Article by Philippe Deray
For a claim to be paid, when someone is considered totally disabled, your disability must meet the exact definition in your insurance policy. Do not assume anything when it comes to disability insurance and read your policy carefully. Below are the most common and basic total disability definitions. Your disability insurance policy may offer a variation of these definitions.
Own-Occupation Disability Insurance
This is the most comprehensive definition of total disability. The definition may say:
The inability to perform the material and substantial duties of your regular occupation. The insurance company will consider your occupation to be the occupation you are engaged in at the time you become disabled. The insurance company will pay the claim even if you are working in some other capacity full or part time.
What I have found is that people will not want to sit at home and collect monthly disability checks. Instead, as long as they are not severely disabled, most people will decide to go back to work in some capacity or just keep physically active. Own-occupation disability insurance is the only plan that does not penalize disabled individuals for going back to work in a different occupation. Under this type of plan, the bottom line is, if because of a sickness or injury, you cannot work in your occupation, you will still be considered totally disabled, even if you choose to do something else.
Income Replacement Disability Insurance
It seems, that this has become the most common definition of total disability. Most insurance carriers that do not offer own-occupation disability insurance, now offer an income replacement definition policy. The first part of the definition is very similar to the own-occupation definition, but the second part is substantially different.
A disability income replacement definition may say:
Because of sickness or injury you are unable to perform the material and substantial duties of your occupation, and are not engaged in any other occupation
As you will notice, the major difference between an income replacement and an own-occupation definition is that, in the income replacement definition, you will be penalized if you go back to work, or earn any other source of income. Also note that, under this plan, you cannot go back to work in any capacity or the insurance company may offset your monthly benefit checks.
Gainful Occupation Disability Coverage
This definition of total disability is very common in group long term disability insurance policies. It is quite simply the worst definition available and should be supplemented with an individual, quality contract (if not replaced entirely). This definition basically leaves the determination of whether or not you are totally disabled up to the insurance company.
A total disability definition may say:
Because of sickness or injury you are unable to perform the material and substantial duties or your occupation, or any occupation for which you are deemed reasonably qualified by education, training, or experience.
Could somebody be forced to go flip burgers under this definition of total disability? Maybe not, but it does leave a lot of room for litigation and interpretation.
Accident Only Total Disability
As defined, without a sudden event, an insured’s injury does not constitute a total disability due to an “accidental bodily injury” within the meaning of a disability insurance policy that distinguishes between accident versus sickness. As an example, carpal tunnel syndrome, which may be caused by repetitive and forceful activities in which the insured engages for years, the insured’s disability was not due to an “accidental bodily injury”. Total disability in an accidental policy, is often considered total if an individual losses a body part such as a hand, an eye….
Mortgage Disability insurance
Please beware, collecting benefits with lender type mortgage disability insurance policies, is probably the hardest as the definition of total disability is that you may not be able to do any work at all to collect benefits. It is the easiest to understand but at the same time the least likely to pay as most people are able to do some kind of work (even at minimum wage). Also, it is not uncommon for these policies to only cover you if you are totally disabled in an accident. Looking at the certificate the lender gives you at sign up will not show you the exact definitions of total disability. You need to and do have the right to request a copy of the master policy.
In Conclusion
Irregardless of which plan or company you select, you must always read your approved policy or master policy very carefully. You certainly do not want to find out that your total disability is not covered because of some nuance in the coverage. Please, also feel free to ask us as many questions as you need. the answers are fast, no obligation and free. Be well.
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