An important question to answer with certainty is: How do I know if my client’s policy, in fact, has the true specialty definition of disability? Here’s what you need to know when you are working with clients who need and want a specialty definition of disability.
Specialty Own Occupation
The true specialty definition of disability has two components:
- You’re considered to be disabled if due to illness or injury you’re unable to perform the material and substantial duties of your occupation at time of claim. If you’re a physician or dentist, your occupation can mean a specific, professionally recognized specialty or sub-specialty, such as cardiologist or orthodontist.
- You can earn any amount of income from a different job while on claim, and continue to receive full policy benefits. So, if you are an orthopedic surgeon, and you can not perform surgeries because you have developed a tremor or you have a back issue that will not allow you to stand for long periods, but you can work in another occupation or in another medical capacity, you will still collect your full monthly disability benefit.
Make sure your physician and dentist clients’ DI policies contain both clauses. For example, if a policy is purchased through an employer or association with little or no medical underwriting, it likely restricts the definition significantly.
Having this definition is important economically as well as emotionally. Having the freedom to feel useful and contribute to the world around us can be an important part of recovery. It can also allow your client to earn an income consistent with his lifestyle before the disabling accident or sickness.
Here are some other common definitions of disability used in disability income policies:
Medical Own Occupation Definition
The Medical Own Occupation Definition states that an insured can be considered disabled in one of two ways:
- If you are totally disabled and you can no longer do any of your material and substantial duties, you can collect your full disability. Or,
- If you can do one or more of your material and substantial duties, you can change your occupation all together and collect all or some of your benefit.
To be totally disabled the second way, you must meet all the following requirements:
- the majority of your time before you were disabled was spent in direct patient care and services
- you are unable to perform the duties that accounted for more than 50 percent of billed charges
- you are not working
If the insured can perform one of more of the material or substantial duties of the regular occupation, and is not considered totally disabled, the insured may qualify for partial disability.
For example, an orthopedic surgeon, earning $40,000 a month, has a disability policy that pays $10,000 a month. He can not perform surgeries because he has developed a tremor or he has a back issue that will not allow him to stand for long periods, but he chooses to work in another occupation or in another medical capacity, earning $34,000 a month. Under the medical occupation definition his monthly disability benefit would be the lesser of the two:
- His total disability benefit of $10,000 a month, or
- His loss of earned income: $40,000-$34000=$6,000 a month
Unless the insured is not working, his disability benefit may be offset by the amount earned in his new occupation. Physicians and dentists need the strongest definition of disability–a specialty own occupation definition. The specialty own occupation definition does not offset the insured’s income, if he is working in another occupation. In the example of the orthopedic surgeon, he will collect his total disability benefit of $10,000 a month, in addition to his salary of $34,000 a month earned in another occupation with a specialty own occupation definition.
Transitional Own Occupation
Transitional own occupation is a variation of the True or Specialty Own Occupation Definition. Transitional Own Occupation will pay benefits if you are totally disabled in your occupation but are readily employed in another, provided your monthly earnings do not exceed or match the earnings from your former occupation. This definition will take you up to, but not over, what you were making before. Think of it as True or Specialty Own Occupation with a cap.
For example: A dentist starting out in new practice makes $8,333 per month becomes disabled and takes a job as a consultant that pays him $5000 per month. A person earning $8,333 per month qualifies for a $5,000 monthly disability benefit or 60 percent of his salary. The benefits payable under the Transitional Own Occupation definition would be $0 per month because the transitional own occupation benefit is offset by any income the dentist earns in another occupation. The dentist job as a consultant provided 60 percent of his former salary, so he does not qualify for any additional benefit with the transitional own occupation definition of disability.
However, if he had a “true” or specialty own occupation definition of disability, he could collect his $5,000 monthly disability benefit on top of his $5,000 monthly salary as a consultant.
For medical professionals, a “true” or specialty own occupation definition of disability is the better choice because it is the most liberal definition of disability available. It pays the full monthly disability benefit even if the insured chooses to work in another occupation.
Modified Own Occupation
Modified own occupation will pay benefits if the insured is unable to perform the duties of his or her occupation and is not working in any other gainful occupation.
This is a very suitable definition for many professionals who do not have specialized skills. For example, if an insurance broker cannot make calls, operate a computer or drive a car, he will not be able to perform the duties of his occupation, and he will not likely be able to perform the duties of another occupation either.
His skills are not as specialized as a surgeon’s. If he can’t perform the duties of his occupation, he likely will not be able to perform the duties of another occupation.
It’s important that brokers have a good understanding of the different definitions of disability in the disability income policies they present and sell to their clients.
When you partner with Source Brokerage, our disability income specialists not only help you understand the different definitions of disability, but they help you determine the most suitable definition of disability for your client’s occupation.
Contact Steve Crowe at ext. 222, Ellen Crowe at ext. 223 or Brian Hettmansberger at ext. 230 Chris Bussey at ext. 220 or request a quote.