Broker Check

Own-Occupation...Is It Really?

by Steve Crawford

Own-occupation is not what it used to be for most carriers, but it can be!

Ten years ago if you read the words "own-occupation" on a disability insurance proposal, you could feel comfortable that the policy being proposed to you truly was the best definition of total disability available in the industry. Today, that is just not the case, buyer beware!

This is the one issue that upsets me the most about this industry. There is no regulation regarding the various terms used in individual long term disability insurance policies. The "own-occupation" definition in one carrier's contract is not the same as the "own-occupation" definition in another carrier's contract. The consumer, who should not be expected to read the different definitions in various contracts may be left with a contract, which they believe to be own-occupation and is in-fact a "modified own-occupation" policy.

Ten years ago carriers that offered own-occupation disability insurance policies had one definition of total disability. Everybody was marketing the same "own-occupation" definition and the consumer was not responsible for verifying what was being sold to them. Ten years ago, the definition went something like this:

"Because of sickness or injury you are unable to perform the material and substantial duties of your regular occupation. We will consider you to be totally disabled even if you are at work in some other capacity, so long as the disability prevents you from performing your original occupation"

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What Is Different Now?

The main problem now is insurance companies actually using the words own-occupation on disability insurance proposals, when they know that their policy is not a pure own-occupation policy. This problem is actually a very large problem. Not only are major insurance carriers guilty of this, but the problem has penetrated into major professional associations. Associations that membership depends on to obtain the best possible coverage are now marketing disability insurance policies with the words own-occupation on their marketing material when the actual policy is anything but the own-occupation disability insurance sold by everybody just ten years ago. It is as though some insurance carriers consciously said, "we can't afford to offer such a quality definition of total disability, so let's offer a more restrictive definition of total disability and just call it own-occ. I see physicians, dentists, and other professionals on a daily basis with proposals from associations and other insurance carriers with the words own-occupation on the marketing material and proposal. They argue with me daily saying that the proposal they have is also "own-occupation", until I show them the actual definition of total disability in the physical policy.

Ten years ago many insurance companies decided to stop selling individual disability insurance because they were not doing well in the market, and some carriers went out of business all together. Many of the carriers that decided to stay in the disability insurance business had a complete product overhaul, and moved away from the own-occupation disability insurance product in favor of an income replacement product line. Very few insurance carriers stayed in the pure own-occupation disability insurance business, but it is important to understand that some insurance companies did stay in this product line, and continue to do so very well.

The fall-out has taken place, and now many carriers are ready to start making serious strides in the disability insurance industry once again. The mergers have all been completed with (Guardian and Berkshire), (Unum, Paul Revere, and Provident), and (Mass Mutual and Connecticut Mutual). The problem is that certain carriers made a conscious decision to start marketing own-occupation once again even though they changed their definition of "own-occupation" drastically. While an insurance company like Berkshire Life Insurance Company of America still offers a pure own-occupation contract, the same definition from ten years ago, some carriers now have the words "own-occupation" on their proposals with a definition that is anything but what the industry had come to know as the definition for it over the previous forty years.

What many carriers are now marketing as own-occupation, in reality is an income replacement contract. Own-occupation should mean that if you are unable to perform the material and substantial duties of your regular occupation, the insurance company will pay you even if you are able to perform some other occupation. The new, what I believe to be deceptive, modified own-occ contract has the words "so long as you are not engaged in any other occupation" tacked onto the end of the definition of total disability. This means if you go on claim, and begin working in an entirely different occupation, the insurance company is going to reduce your disability benefits accordingly (possibly even ending the claim).

What Can The Consumer Do To Check?

Understand that the words "own-occupation" should not be taken for granted. Because these words are physically on a proposal does not mean that you are reviewing the best definition of total disability available. In order to make sure that you are receiving the best definition of total disability make sure that the definition of total disability matches the definition listed at the beginning of this article. If the words "any other occupation", or "gainful occupation" are anywhere in your definition of total disability, you may want to make sure that you are not eligible for a pure own-occupation contract elsewhere.

Is own-occupation the most important feature of a disability insurance policy? My answer to this question is NO. There are certain occupations that may not be eligible for a pure own-occupation contract with any company. There are also certain occupations that may only be eligible for a 5-year pure own-occupation policy, with a modified own-occ thereafter with one company, but pure own-occupation to 65 with another. If you went on own-occupation alone, then one may make a mistake in this scenario. Review this entire site, you will see that the residual, waiver of elimination period, exclusions, and optional riders all mean quite a bit.

Don't make your decision on own-occupation alone, there is a lot to understand in a disability insurance policy. But understand that just because the words are on a quote, it does not mean that you actually have what you think you do. Unfortunately many companies have decided to change the rules without telling everybody, and they are in my opinion attempting to deceive the consumer by allowing them to believe they are purchasing a good old fashioned own-occ policy when in fact they may not be. A real own-occupation policy may be available to you, ask the question of your insurance agent, "Is this a pure own-occupation contract to age 65, or is this a "modified" own-occupation policy that offsets for other income during a claim?"

These are the personal views of the author and do not necessarily reflect the views and opinions of The Guardian Life Insurance Company of America or its subsidiaries and affiliates thereof.