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Are you a working professional looking for long-term disability insurance benefits? If so, you may have heard of a type of disability insurance called own occupation.
Own occupation disability insurance (DI) is an essential coverage that can help with financial security. While it’s crucial for doctors, lawyers, and other professionals, these are not the only careers that benefit from this type of insurance.
What is own occupation DI? And how does it compare to other types?
Read on to learn more about this type of coverage and how it can help protect your income during a long-term disability!
Definitions Of Disability
The definition of disability varies for each company. It’s essential to understand the language of disability that is used in your disability policy. That’s because the thresholds for claiming benefits may differ depending on it. Therefore, you need to make sure to read through the entire contract before accepting any offers from an insurer.
The definition of disability is a complicated topic, and understanding your options can be overwhelming. It’s important to know the difference between these terminologies in your individual and group insurance so you know when you can claim benefits.
Bottom Line: Whether you can claim disability benefits depends on the definition of disability.
In total, there are three definitions of total disability:
- Own Occupation
- Any Occupation
- Regular Occupation
Let’s discuss the disability definitions of each one below!
Own occupation
An “own-occupation” policy defines total disability as an illness or injury that prevents you from performing your regular occupation.
Own occupation disability policies payout if you are unable to perform your specific occupational duties, even when you are working another gainful occupation.
For example, a surgeon who loses their precision due to a disability can no longer do the duties of a surgeon. But he’s able to work as a university professor and still get disability payments from his insurance contract.
Because of the meaning of disability, it could result in overinsurance. How? By having two sources of income while disabled. That’s why this meaning of disability is reserved for industries where you are highly motivated to return to work in your career—for instance, lawyers, accountants, doctors, and other highly trained professions.
Any occupation
An “any occupation” policy defines total disability as unable to perform the essential duties you’re qualified for based on your education, training, or work experience.
That means even if you can’t do your own job, your coverage might end if you can do a related occupation. At this point, the insurance company may do an occupation test. If you can work in another gainful occupation, it will stop payments. Going back to the previous example, if the surgeon can work as a professor given his education, training, or work experience, then his benefits will end.
Any occupation is the most affordable type of insurance because of the more liberal meaning.
Regular occupation
A “regular occupation” policy means you are unable to perform your job duties and not working in another gainful occupation. If you can work in a different job, you will not be considered disabled.
Following our previous example, if the surgeon worked as a professor, he would not be considered disabled and get disability benefits. However, unlike the any occupation meaning, he can choose not to work as a professor and stay on the claim.
The difference between regular occupation and own occupation definition is the ability to continue receiving payments while working a new occupation for the latter meaning.
Under regular occupation, the insurance company would not pay disability benefits to the surgeon who chooses to work as a professor.
Difference between the three definitions of occupation
As you can see, your ability to claim disability benefits depends on your policy’s meaning of disability.
Since the any occupation definition has the strictest rules, it’s the hardest to qualify for benefits. While it’s easier to make a claim with regular occupation, it’s not the best one for you. The best type of DI is certainly own occupation, which gives you the greatest freedom to collect benefits while working another job.
Where Can You Get An Own Occupation Disability Insurance Policy?
Millions of people in Canada have a disability, and many more are at risk. A long-term disability can happen to anyone—even if you’ve never had a medical condition before.
If you are looking for an own occupation disability policy, then you need to explore your options. The primary sources of disability income are group long-term disability and individual disability insurance. What are the differences between the two, and which one should you get?
Group LTD
Group long-term disability insurance provides income replacement for disabled employees. Employers typically offer it as part of an employee benefits package.
An LTD benefits plan covers your living expenses, helping maintain financial stability during tough times.
With group LTD, the definition of disability begins as regular occupation. However, if you become disabled for 2 years, the meaning changes to any occupation, making it harder for you to qualify for benefits.
Although your employer typically pays for your LTD benefits, this is becoming rarer as costs increase. As a result, you’ll either find limited coverage or no coverage altogether. If this is the case, you’ll need an individual DI policy. One thing that reduces the burden on employers is that LTD premiums are tax-deductible, lowering the taxable income of employers.
Individual disability insurance policy
If you are self-employed, individual coverage is highly recommended!
This will help protect your income if a disability prevents you from working. It may also be wise for those who work as employees but do not have any other form of protection, such as group LTD. Since you don’t have any other coverage, an individual DI policy is suitable for you.
With a personal LTD policy, you can customize it to your liking. This includes choosing your definition of disability to suit your budget and needs.
If you have dependents who rely on your income for their well-being, then it may be wise for you to consider this disability policy as part of your financial plan.
Insurance companies that offer own occupation disability policies
If you’re looking for your own occupation disability insurance, there are only three disability insurance companies in Canada that offer it—RBC Insurance, Canada Life, and Manulife.
Even then, they don’t offer it to every occupation. Only specific occupation classes qualify for the own occupation upgrade. These include highly paid professionals such as lawyers, architects, and physicians. However, other low-risk occupations can get it too. For example, secretaries, administrative assistants, librarians, and more all qualify.
