In every disability insurance policy will be written the definition of disability. There are three types or definitions and they are known as true own-occupation, modified own-occupation, and gainful occupation. Each definition carries a very different set of circumstances and should be clearly defined before you sign any paperwork or hand over any money.
It is important to know the differences between the three so you know what you are getting when you look at a policy. Here is a breakdown of the three:
1. True Own-Occupation: This is the most comprehensive of the three and will cover you if you are disabled and not able to work where you did before the disability occurred. For many people however, sitting at home and collecting a disability check is not how they want to live. Many will want to go out and get a job, even if it is only a part time job so that they feel a sense of pride. Own-occupation is the only type of coverage that will allow you to work in another area and still consider you to be disabled and thus pay you your full benefits for as long as you cannot return to your former job. So if you want to go down the street and work for that convenience store for 15 hours a week you can do so and not fear that your benefits will be tampered with.
2. Modified Own-Occupation: Also known as Income Replacement Insurance, this has become the most common form of disability insurance offered by providers. Many providers who once offered own-occupation are now going the way of income replacement. It is very similar in the verbiage as own-occupation with one big exception. In order to be considered disabled, your disability must prohibit you from working anywhere. So if you are disables and you want to go get a part time job, you may be able to do so but you will also be penalized a portion of your benefits due to the fact that you are in again working. A common misconception that people think is that this type of coverage is much less expensive that own-occupation coverage. Really it all depends on the occupation and in some instances own-occupation coverage can actually be less expensive so it pays to do your homework.
3. Gainful Occupation: This is the most common type of coverage for an employer sponsored group plan but is also often seen being used by property and casualty insurance companies that decide to start offering disability insurance policies. This is the worst coverage of the three and should at the least be supplemented with a better plan or replaced all together if possible. By definition, it is at the sole discretion of the insurance provider to determine whether or not an enrollee's disability is actually going to be considered a disability. If you go shopping for disability insurance by rate alone, this is more than likely what you will end up with. But this type of coverage often proves worthless and you may spend a lot of time on the phone, or even worse in the court room, trying to get the insurance provider to pay your benifits. The whole idea behind obtaining disability insurance is to give yourself peace if mind, not extra doubt and worry. If this is the type of plan that you have then you should chalk it up to a rookie mistake and replace it with any type or own-occupation policy as quickly as you can. If you have this type of plan through your employer and it is not costing you anything you should at least find a good provider to supplement your sub-par plan with.
Disability happens more often than many people think and having adequate disability insurance will keep you prepared for the worst, but only if you get the right kind. Knowing how it is that the insurance providers define your disability will help you to better make an educated decision that will be the best one for you and your family.
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