In today’s fast-paced and unpredictable world, it is essential to safeguard your financial stability in the face of unexpected circumstances. One such circumstance that can significantly impact your livelihood is a disability that prevents you from working in your chosen profession.
You’ve probably heard of your own occupation disability insurance for Small business. Own occupation disability insurance (DI) is a necessary coverage that can aid in financial security. While this form of insurance is essential for doctors, lawyers, and other professionals, it is not the only profession that benefits from it.
What is DI’s own occupation and how does it stack up against other types? Continue reading to discover more about this form of coverage and how it can help you secure your income in the event of a long-term disability!
Understand Own Occupation Disability
Each organization has its own definition of disabilities. It is critical to understand the disability terminology used in your disability policy. It is because the thresholds for claiming benefits may fluctuate based on it. As a result, before accepting any offers from an insurer, make sure to read the full contract.
The concept of disability is a complex subject, and comprehending your alternatives might be difficult.
An “own-occupation” policy defines total disability as a disease or accident that precludes you from conducting your regular occupation.
Own occupation disability policies pay out if you are unable to execute your specified job obligations, even if you are performing another job. A surgeon, for example, who loses precision owing to a disability can no longer perform surgical operations. However, he can work as a university professor while receiving disability income from his insurance contract. It is a type of disability insurance that covers you if you are unable to perform the specific obligations of your own occupation due to an injury or sickness.
Own Occupation coverage, unlike other types of disability insurance, assesses your capacity to work in your chosen field rather than any occupation or job in general. It means that even if you can work in a different sector, you will be eligible for benefits if you are unable to continue practicing your current occupation.
How Does Own Occupation Disability Insurance Work?
Its working is quite simple actually. When an own-occupation policy is activated, the policyholder and the insurance carrier enter into a contract in which the insurance provider agrees to pay the policyholder a monthly benefit if they become handicapped. The key part here is to determine if the disability is actually hindering your ability to work at your selected occupation.
To explain this in a better way, consider hypothetical situations where if a surgeon loses part of a finger in a vehicle accident, they may be unable to do surgery. A trial lawyer whose voice cords have been destroyed by throat cancer may be unable to argue a court case or execute other significant obligations or a permanent foot injury to a railroad worker will prevent them from walking and performing daily operations.
In such situations, the disability is hindering the earning potential of a professional. It is the point where own-occupation disability insurance kicks in to provide said benefits to an affected individual. The key point here is your policy will pay if you are unable to work in your occupation or specialty, even if you can work in another field and earn as much money as you wish. Simply ensure that your occupation is designated as your specialty.
How Own Occupation differs from Regular and Any Occupation Policies?
The own occupation policy kicks in when the said individual is unable to perform tasks of their specialized job. Even if they can work in some other profession, this insurance will provide benefits to the policyholder.
However, this policy is not be confused with regular and any-occupation policies. As there are three types of definition of total disability.
- Own Occupation
- Any Occupation
- Regular Occupation
Total disability is defined as being unable to do the essential duties you are qualified for based on your education, training, or work experience under an “any occupation” policy. Thus, even if you are unable to perform your current job, your coverage may be terminated if you can perform a comparable occupation.
The insurance company may conduct an occupation test at this point. It will suspend payments if you can work in another gainful occupation. Such as if the surgeon can work as a professor given his education, training, or job experience, his benefits will be terminated. Its definition is more liberal, making it the most affordable type of disability insurance.
A “regular occupation” policy states that you cannot carry out your job tasks and are not engaged in another lucrative occupation. You won’t be regarded as disabled if you can work in a different position. If the surgeon worked as a professor, as in our earlier scenario, he would not be regarded as disabled and get disability payments. He can decide not to work as a professor and continue to be covered by the claim, unlike with any other career. The capacity to continue receiving compensation while working a new occupation under the later definition distinguishes own occupation from regular occupation.
The key difference in these three definitions of total disability is – how easy is it to qualify for benefits? Any occupation is most difficult to qualify for benefits as it has strict rules. While the regular occupation makes it easier to file a claim for benefits, it may not provide the best value which is what we are after. The Own occupation gives the best odds to qualify for benefits. It also allows you to keep working some other job and collect benefits.
Variation in Own Occupation Policies
In the last few paragraphs, we discussed the key difference between own, any, and regular occupation policies. However, there are key differences in various types of own occupation policies. We will try to briefly explain to them to understand the key difference between them.
· True Own Occupation
If you have true own occupation disability insurance and are unable to carry out all of the significant and material responsibilities of your regular occupation, you are qualified to receive the entire monthly benefit offered by your policy. Whether or not you can pursue a new career, this still holds true. If you start a new job, your benefit amount is unaffected by how much you make.
