Definition of Total Disability
Why is this page important? - It is here you will learn when a policy actually pays you.
Every disability insurance plan has a definition of disability in the policy. There are three basic types:
- True Own-Occupation
- Modified Own-Occupation
- Gainful Occupation
True Own-Occupation Disability Insurance
The most comprehensive definition of total disability available. This type of policy will have a definition that says:
The inability to perform the material and substantial duties of your regular occupation, the insurance company will consider your occupation to be the occupation you are engaged in at the time you become disabled, they will pay the claim even if you are working in some other capacity.
What I have found over the years is that people will choose to fight their disabilities. They will refuse to sit at home and collect a monthly disability check. Instead, as long as they are not severely disabled, most people choose to go back to work in some capacity to give themselves a sense of self worth, or just to go do something everyday. Own-occupation disability insurance is the only plan that does not penalize somebody for going back to work in a different occupation while on a claim. Under this type of plan, the bottom line is if because of a sickness or injury you can not perform in your occupation, you will be considered totally disabled, even if you choose to do something else.
Modified Own Occupation Insurance
This has become a very common definition of total disability in the industry today. Some insurance carriers that have stopped offering own-occupation disability insurance have moved to an income replacement, or modified own occupation definition. You will find the first part of the definition is very similar to a true own occupation definition, but it is the second part that the major change occurs. A typical income replacement definition will look something like this:
Because of sickness or injury you are unable to perform the material and substantial duties of your occupation, and are not engaged in any other occupation.
As you can see there is a major difference between an income replacement and a true own-occupation definition of total disability. The modified own occupation definition will penalize you during a claim if you make the decision to go back to work and earn an income while on a claim. I have found that most people if given the choice would go back to some work if possible. Under this plan if somebody wants to go back to work in some capacity, the insurance company may offset your monthly benefit check based on your new income in your new occupation.
Gainful Occupation Coverage
This definition of total disability is very common in an employer sponsored group long term disability insurance policy, or with property and casualty insurance companies that decided to release a disability insurance policy. It is quite simply the worst definition available and should be at the very least supplemented with a quality contract if not replaced entirely. This definition basically leaves the determination of whether or not you are disabled up to the insurance company. A typical definition will look like this:
Because of sickness or injury you are unable to perform the material and substantial duties or your occupation, or any occupation for which you are deemed reasonably qualified by education, training, or experience.
You should be buying disability insurance so that you do not have to worry about your income if you can't do the material and substantial duties of your occupation. Many people who simply shop for the cheapest disability insurance rate end up with this type of coverage. Like most things, you get what you pay for and sometimes the most expensive policy is the one that doesn't pay you when you need it to. Try and avoid this type of policy if at all possible and get something that covers you in your own occupation.
The views and opinions expressed herein are that of the author and do not necessarily reflect the views and opinions of The Guardian Life Insurance Company of America or its subsidiaries or affiliates thereof.