Definition of Total Disability

Pay attention to this provision, it dictates how the insurance company pays your claim.

Disability Insurance Articles

Disability Insurance

Policy Provisions
Definition of Total Disability
Residual Disability Insurance
Elimination Period
Benefit Period
Optional Riders
Policy Exclusions


Why is this page important? - It is here you will learn when a policy actually pays you.

Every disability insurance plan has a definition of total disability in the policy, you should always know the exact language of this definition before you own anything. There are three basic types:

True Own-Occupation
Modified Own-Occupation
Gainful Occupation

Own-Occupation Disability Insurance

The most comprehensive definition of total disability available. This type of policy will have a definition that says:

The inability to perform the material and substantial duties of your regular occupation, the insurance company will consider your occupation to be the occupation you are engaged in at the time you become disabled, they will pay the claim even if you are working in some other capacity.

What I have found over the years is that people will choose to fight their disabilities. They will refuse to sit at home and collect a monthly disability check. Instead, as long as they are not severely disabled, most people choose to go back to work in some capacity to give themselves a sense of self worth, or just to go do something everyday. Own-occupation disability insurance is the only plan that does not penalize somebody for going back to work in a different occupation while on a claim. Under this type of plan, the bottom line is if because of a sickness or injury you can not perform in your occupation, you will be considered totally disabled, even if you choose to do something else.

Income Replacement Insurance

This has become the most common definition of total disability in the industry today. Most insurance carriers that have stopped offering own-occupation disability insurance have moved to an income replacement definition. You will find the first part of the definition is very similar to an own-occupation definition, but it is with the second part that the major change occurs. A typical income replacement definition will look something like this:

Because of sickness or injury you are unable to perform the material and substantial duties of your occupation, and are not engaged in any other occupation.

As you can see there is a major difference between an income replacement and an own-occupation definition of total disability. The income replacement definition will penalize you during a claim if you make the decision to go back to work, or earn another source of earned income while on a claim. I have found that most people if given the choice would go back to some work if possible, under this plan if somebody wants to go back to work in some capacity, the insurance company may offset your monthly benefit check. There is a common misconception that own-occupation disability insurance costs a lot more than an income replacement policy. While I am certain that in some scenarios this is true, as a blanket statement it is false. There are many professional occupations where an own-occ contract is actually less expensive than an income replacement policy. Many companies, as an example, do not like writing individual disability insurance on physicians. It is very likely that an own-occupation disability insurance policy may be less expensive from a company that still enjoys writing disability insurance for doctors.

Gainful Occupation Coverage

This definition of total disability is very common in an employer sponsored group long term disability insurance policy, or with property and casualty insurance companies that decided to release a disability insurance policy. It is quite simply the worst definition available and should be at the very least supplemented with a quality contract if not replaced entirely. This definition basically leaves the determination of whether or not you are disabled up to the insurance company. A typical definition will look like this:

Because of sickness or injury you are unable to perform the material and substantial duties or your occupation, or any occupation for which you are deemed reasonably qualified by education, training, or experience.

Could somebody be forced to go flip burgers at McDonald's under this definition of total disability? Probably not but it does leave it open for litigation and interpretation. You should be buying disability insurance so that you do not have to worry about your income if you can't do the material and substantial duties of your occupation, going with this type of disability insurance policy is an inexperienced decision, and should be re-thought for an own-occupation plan. Many people who simply shop for the best disability insurance rate end up with this type of coverage. In my opinion, it is worthless, and you may end up with the Lemon of the disability insurance industry.

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