Written by: Corey Janoff
Own occupation disability insurance. It’s a regularly searched term for specialized professionals, such as doctors. Some people will search for physician disability insurance. Others may search for occupational disability insurance. I can see how own occupation disability insurance and occupational disability insurance can be interchangeable terms. The more commonly referenced terminology for occupation-specific disability insurance is “own occupation disability insurance,” so we’ll stick with that for today.
Own occupation disability insurance is a form of insurance that protects your income if you cannot perform the substantial and material duties of your own occupation. Why is this important? Let me tell you a story.
I have a client. We’ll call her Jane for anonymity purposes. Jane is an otolaryngologist, or ENT surgeon, specializing in ear, nose, and throat surgery. About a year ago, Jane started getting pain in her arm. It would come and go. She found if she lifted her arms out for more than a couple of minutes (a task required to operate on someone), the pain would come and be unbearable. Long-story-short, she was unable to operate.
Her employer was kind enough to adjust her job duties and continue paying her full salary. At the same time, she tried to resolve this issue, but that was likely only temporary if she couldn’t return to operating.
In terms of basic daily living, it doesn’t really hinder her. She does not need to use a wheelchair. She can still get around and do most of the things almost anyone else can do. She just can’t perform surgery.
Jane was ultimately diagnosed with Thoracic Outlet Syndrome, and it’s unclear what the future holds. There isn’t really a definitive cure for it. Some people get better with physical therapy or surgery in some cases, but there are no guarantees.
Jane has two own occupation disability insurance policies. She is collecting benefits on one of them and is in the process of filing a claim to collect benefits on the other (filing for a claim can take months before benefits begin to pay).
If Jane had an any-occupation disability insurance policy, she wouldn’t be able to collect benefits. The devil is in the details.
Own Occupation Disability Insurance Definition
Almost everyone in America has a disability insurance policy. It’s called Social Security. The benefit amount is small, and it is very difficult to collect disability benefits from Social Security. To qualify for disability benefits from Social Security, your disability must be expected to last greater than 12 months and prevent you from doing any gainful occupation.
I joke, but if your tongue produces saliva, you can lick stamps and go work at the post office. You’re not disabled.
Social Security is what is considered any occupation disability policy. If you are unable to perform any occupation, then you are considered disabled. If you can’t perform complex surgical procedures, but you could work as a schoolteacher, you will not be eligible for benefits.
You want your own occupation disability insurance to be clear and concise. There are a handful of companies that have a true own occupation disability insurance definition. I’m paraphrasing, but they all more or less say:
Disability is defined as being unable to perform the substantial and material duties of your own occupation at the time of disability.
Some will take it a step further (albeit redundant) and say: If your occupation is a specialty of medicine, that is considered your occupation.
Translated to English: whatever your job duties are on the date you become disabled, if you can’t do those duties anymore, you are disabled. It doesn’t matter if you can do something else. As long as you can’t do your specific job, you meet the requirements to receive benefits.
The amount of benefit you receive will depend on your policy, how much benefit you have signed up for, and how impaired you are from doing your job. If you can do some of your job duties, but not all of them, or can still work part-time in the same job, you could qualify for partial benefits but maybe not full benefits. Again, the devil is in the details. It all depends on the wording of your contract with the insurance company.
Pricing of Own Occupation Disability Insurance
The factors that drive the cost of the policy are age, gender, health, and occupation. Some occupations are riskier than others. A power lineman is dozens of feet in the air, dealing with high voltage electricity every day. Some occupations have more things that can render them disabled. More things could prevent a nurse from performing their occupation than a software engineer. Some occupations have a greater propensity of filing disability claims (disability companies track the data of their claims department).
All else being equal, if you are an anesthesiologist seeking disability insurance, your costs will be higher than a diagnostic radiologist disability insurance policy. Why is that? Anesthesiologists need to use their hands more precisely than a diagnostic radiologist. As long as the diagnostic radiologist can see, think, and speak, they can do their job more or less. Anesthesiology requires more fine motor skills. Also, anesthesiologists have access to some potent drugs. Some have taken a liking to their own stuff, leading to a greater than average likelihood of filing a claim for mental health and drug-related disabilities.
As a good rule of thumb, if you are early in your career (late 20’s to early ’30s), you can expect to spend about 2-4% of your gross income on an own occupation disability insurance policy that covers the bulk of your earnings. If you’re on the younger side or go with a more basic policy, it may cost less. If you are older or get a policy with all the bells and whistles, it could cost more. If you have health issues, that could impact the pricing or potentially lead to certain types of claims being excluded.
The cost isn’t cheap. It’s a lot less expensive when you are young and healthy, so use your age and health to your advantage and get a policy sooner rather than later.
Whether you call it occupational disability insurance, own occupation disability insurance, or occupation-specific disability insurance, you want a policy that replaces your income if you cannot perform your specific job duties. It’s not cheap, but if you ever get disabled and cannot perform your job at full capacity due to injury or illness (illness being the most likely by a 10:1 ratio), you’ll thank your lucky stars you have it.
Every time a client has a health scare, I’m often one of the first people they get in touch with. They want to make sure their disability and life insurance are all squared away in case the worst happens.
Hopefully, it is something you will never need. However, according to the Department of Labor, about 25% of you reading this will incur an injury or illness, keeping you out of work for at least 90 days. If it lasts longer than that, you’ll be glad you have an own occupation disability insurance policy.
Need to get an own occupation disability insurance policy? Meet with us to figure out which disability insurance company may be right for you.