· Modified Own Occupation
With modified own occupation disability insurance, you are qualified to receive the entire monthly benefit offered by your policy should you become unable to carry out the significant and material obligations of your current line of work, but only if you are not already employed in another line of work.
· Transitional Own Occupation
If the policyholder chooses to accept employment in a lower-paying occupation, transitional own-occupation disability insurance may still be able to provide disability payments; however, the benefits may be lowered in proportion to the pay disparity.
· Two-Year Modified Own Occupation
This type has further two variations. In the first instance, your coverage changes to a Modified Own Occupation definition for the remainder of your benefit period if you are still handicapped after two years. The second variation states that, if you are still handicapped after two years, your coverage changes to an Any-Occupation definition, which means that you are unable to work in any occupation as a result of illness or accident.
What Professions Need Own Occupation Policy?
Most likely, you’ve noticed that doctors keep popping up in this article. This is because medical professionals, and surgeons, in particular, are viewed as excellent candidates for own-occupation coverage. They possess highly specialized talents, and if they were to develop a disability that did not prevent them from doing all forms of employment, they might be forced to give up their line of work. They also make a lot of money, so they can afford the additional cost of own-occupation coverage and have a strong motive to safeguard their income.
Pilots and dentists are other excellent candidates for own-occupation disability insurance. The extensive coverage that own-occupation insurance offers may also be advantageous to some people who do not fit into these typical instances, particularly in highly specialized, white-collar jobs.
Own Occupation Disability Insurance Cost
Own occupation disability insurance cost more than regular and any occupational ones because of the higher level of protection. The cost is mostly dependent on each case. Many variables affect the cost so it can be difficult to narrow down the cost. However, based on my annual salary, here is the estimated cost of my own occupation policy,
If a person earns $30000 then expect monthly premiums to be around $25-75. Similarly, if a person earns $200000 annually then monthly premiums are expected to be around $166-500. Do note this is just estimated costs based on annual income. The actual amount can vary a lot from person to person. Even if two individuals earn the same amount annually, the monthly premiums might be different for them.
Factors that Affect the Cost of Own Occupation Insurance
Because every person’s condition is different, disability insurance is one of the most individualized sorts of insurance you can purchase. You can anticipate paying between 1% and 3% of your annual income for disability insurance. The following factors will affect how much you spend in premiums:
Just like in other types of insurance policies, the older you are, the higher will be your premiums. It is because at older age you will be considered more likely to trigger a policy claim hence you are considered more of a risk.
Regardless of your age, if you have good health, you will be offered an insurance package with lower premiums. However, if you have some medical issues of any sort then this may result in higher premiums.
3. Occupational Hazards
If you have a simple office job with most of your tasks being administrative then you will be eligible for lower premiums in your policies. However, if you work in a high-risk environment such as an oil rig, heavy industry or construction facility then expect your premiums to be higher than usual.
4. Coverage Length
If you want your policy to provide benefits for longer periods, then you will be charged higher premiums.
5. Benefit Amount
Own Occupation covers the benefit you would have received from your specialized occupation. So, if you had a high-paying job that is listed as an occupation in the policy then expect higher premiums since the insurer would have to cover increased benefits in case you have a disability that prevents you from working.
6. Risky Activities
Some other factors might also raise your premiums such as if you are an active smoker, takes part in car racing, scuba diving, etc. These activities are considered high-risk and will raise premiums. The insurer will expect a higher risk of disability if you regularly partake in such activities.
How to Apply for Own Occupation Disability Insurance
Applying for an Own Occupation policy is simple. The following are steps to obtain this insurance:
- Submit an application for a particular own occupation policy
- There will be an underwriting procedure (similar to that for life insurance) where the firm evaluates your age, way of life and health.
- You may also be required to undergo a medical examination.
- Review the policy offer given by the insurer and accept it if it is according to your requirements.
It might seem like a lot to consider, but with the assistance of a reputable financial advisor, you can develop an own-occupation disability plan that is affordable and tailored to your needs. One additional thing: don’t wait; the more affordable it will be the younger and healthier you are. Keep a copy of the policy and contact information for the insurance provider in a safe place for future reference.
Protecting your livelihood is essential, and Own Occupation Disability Insurance offers a comprehensive solution to mitigate the financial risks associated with a disability. By providing income replacement and tailored coverage, this specialized form of insurance ensures that you can maintain your lifestyle and support your loved ones, even if you cannot work in your own occupation.
Consider the factors discussed in this article and consult with a reputable insurance professional to find the right Own Occupation Disability Insurance policy that suits your needs.