Much has changed with the disability income protection market over the last decade. There used to be dozens of carriers offering disability income, but as a result of consolidation, there are less than 10 companies offering competitive disability products today.

Because of liberal underwriting and policy declarations, insurers have been bombarded with claims. Much of these claims have occurred as a result of mental/nervous conditions, which remain hard to justify. Furthermore, true Own Occupation policies are few and far between now.

Even so, there are still several variations of disability definitions available to insureds today. Applicants can generally choose between an Any Occupation, Own Occupation, Loss of Income, or some hybrid of all these. Currently, a typical policy for most applicants has a dual definition. The first two to five years of disability are defined under the more liberal Own Occupation. After this initial period, if the person is still disabled, then the more restrictive language of Any Occupation is employed to determine benefits.

The most liberal definition, which of course costs more, defines disability as the inability to perform any and every duty of the person's own occupation. This definition is generally used for professional people.

To illustrate the point, let us use the example of an orthopedic surgeon. This person has undergone many years of training and is at the top of his/her profession and income. Let us also suppose that while playing golf, the surgeon has an accident and breaks several fingers on his right hand. He requires surgery and long-term therapy in order to return mobility to his hand. However, he is unable to perform surgery again because he has lost dexterity in his right hand. With an Own Occupation definition this physician could teach school and still receive full disability benefits. Under any other policy definition, he may only be eligible for limited benefits for a short duration if he returns to a new occupation.

Another example would be that of a manufacturer's representative. This person's daily duties generally do not constitute the need for an Own Occ policy. There is not any one duty that truly defines this person's occupation. A Loss of Income or Any Occ policy would probably provide adequate coverage for this person.

Let's now consider the independent business owner the runs a small bookstore. She has three other employees that help her run the business. While she is definitely a jack-of-all-trades, neither an Own Occ nor Loss of Income policy would be appropriate for her in most cases. The first is obvious, but what if this business owner became disabled for six months and her store never truly suffered. She never realized a loss of income. In this case, a Loss of Income policy might never pay benefits.

Consequently, great care must be exercised in selecting the most appropriate occupational definition for the insured. And, while it is certainly true that the more restrictive definition is much less expensive, the potential benefits payable are also substantially reduced or entirely eliminated! So be cautious.

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