Article Index

1. What is disability insurance?

Disability insurance is privately owned insurance that pays a monthly benefit to an insured who is either disabled by an injury or sickness in his/her "own occupation," "any occupation," or a modified definition of his/her occupation. 

The insurance can be acquired in the form of an individual policy where the policyholder usually pays the premium or group insurance offered by an employer which insures an individual usually in their capacity as an employee.

 "Own occupation" insurance insures an individual against his/her ability to perform the substantial and material duties of his/her occupation, i.e. a salesman, surgeon, accountant. An individual can be disabled in his/her own occupation and still collect benefits if s/he is capable of working in a different occupation.

"Any occupation" coverage, on the other hand, pays a disability benefit if the insured is unable to work in any occupation for which s/he is suited by  age, education, status in life, income and experience. The standard is similar to that utilized by the Social Security Administration and generally requires a greater degree of impairment.

A policy with "modified occupation" language generally pays a disability benefit if one is disabled in his/her own occupation and not engaged in another occupation.

Finally, some policies have a "Change in Definition" feature ("CID") which states that after a passage of time (12, 24, 36 or 48 months), the disability standard changes from "own occupation" to "any occupation." This is a typical feature of a Group Disability Insurance policy. 

The impact of the CID is to elevate the degree of disability if one is to remain disabled and eligible for benefits after the "own occupation" period passes. In short, benefits will only continue if the insured is disabled in the "any occupation" period that follows the "own occupation" period.