The own-occupation provision of disability insurance is often considered the gold standard. So is a Mercedes Benz, but more of us buy a Chevy or Ford. All automobiles fulfill the essential need – transportation – but a Chevy or Ford can do it without the high sticker price. Likewise, all disability insurance policies provide paycheck protection, but an own-occupation policy adds both bells and whistles and a higher price tag.
For some individuals, an own-occupation disability insurance policy is absolutely the best choice. For others, it might not be worth the cost. Before buying or recommending a policy, it’s important to know the pros and cons.
What Is Own-Occupation?
An own-occupation disability insurance policy, or own-occ policy, is one that will pay out if the policyholder is unable to continue working in the field that he or she has been trained for due to an injury or illness.
For example, let’s say the policyholder is a pianist. She has trained for years to become a world-class pianist. If a hand injury prevents her from playing the piano, she will be able to file a claim with her own-occupation disability insurance policy. This is true even if she can find work in another field.
What Is the Alternative to Own-Occupation?
The alternative to own-occupation disability insurance is any-occupation disability insurance.
While an own-occupation policy will pay benefits if the policyholder is unable to work in their chosen field, an any occupation policy will only payout if the policyholder is unable to work in any occupation that is suitable for them.
Own-Occupation Offers the Broadest Protection
If your main concern is the level of protection the policy provides, own-occupation policies come with both pros and cons.
Pro: Clients with specialized skills, especially those with a specific physical requirement, often need the broad coverage that only own-occ policies offer. Consider own-occ for specialized white-collar professions such as dentists and surgeons.
Con: The majority of occupations do not have such specialized requirements. Clients whose jobs rely on mental faculties have less need for own-occ coverage and may be overpaying for protection if they choose an own-occ policy.
Own-Occ Comes with a Higher Price Tag
Price objections are common when it comes to disability insurance. If price is the primary concern, consider the following pros and cons.
Pro: Clients who need the level of protection own-occ provides often have a higher risk of not returning to the same level of employment after some disabilities. The nature of their work and salary may make them more likely to find the added premium acceptable and affordable.
Con: Carriers price products based on risk. The own-occ benefit may come with a higher risk of claim, a longer claim period, and a high benefit payout. All those factors add up to a more expensive premium. For most clients, any-occ will provide the necessary safeguard against an income interruption due to a disability with a much more affordable policy.
Own-Occ May Require More Explanation
Educating clients on disability insurance can be a challenge. Explaining the difference between own-occ and any-occ policies may take some extra time, but it may be worthwhile. Consider these pros and cons.
Pro: Many clients won’t realize how much the policy definition can impact the premium charged and the ultimate benefit. Helping your clients understand the nuances of the definition makes them a partner in the decision-making process and establishes you as the expert advisor.
Con: Proposing own-occ with every case certainly gives the maximum coverage to every client but may also limit your ability to earn client trust by making decisions through education and collaboration. You may also lose more sales based on budget objections.
Own-Occupation Policies Can Vary
Although we’ve covered how own-occupation policies work in general, there are some differences depending on the details of the individual policy and which insurance company is offering it. Make sure you read the fine print to understand key issues and compare options from different insurance carriers.
- How is disability defined? Does the policyholder need to be considered totally disabled? What counts as a disability? For example, the policy may say that benefits will be available if the policyholder is unable to perform material and substantial duties of their occupation. If the policyholder ever wants to file a claim, knowing what does and does not count as a disability under the terms of the policy will be essential.
- Does the policyholder need to be working at the time of the disability in order to qualify for benefits? This is often the case with own-occupation policies. However, a modified own-occupation policy may work differently.
- What is the maximum monthly benefit? How long is the benefit period? How long is the waiting period, also called the elimination period? Before a client can decide whether a policy meets their needs, they need to know exactly how much it offers in benefits.
When Should You Offer Own-Occupation Coverage?
Own-occupation policies tend to be appropriate for doctors and other highly specialized professionals who would take a serious pay cut if they had to switch careers due to a disability. Consider the following questions:
- Could the client maintain the same income level in another line of work?
- Does the client’s profession have special physical requirements? For example, a surgeon may be unable to work after a hand injury or an illness that impacts coordination.
- Can the client afford the extra cost of an own-occupation policy?
The key takeaway here should be that disability insurance is not a one-size-fits-all product. You shouldn’t automatically offer own-occupation to every single client as a matter of routine. You shouldn’t avoid offering own-occupation to anyone, either. Instead, examine the needs of each client on a case-by-case basis and determine whether an own-occupation policy is worth the extra cost. Sometimes, you may want to offer a true own-occupation or modified own-occupation policy. Other times, you may recommend an any-occupation policy.
Also explain the difference to your clients. This will allow them to make informed decisions. It will also help them understand the value of an own-occupation policy if that’s the best choice for them, thereby reducing the chance of price objections.