Do Doctors Need Own Occupation Disability Insurance?
Insurance isn’t always the most interesting, but if there is one type of insurance physicians like you need to pay particular attention to, it’s own-occupation disability insurance. This policy will replace your salary if you end up disabled and can longer work. Today, we’ll walk you through everything you need to know about own-occupation in a disability insurance policy.
What is Own-Occupation Disability Insurance?
Own-occupation disability insurance is a policy you can purchase to supplement your employer-sponsored disability insurance. Own-occupation means you can still work in another field, but you cannot perform the duties of your medical specialty. For example, a surgeon who loses partial use of their hand cannot perform their duties as a surgeon, but they may be able to work in an office setting or in another medical capacity. The point with own-occupation is that whether they work somewhere else or not, if they have an own-occupation physician disability insurance policy, they’ll receive benefits.
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How Does Own-Occupation Define Disabled?
What does “permanently disabled” mean in the insurance world? The answer depends on your medical specialty and your individual insurance policy. In general, with an own-occupation policy, any incident or condition that causes you to no longer be able to perform the duties within your specialty is considered disabled. Your specific insurance contract will list out the exact definition, so make sure to read the fine print before signing. If you have any questions, clarify them with your insurance agent or consider hiring a disability insurance attorney. After all, the worst-case scenario is being denied benefits because you didn’t understand the legal language! Typically, though, you’ll find language in your policy that goes something like this:
You will be considered totally disabled if you are unable to perform the material and substantial duties of your occupation, even if you are gainfully employed in another occupation.
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Types of Own-Occupation Disability Insurance
There are a few different types of own-occupation insurance that you’ll want to look into before deciding on your final policy.
True own-occupation disability
True own-occupation disability insurance is the most comprehensive form of own-occupation insurance, meaning it’s also the more expensive policy option. This one is one of the better options for physicians, though, especially, since it’ll offer wider coverage amounts. True own-occupation may also cover partial disabilities that prevent physicians from doing parts of their job or force them to take on fewer hours.
Modified own-occupation disability insurance
Modified own-occupation policy is much more strict than a true own-occupation policy and is similar to any-occupation insurance (more on that below). It will pay out a benefit only if you are deemed disabled and choose not to work. For example, an ER doctor who can get a job teaching medical students will not receive benefits even if they are unable to work as an ER doctor due to their disability. You must opt to no longer work in any field or else you will not receive modified own-occupation benefits. This is why you’ll also often hear this type of policy called “own-occupation, not-engaged.”
Transitional own-occupation disability insurance
Transitional own-occupation disability insurance is very similar to true-occupation. However, it helps make up the difference between your full disability payments and your salary if you should return to work after a disability. For example, say you worked as a surgeon but you were injured and could no longer perform that job. With your disability policy, you get a check for $6,000 each month. If you eventually returned to the work force and went on to teach and made $4,000 each month, a transitional own-occupation policy would pay out $2,000 to get you up to your full payment.
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Own-Occupation vs. Any-Occupation Disability
Own-occupation and any-occupation insurance policies are somewhat similar, but any-occupation is a bit broader and gives the insurance company more power to deny claims. Under the any-occupation definition, you will typically only receive benefits if you are unable to perform any work for which you have been trained, even if it’s not your medical specialty. Any-occupation language in a disability insurance policy will typically look something like this:
You will be considered totally disabled if you are unable to perform all the substantial and material duties of any-occupation for which you are fitted by education, training, and experience.
So the example above with the surgeon who returned to work to teach in the medical field would likely not qualify for benefits under an any-occupation policy since they are still working in a field they were trained, in some respect, for.
Why Doctors Should Have Own-Occupation
If there’s any disability insurance policy a doctor should consider, it’s own-occupation. Think about it: you spent at least eight years in school taking on debt and learning how to practice medicine. One small injury could put an end to that career and suddenly you no longer have access to the income you need and deserve. Own-occupation is an insurance option that allows you to work in another field AND still collect a paycheck from the job you can no longer do. Many disability insurance policies state that you must not have the ability to work in any field to secure benefits, but that’s not the case here.
Cost of an Own-Occupation Disability Insurance Policy
There’s no straightforward answer when it comes to the cost of own-occupation disability insurance. How much you pay depends on the provider you go through and the type of coverage you buy. That said, a disability insurance policy will cost between 2 – 5% of your annual salary. So, if you make $250k a year, you’ll pay between $5 – $12.5k depending on your exact needs. If you ever need to start claiming benefits, you’ll get about 60% of your total annual income. And remember, since you can still work in another field even if you’re unable to work in your specialty, you’ll collect a paycheck from that position as well as 60% of your lost income in disability checks. However, there is often a cap to this 60%. Typically, insurers will pay up to 60% of your income, maxing out at around $15-$17k a month. Still, that’s an impressive amount with any insurance policy.
Compare own occupation disability insurance rates
Let’s apply the own occupation disability insurance definition to a potential scenario: Jim is a surgeon who loves HGTV’s Fixer Upper, and when he is not practicing medicine, he likes to spend time working on his home. One fateful weekend, Jim’s hand slips on a saw and his finger has to be amputated. Jim is no longer able to perform surgery but may be perfectly capable of working in another medical specialty, or even in a completely different occupation outside of medicine.
Under the own occupation disability insurance definition, Jim is unable to perform the material and substantial duties of his own occupation – aka he cannot perform the duties of being a surgeon. If Jim has an own occupation disability insurance policy, he will receive full benefits regardless of whether he chooses to work in another medical specialty or even a different career outside of medicine. This is why the own occupation definition provides the most flexibility for the policyholder and is a critically important feature in disability insurance for doctors.
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Own-Occupation Disability Insurance Policies for Doctors
Here’s the exact language in each of the 3 major own-occupation disability insurance policies for doctors.
Total Disability or Totally Disabled means that, solely due to sickness or injury, you are not able to perform the material and substantial duties of your occupation. Your occupation means the occupation that you were engaged in, based on the duties you were performing for wage or profit, at the time disability began. If you are not employed at the time of disability, your occupation means any-occupation you are able to perform based on your education, training and experience. If you are a physician or dentist and have limited your duties to the performance of the usual and customary functions of a specific, professionally recognized medical or dental specialty, we will consider that specialty your occupation.
Total Disability or Totally Disabled: You have a Total Disability or you are Totally Disabled if due to a Sickness or Injury, in and of itself, you are not able to perform the Material and Substantial Duties of Your Regular Occupation, and you satisfy the Regular Care of a Physician provision in the policy. Your Regular Occupation: The occupation(s) in which you are regularly engaged on the date of Disability. If Your Regular Occupation on the date of Disability is limited to a professionally recognized specialty in medicine, dentistry or law within the scope of your degree or license, we will deem that specialty to be Your Regular Occupation. If you are unemployed, retired, or otherwise not working on the date of Disability, Your Regular Occupation means any-occupation you are able to do based on your education, training and experience.
Total Disability/Totally Disabled means that due to your Injury or Sickness:
- Unable to perform the Substantial And Material Duties of your Regular Occupation; and
- You are under the regular care of a Physician appropriate for your Injury or Sickness. This Physician’s care requirement will be waived when we receive written proof, satisfactory to us, that further care would be of no benefit to you.
If you are a physician or dentist and have limited your Regular Occupation to the performance of the Substantial And Material Duties of a single specialty recognized by the American Board of Medical Specialties (ABMS) or American Osteopathic Association Bureau of Osteopathic Specialists (AOABOS) or American Dental Association (ADA), then that specialty will be deemed your Regular Occupation.