Dec 15, 2017

Not All Disability Policies Are Created Equal


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11/17/2008
Brian S. King
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The common idea behind all disability insurance policies is that you'll get benefits if you can't work.  You pay a premium to the insurer in exchange for the expectation that if you become disabled the insurer will replace your lost income. 

However, the variety among disability policies is great.  Some pay benefits for your entire working career if, for any reason, you can't work in the specific occupation in which you've been trained.  These "own occupation" policies are great things to have if you can get them.  But they will almost always be more expensive than policies that only pay disability benefits if you are disabled from any occupation that exists for someone of your education, training and experience.  For these "any occupation" policies, you have to show that you can't work in any job rather than just the one for which you've been trained.  For example, the concert pianist who loses the pinky and ring fingers of her non-dominant hand isn't going to collect a dime from an "any occupation" policy.   But she should get benefits from her "own occupation" policy without too much trouble.  

There are many other ways in which an insurance policy defines when and how much they pay out.  Generally speaking, insurance companies can structure their policies to be as generous or as stingy as they want.  The premium charged should (but doesn't always) reflect those differences in coverage.  The distinction between own occupation and any occupation coverage is one of the most common ways insurers distinguish between types of coverage and the risks they will insure.  There are a lot of other methods they use.  But keep the title of this post in mind when you're shopping for a policy or need to make a claim.  



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