What do the different definitions of disability mean and why does it matter?

By: Dennis Ho

The definition of disability is one of the most important parts of your policy, so it’s good to be asking this question before you buy. In short, the definition of disability tells you when you qualify for benefits. There are a range of definitions and each has a different cost, so you want to pick the right one for your situation and budget.

At one end of the spectrum is a “true own occupation” definition, which is the best protection you can get. With this definition, if you can’t do your current job, then you qualify to collect your benefits. Period. Even if you could theoretically do another job, your insurer can’t force you to do it. If you work in a specialty field (e.g. you are a surgeon or an executive), a true own occupation definition is something you should consider. At the other end of the spectrum is an “any occupation” definition. Under this definition, if you can’t do your current job, your insurer has the right ask you to consider other jobs that are generally in line with your experience and education. The upside is you could save 15% or more on your coverage, so if you work in a more general line of work, the “any occupation” definition could be a good fit.

In some cases, insurers may offer you a combination of the above definitions to help you further tailor your coverage — for example, the first two years of benefits might be based on a “true own occupation” definition and then it changes to an “any occupation” definition in year three. You can see that there are potentially dozens of variations that can be created. The good news is once you have a handle on the two main definitions of disability, you should be in good shape to assess any variations that insurers offer you. Good luck!


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