There are a number of important features that consumers should review and understand when purchasing an individual disability insurance (IDI) policy. However, there is one provision, referred to as the "definition of total disability", which should be held to a higher regard than most others. It is this provision that explains the circumstances under which a disability benefit may be payable for total disability.
There are various versions of the definition of total disability, and although the wording in two separate policies will never be identical, they can typically be categorized as one of the following: Own-Occupation, Modified Own-Occupation or Any Occupation. The mission of this article is not necessarily to provide you with an understanding of the specific definitions but more so an understanding of the actual structure of this provision as it includes multiple factors.
What we will refer to as "part one" of the definition of total disability is what most consumers and advisors concentrate on, and it is often what insurance companies include in their proposals. Although these proposals are informative, they are also marketing pieces for each insurance company's products and some things are not included in the proposals that are included in the actual policies. Below are a few examples of part one of the definition of total disability:
– You will be considered totally disabled if, solely due to injury or sickness, you are not able to perform the material and substantial duties of your occupation, even if you are gainfully employed in another occupation.
– Total disability means that due solely to impairment caused by injury or sickness, you are unable to perform the material and substantial duties of your occupation and you are not working in any occupation for wage or profit that you are reasonably suited to by your education, training and experience.
These two definitions are clearly worded differently and even explain different circumstances under which a claim may or may not be paid. Regardless of the differences, the question that must next be asked, which leads us to Part 2 of the definition of total disability, is: how does the insurance company define "your occupation"?
Without understanding how "your occupation" is defined, it would be impossible to know just how related a policy is to one's specific occupation and occupational duties. Below is an example of what consumers can expect to find as the definition for "your occupation":
– Your Occupation means the occupation (or occupations, if more than one) in which you are gainfully employed during the 12 months prior to the time you become disabled.
– Regular occupation means your usual occupation (or occupations, if more than one) in which you are gainfully employed at the time you become disabled. If you are not gainfully employed at the time your total disability begins, Regular occupation shall then mean any occupation (s) for which you are reasonably fitted by your education, training or experience.
Understanding how "your occupation" is defined is nearly as critical as understanding the definition of total disability. The fact is that the relevance of an IDI policy could actually change over an individual's career. For example, a physician whose primary focus is surgery may expect to receive benefits if he / she is no longer able to operate. However, if that same surgeon eventually decides to go into teaching instead of practicing, the policy would no longer be likely to pay benefits due to the inability to operate – it would now be relevant to that physician's duties as a teaching physician.
Understanding both the definition of "total disability" as well as the definition of "your occupation" makes understanding the circumstances under which an insurance company may pay benefits much more clear. Although the specificity of a policy may not be as important to some professionals, it may be imperative to highly specialized professionals like physicians.