickness, you are not able to perform the material and substantial duties of your occupation, even if you are gainfully employed in another occupation.”
Specialty Definitions for Physicians, Dentists, and Attorneys
Several insurance companies offer an expanded version of the True Own Occupation definition which includes a statement that if a physician, dentist, or attorney has limited the scope of their practice to a single Specialty, that Specialty will be considered their occupation.
For example, if a vascular surgeon sustained nerve damage which prevented them from performing their duties as a surgeon, that person could continue working as a primary care physician while being paid their disability benefits.
Guardian has recently introduced an even better Specialty definition – if the insured derives at least 50% of their income from performing procedures and can no longer perform procedures due to their disability, they can receive full benefits even if they remain within the same practice. Or, if the insured derives at least 50% of their income from hands-on patient care and can no longer work hands-on with patients, they can receive full benefits.
As an example, a gastroenterologist that exclusively performs procedures becomes disabled and unable to perform surgery. They are re-assigned within the same practice to do clinical work at the same salary level. The Guardian definition would allow them to continue earning their salary while being paid their full disability benefits, while other companies would not pay benefits since the physician is still working in the same occupation.
Transitional Own Occupation
Principal offers a Transitional Own Occupation definition of disability. This is the same coverage as True Own Occupation, except the insured’s income from a new occupation plus the income from disability benefits cannot exceed the pre-disability income level, otherwise benefits will be reduced.
Modified Own Occupation
Modified Own Occupation is the same as True Own Occupation, except you cannot be working in another occupation. The insurance company cannot force you to go back to work, but if you choose to work they will not pay the Total Disability benefit. If you have a Residual/Partial disability rider attached to the policy, you may qualify for a partial benefit based on the loss of income between the pre-disability occupation and the new one.
Any Occupation
This is the least favorable definition. Generally, the definition will require that you are unable to work in any gainful occupation for which you are reasonably suited by training, education, or experience. There is a lot of gray area when such a definition is applied to certain types of disabilities, and this type of coverage should generally be avoided if either the True or Modified Own Occupation definitions are available.
Any Occupation definitions are most common with employer-provided disability insurance.