Getting disability insurance can be overwhelming, time-consuming and confusing. With so many options out there, it is hard to know which is best for you and your finances.
The biggest mistake doctors make is purchasing a policy that is not true own-occupation.
What’s the point in wasting your money on coverage that won’t protect you when you need it most? After all, the whole point of disability insurance is to protect you from financial risk if you lose your income due to an injury or illness.
To make sure that you’re getting the right policy, you need to pay attention to its definition of disability.
Definitions of disability
This is the #1 thing to pay attention to when selecting a policy. It sets apart good policies for doctors from those that should be avoided.
There are a few different types of definitions of disability, including:
- True own-occupation
- Transitional own-occupation
- Modified own-occupation
- Any occupation
You want the definition to be as broad as possible to cover any type of disability, as this is truly what you are paying for when you purchase disability insurance.
The best definition of disability is “true own-occupation,” sometimes referred to as “true own-occupation.” It provides the strongest definition of disability and protection for physicians.
True own-occupation definition
True own-occupation pays you your full benefit if you can’t perform your specific duties or specialty, even if you’re employed somewhere else.
Essentially, the true own-occupation definition means that if you can’t work in your medical specialty but are able to work in another area, you’ll still be considered disabled and get your full benefit payout.
For example, take a cardiovascular surgeon who can’t perform surgery but can still work as a general cardiologist or teacher. Even though they’re still working, the fact that they can’t work as a surgeon means they get paid the full benefit.
The language of each contract can vary, but an example of the language you should be looking for would be:
You are not able to perform the material and substantial duties of your occupation. You will be totally disabled even if you are gainfully employed in another occupation so long as, solely due to injury or sickness, You are not able to work in your occupation.
The definition is the most important part of the contract!
There are a few other definitions of disability that can be confused or even mistakenly sold as true own-occupation to doctors.
These policies will not continue to pay you your full benefit if you can perform other jobs, even if they are lower-paying.
These definitions of disability include:
With transitional own-occupation, they will generally cover your income up to the point of your income before the disability.
If you can’t work in your specialty and you start earning an income doing something else, your total net income (including benefits) cannot exceed the total original earned income of your former job.
An example of the language a transitional own-occupation definition would use could look something like this:
You will continue to receive disability benefits if you become totally disabled in your occupation, but are working in another occupation. Benefits will be paid up to 100 percent of your prior earnings, but will not exceed the total monthly benefit.
Essentially, with a transitional own-occupation policy, you can start a new career while still getting your benefit. The difference is that the company will only pay the gap between your old monthly take-home income and your new monthly take-home income.
According to this definition, a person receives benefits when they can’t work in their own-occupation and are totally disabled.
The options of a totally disabled person with modified own-occupation coverage would be to either live off their benefit check or to go back to full-time work in a different occupation without their disability benefit.
Within a modified own-occupation policy, the language that you would be seeing for the definition of disabled would contain language like:
The insured is totally disabled when both unable to perform the principal duties of the regular occupation and not gainfully employed in any occupation.
If the insured can perform one or more of the principal duties of the regular occupation, the insured is not totally disabled.
We definitely don’t recommend that doctors get an any-occupation policy.
This is the most common disability definition and is usually found in employer group plans and low-cost individual policies.
Under an any-occupation policy, you’re only considered disabled if you can’t work in any occupation that you could be considered reasonably suited for based on education, training, or experience.
This is the least beneficial type for you, and also gives the greatest leverage to the insurance company.
Often the only way to receive your income benefit at all is if you’re unable to work, period.
An example of the wording of the definition of disabled in an any occupation policy would look like this:
You are unable due to illness or injury to perform the material and substantial duties of any occupation for which you are fitted by education, training, and experience.
In some cases, if you’re able to work in another industry and there are open positions that you’re qualified for, even if you don’t apply for them, you’d no longer be considered totally disabled just because of the possibility that you could work at a different job.
The difference between these policy types can be hard to understand with the insurance language, but they can be very extreme and crucial for you to understand when looking into your policy options.
To help you better understand the differences and how they would pan out, we have laid out the same situation with the four different own-occupation policy options in the image below:
As you can see from this example, the best option is the true own-occupation policy because it allows you the choice to do something else without being punished for it, whereas the other policy types each have a consequence of getting another job, or in Plan 4’s any occupation case, having a possibility of a new job.
The next step
Stories of doctors who didn’t have an own-occupation policy and became disabled are everywhere. In most cases, they then find a new passion by using their medical training to teach or conduct research but will not receive their full benefit or in some cases any benefit at all due to the definition of disabled in their policy.
However, if they had an own-occupation policy and found a new passion or another career, they could receive their full benefit while still pursuing their newfound passion without stressing about finances.
When shopping for a policy, getting a “true own-occupation” definition is always the first and most important thing to consider.
After a decade of working exclusively with doctors, we understand that disability insurance is important to you, but it’s also complicated and difficult to accurately evaluate and purchase.
At Pattern, we help doctors compare all of their true own-occupation options side-by-side to arrive at an unbiased decision on the coverage that’s best for them. Then, we use our easy process to help them quickly apply so that they don’t risk waiting any longer.
If you are ready to get started with your true own-occupation coverage policy today, click here to request your quotes.