What is Own-Occupation Disability Insurance?

The world of disability insurance isn’t exactly known for snappy names for its products and features. Take “own-occupation disability insurance.”

What is that, exactly?

We’re here to help translate some of the terminology so you know what it is, and whether you need it.

What Own-Occupation Disability Insurance is All About

The first thing you should know if you want to understand own-occupation disability insurance is that not all disability policies define disability the same way.

Think about it this way: If you broke your big toe, would you still be able to work?

If you’re an office worker, you probably could. You might hobble a bit getting into the office, but you could pull it off.

Now what if you were a server at a busy restaurant? It would be much more difficult.

What if you were a ballet dancer?

This is the fundamental question: Are you unable to do any job, or are you unable to do your job?

Other Versions of Own-Occupation disability insurance

The highest level of coverage you can get for disability insurance is true own-occupation coverage.

A disability policy that covers you for true own-occupation disability insurance will pay out if you can’t perform the duties of your occupation. It will pay even if you’re employed in another occupation.

True own occupation policies are fairly rare—and fairly expensive.

You can likely imagine why: Even if you get a job that pays you as well—or better—than the job you were in at the time of your disability, the policy will pay out.

There are other options though.

Transitional own-occupation disability insurance. The difference here comes up if you get a job in a different occupation than the one you worked in prior to your disability. In that case, your insurance company will reduce your benefits. The amount of the reduction to your benefit depends upon your policy. These policies are popular because they protect the insurer from over-payment. At the same time, they allow you the flexibility to do the work you can while you’re disabled. People like them because most of us would rather feel useful than stay home and collect benefits.
Modified own-occupation disability insurance. In this case, your insurance carrier will only pay your benefits if you can’t work in your previous occupation and you don’t work anywhere else. If you get a job and start collecting a paycheck at all, your benefits will stop.
Any occupation disability insurance. If you carry this type of policy, your carrier will only pay benefits if you can’t perform any work that’s reasonably suited to you. If your education and experience qualify you for another job that your disability doesn’t prohibit you from doing, then you probably won’t earn benefits. One example from PolicyGenius: Let’s say you’re a pilot and you are disabled and can’t fly planes anymore. If you are still capable of teaching others to be a pilot, you probably won’t be able to collect benefits.
Hybrid occupation disability insurance. Some policies may provide for an initial period with one type of occupation definition, then transition into a different definition. For instance, the first two years of your policy may be covered as a true own-occupation disability insurance policy. If you can’t do your own job, it will pay for two years. But after that, the policy could transition to a modified own-occupation or any-occupation policy.

Deciding Which is Best for You

If you’re shopping for a long-term disability policy, you’ll want to be familiar with these distinctions. You’ll want to know what own-occupation disability insurance, modified own-occupation, or any occupation coverage would do for you.

Be sure to ask questions upfront. This is where an insurance agent if often your best friend—they can help translate the language in your policy, quell your fears, and help you understand which policy is right for you.

Images via Flickr: Sterling College, Jetstar Airways, Quinn Dombrowski. Collage via Canva.com

About Council for Disability Awareness

Council for Disability Awareness has written 478 posts in this blog.

The Council for Disability Awareness is a nonprofit organization dedicated to educating the American public about the risk and consequences of experiencing an income-interrupting illness or injury. The CDA engages in research, communications, and educational activities that provide information and helpful resources to wage earners, employers, financial advisors, consultants, and others who are concerned about the personal and financial impact a disability can have on wage earners and their families.