Choosing the Definition of Disability for your Policy
An important detail of choosing an insurance company and their policy is determining which “definition of disability” is best for you, and thus which insurer’s policies offer that definition.
There are three main definitions:
-Standard Definition of Disability
-Own Occupation Definition of Disability (alternatively called “Your Occupation” by some insurers)
-True Own Occupation Definition of Disability (alternatively called “Pure Own Occupation” by some insurers)
You have to choose the definition by balancing your needs with the premium cost differences in policies with the 3 differing definitions.
Let’s compare the three definitions of disability:
(To help illustrate the definitions, we will use a real life example, one of our clients in Greensboro we helped choose Disability Insurance. Susan is a veterinary surgeon.)
Comparing the 3 Definitions of Disability
When does a Disability Insurance policy pay you benefits? The answer is when you meet the policy’s “definition of disability.” Here are the 3 main definitions insurers offer:
Standard Definition of Disability
(the base standard)
This standard definition means:
-You are totally disabled due solely to injury or sickness.
-Your physician has certified your disability, and you remain under a physician’s care.
-You are unable to perform the substantial and material duties of any occupation for which you are suitable by means of education or prior experience
-You are not working.
This standard definition works for most people. If your occupation does not require extra school or training, and other occupations you would be suitable for due to your work experience offers a similar annual income, this definition is suitable for you.
The premium cost for this definition is the lowest of the 3.
Susan did not choose this standard definition, as she spent many years, at great expense, in veterinary school, and in a fellowship, to become a veterinary surgeon. Her income is higher than average.
A policy with his standard definition would not pay benefits if Susan was disabled and could not perform surgery (example, loss of use of her hand), but could work as a veterinarian in an animal clinic at a much lower annual income. So it does not protect her income.
Own Occupation or Your Occupation Definition of Disability
This Own Occupation definition means:
-You are totally disabled due solely to injury or sickness.
-Your physician has certified your disability, and you remain under a physician’s care.
-You are unable to perform the substantial and material duties of your own occupation. If your disability prevents you from performing just one of the main duties of your own occupation, you are considered totally disabled.
-You are not working.
The own occupation definition works best for people whose occupation requires specialized training (examples, physician, veterinarian, attorney, dentists, etc.). Their specialized training means their annual income is higher because they have that training and experience.
Though people in many other occupations (including Chip, an insurance broker) choose this stronger definition.
Susan chose this own occupation definition for her DI policy. Her many years of school and fellowship, at great tuition expense, to gain the expertise to work as a veterinary surgeon affords her an above average income.
A disability could prevent her from performing surgery, but may not stop her from being able to work in other occupations at a much lower income. This stronger own occupation definition protects her earning power, and ensures she will be able to fund her family budget if disabled.
True Own Occupation or Pure Own Occupation Definition of Disability
This True Own Occupation definition means:
-You are totally disabled due solely to injury or sickness.
-Your physician has certified your disability, and you remain under a physician’s care.
-You are unable to perform the substantial and material duties of your own occupation. If your disability prevents you from performing just one of the main duties of your own occupation, you are considered totally disabled.
-You are not working in your own occupation (pre-disability), but can work and earn income in any other occupation.
The true own occupation definition is a step up from own occupation, and would be important to someone who may have an interest in continuing to work in some capacity post-disability.
Susan did not chose this true own occupation definition of disability for two main reasons:
-There is an added cost to the stronger definition, and she was balancing premium costs with the benefit options most important to her.
-And she is passionate about her job! Susan felt that if disability kept her from veterinary surgery, there was not another occupation she was interested in.
Request a Free Disability Insurance Illustration with “Definition of Disability” Options
Complete the form and Chip will send you an email with recommended quotes of disability insurance (tailored to your occupation, income and other details). All in a conversational, easy to understand explanation of the details Chip is known for. You can review the information, then follow up with your questions via email, phone call, text, Zoom / Google Meet or an in person meeting.
Privacy is something we take seriously. The minimum of information is shared with an insurance company to put together a detailed free quote and illustration for you.
Note: Chip only helps North Carolina residents choose and enroll in Disability Insurance.