You would think that more insurers would sell it because of the benefits it offers. However, underwriting for disability insurance is more complicated than for life insurance. Also, some insurers don’t want to provide the guarantees of an own occupation policy.
Therefore, if you want the best long-term disability coverage, you’ll have to buy it from one of these companies. These are 3 of the largest insurance companies in Canada. Each pay millions in disability claims every year.
How much does own occupation disability insurance cost?
Own occupation policy is a type of disability coverage that pays you if you are totally disabled in your job but are still working another occupation. It’s essential to have this type of guarantee because it helps protect your income and assets. But how much does it cost?
The cost of own occupation DI varies depending on the insurer and what level of protection you need. Insurance companies offer different levels of security, so make sure to find out which one best suits your needs before purchasing.
Because of the higher level of protection offered, own occupation disability policies cost more than regular and any occupation ones. You’ll often find that the definition starts as regular occupation in the first 2 years of a disability. After 2 years, it changes to any occupation.
With most policies, insurance companies give you a choice of upgrading the definition from regular to own occupation. If the price is too high, you can also extend the regular occupation period from 2 years to the entire length of the disability.
Having these choices let you customize the definition of disability to fit your budget and needs.
Here’s the monthly cost for a 35-year-old male non-smoker buying $5,000 of monthly benefits:
With own occupation: $121.55/month
Without own occupation: $99.28/month
Tailoring Your Own Occupation Disability Insurance Policy To Suit Your Needs
As previously mentioned, you can tailor your personal DI policy to suit your needs. While getting the best benefits could be too expensive, you don’t want to settle with the lowest protection. The key is finding the balance between cost and benefits.
Here are some ways you can customize your policy.
Waiting period
Disability insurance policies have a waiting period, also called the elimination period. The waiting period is the length of time before the insurance company pays out the disability benefits. It varies by company and can be anywhere from 30 days to 2 years.
This means that you will not receive your disability benefit until you reach the end of the waiting period. For example, if you are unable to work due to an accident or illness, you must wait 30 days to 2 years before receiving any money.
Although choosing a 2 year waiting period would be most cost-efficient, you might not have enough financial resources to survive that long. On the other hand, a 30-day waiting period is expensive, so you should try to self-insure in the short term. A 90 or 120-day waiting period is typically the sweet spot.
Benefit period
The benefit period is the time you will be paid if you are unable to perform work because of an illness or injury. Benefit periods typically offer a range as short as 2 years until you reach 65 years old.
To protect against the financial risks of a permanent disability, you should choose the longest benefit period.
Benefit amount
This refers to the amount of money per month you will receive tax-free when you are unable to work due to a disability.
The disability benefit amount varies depending on your income and the level of monthly income replacement desired. Benefit amounts could range from anywhere between $1,000-$25,000/month.
Non-cancellable and guaranteed renewable
One of the most important considerations when buying disability insurance is the type of renewal option. One consideration that will provide you with a lot more protection against life’s unexpected events is if the insurance company can’t cancel your policy and renewal is guaranteed.
A non-cancellable policy means that the insurer can’t cancel your protection for any reason. Also, it can’t increase the premium or reduce the benefits for as long as you pay the premiums. Your coverage will stay the same as when you first purchased it.
A guaranteed renewable policy allows you to renew your coverage no matter what. With this type of policy, as long as you pay your premiums, there are no limits on how long you can renew it. However, the price could increase if the insurer experiences many claims in your occupation, age group, or another factor. The good thing is the insurer can’t single you out for a premium increase because you’ve had a disability claim.
Both provide peace of mind in knowing that your protection won’t change even if something unexpected happens to you.
Partial disability rider
A residual or partial disability rider means that if you are disabled but still able to perform your job partially, the insurance company will pay you a percentage of your disability insurance benefit.
This way, even if your paychecks decrease, the policy still pays some benefit for as long as you need. A partial disability rider can be a great option if you want some peace of mind in case you’re not totally disabled but can still work in some capacity.
Future income option
A future income option is a feature of LTD policies that lets you increase your benefit amount in the future.
This means that if your salary increases, you can easily upgrade your plan without having to go through the entire application process again.
Cost of living adjustment
Cost of living adjustment (COLA) is an optional add-on to an LTD policy that will help your monthly payments keep pace with inflation.
The cost of living goes up every year. If your income doesn’t grow in tandem, it can be hard for you to pay your bills without sacrificing other necessities.
If you’re concerned about the effects of inflation on your coverage over the long term, this rider is right for you!
Need An Own Occupation Disability Insurance Quote?
If you’re looking for an explanation of different types and definitions of disability, we are your best bet!
We offer a wide range of occupation disability insurance policies that you can tailor to suit your specific needs.
Finding the right policy for you doesn’t have to be complicated—we’ll help guide you through the process! Whether it’s just covering the cost if something happens or protecting your entire income from losses because you are totally disabled, we’ve got you covered!
We offer the best rates for all types of occupations, so contact us today at info@briansoinsurance.com or (604) 928-1628 to get started on creating the perfect own occupation DI policy tailored specifically for you.
Get Your Disability Insurance Quote Now
While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser. This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
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