Original Definition of Own Occupation
The definition of “Own Occupation” on a Long Term Disability policy use to mean:
Because of sickness or injury that prevented you from performing the material and substantial duties of your regular occupation, you were considered to be totally disabled, even if you were at work in some other capacity, so long as the disability prevented you from performing your original occupation.
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 altogether. Many of the carriers that decided to stay in the disability insurance business moved away from the own-occupation disability insurance product in favor of an income replacement product line.
New Definition of Own Occupation
Being creative, a number of carriers eventually started marketing own-occupation policies with their own definition of “own-occupation.” Some carriers now have the words “own-occupation” on their proposals with a definition that bears little resemblance to the original definition.
The new, modified own-occupation contract has the words “so long as you are not engaged in any other occupation” at 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 end the claim).
How to Find the Right Disability Policy
Read the fine print on your policy. Just because the words “own occupation” are on a quote, it does not mean that you actually have what you think you do. If the words “any other occupation”, or “gainful occupation” are anywhere in the policy’s definition of total disability, look elsewhere for a pure own-occupation contract.
There is a lot to understand in a disability insurance policy. Ask 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”?