Definitions of Disability
How "disability" is defined in a policy is critically important—it determines when benefits are payable. Different definitions provide varying levels of protection.
Own Occupation
Own occupation (also called "own occ" or "specialty") is the most favorable definition for the insured:
True Own Occupation
| Feature | Details |
|---|---|
| Definition | Unable to perform the duties of YOUR specific occupation |
| Benefit trigger | Can't do your job, even if capable of other work |
| Working while disabled | May work in another occupation and still receive benefits |
| Premium | Highest |
Example - True Own Occupation
Scenario: A surgeon loses use of dominant hand
- Cannot perform surgery (own occupation)
- Could work as a consultant, professor, or medical reviewer
- Result: Receives FULL disability benefits while earning income elsewhere
Modified Own Occupation
| Feature | Details |
|---|---|
| Definition | Unable to perform own occupation AND not working in any occupation |
| Benefit trigger | Can't do your job AND choose not to work elsewhere |
| Working while disabled | Benefits stop if working in any occupation |
| Premium | Lower than true own occ |
Exam Tip: "True own occupation" allows working in another job while collecting full benefits. "Modified own occupation" stops benefits if you work anywhere.
Any Occupation
Any occupation is a stricter definition that favors the insurer:
Standard Any Occupation
| Feature | Details |
|---|---|
| Definition | Unable to perform ANY occupation for which suited by education, training, and experience |
| Benefit trigger | Must be unable to do any reasonable work |
| Working while disabled | Must be unable to work anywhere |
| Premium | Lower than own occupation |
Any Gainful Occupation
| Feature | Details |
|---|---|
| Definition | Unable to perform any occupation that provides gainful employment |
| Interpretation | Very strict—any job you could do |
| Common in | Social Security, some group plans |
Example - Any Occupation
Scenario: Same surgeon loses use of dominant hand
- Cannot perform surgery
- Could work as consultant earning $150,000
- Result: NOT disabled under "any occupation" definition
Split Definition (Transitional)
Most group and many individual policies use a split definition that changes over time:
How Split Definition Works
| Period | Definition Applied |
|---|---|
| First 24 months | Own occupation |
| After 24 months | Any occupation |
Rationale for Split Definition
| Phase | Purpose |
|---|---|
| Initial period | Allow time to recover and return to own occupation |
| Later period | Encourage transition to any suitable work |
| Cost control | Prevents indefinite own-occupation claims |
Example - Split Definition
Timeline:
- Months 1-24: Surgeon receives benefits (can't do surgery)
- Month 25+: Must be unable to do ANY suitable work
- If surgeon could be a consultant → benefits may stop after 24 months
Presumptive Disability
Presumptive disability provides automatic total disability status for certain catastrophic losses:
Common Presumptive Conditions
| Condition | Benefit |
|---|---|
| Loss of sight (both eyes) | Presumed totally disabled |
| Loss of hearing (both ears) | Presumed totally disabled |
| Loss of speech | Presumed totally disabled |
| Loss of use of two limbs | Presumed totally disabled |
Presumptive Disability Features
| Feature | Details |
|---|---|
| Elimination period | Often waived |
| Proof of income loss | Not required |
| Duration | May be permanent |
| Return to work | Benefits continue even if working |
Key Point: Presumptive disability typically waives the elimination period and provides benefits even if the insured returns to work.
Partial and Residual Disability
Partial Disability
Partial disability pays when the insured can work but with limitations:
| Feature | Details |
|---|---|
| Definition | Cannot perform one or more duties of occupation |
| Typical benefit | 50% of total disability benefit |
| Duration | Limited (often 6 months) |
| Requirement | Usually must follow period of total disability |
Residual Disability
Residual disability is more flexible than partial disability:
| Feature | Details |
|---|---|
| Definition | Income loss due to disability (even if working) |
| Benefit calculation | Proportional to income loss |
| No prior total disability | May not require preceding total disability |
| Duration | Can extend for full benefit period |
Residual Benefit Formula
Residual Benefit = Total Disability Benefit × (Pre-disability Income - Current Income) / Pre-disability Income
Example - Residual Disability
| Factor | Amount |
|---|---|
| Pre-disability income | $10,000/month |
| Current income (working part-time) | $4,000/month |
| Income loss | $6,000 (60%) |
| Total disability benefit | $6,000/month |
| Residual benefit | $6,000 × 60% = $3,600/month |
Definition Comparison
| Definition | Strictness | Premium | Protection |
|---|---|---|---|
| True own occupation | Least strict | Highest | Best |
| Modified own occupation | Moderate | High | Good |
| Split (own → any) | Varies | Moderate | Moderate |
| Any occupation | Strict | Lower | Limited |
| Any gainful occupation | Most strict | Lowest | Least |
Choosing the Right Definition
| If You Are... | Consider... |
|---|---|
| Highly specialized professional | True own occupation |
| Moderate income, transferable skills | Split definition |
| Cost-conscious | Any occupation |
| Employer-provided only | Understand your plan's definition |
Under a "true own occupation" disability definition, a surgeon who loses the use of their dominant hand would:
What typically happens after 24 months under a split definition disability policy?
An insured with a $5,000/month total disability benefit earned $8,000/month before disability. They now earn $3,000/month working part-time. Under a residual disability provision, what monthly benefit would they receive?
24.3 Policy Features and Provisions
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