How the occupation of the client is defined is one of the most important policy differentiations. Everyone should have coverage if they are sick or hurt and cannot work. We will always offer as a first choice the best definition available. If available, we want the client to be able to receive benefits if he or she is unable to perform his or her occupation, but that does not mean that the strongest (and most expensive) necessarily makes sense for everyone.
There are four definitions of disability that are most often available from insurance companies (described here from strongest to weakest).
Own Occupation or Regular Occupation (sometimes True Own Occupation)
The inability to perform the substantial and material duties of your occupation—this definition would allow the client to work in another occupation and still collect all of his or her benefit, regardless of how much he or she might earn in the new occupation, if disabled from his original occupation. This feature is very popular with professional occupations.
Transitional Own Occupation
This definition is similar to the own occupation definition. It differs only if the client chooses to work in a different occupation. In that circumstance, the carrier will compare the new income of the client in combination with their benefit amount with their pre-disability earnings. If the new income and benefit amount are less than the pre-disability earnings, the client will continue to receive the full benefit (same as the true own occupation definition). However, if the new income and the benefit combined exceed the pre-disability earnings, then the carrier will reduce dollar for dollar the benefit amount. This is a less expensive option to True Own occupation definition, but still indemnifies at 100% of pre disability earnings.
Own Occupation and Not Working (or not engaged)
The inability to perform the substantial and material duties of your occupation and not working. The and not working is what differentiates this from the true own occupation definition. Often this definition comes with language that relates the definition of disability to the client’s level of training and experience The vast majority of all clients who return to work after being disabled return to their same pre-disability profession—this is particularly true for executives and small business owners The key here is that clients are protected as long as they do not choose to work in a different occupation—and the carrier cannot force them into a different occupation.
Any Occupation
The inability to perform the substantial and material duties of your occupation and not working in any occupation. With some occupations or health conditions, however, this is the best definition that is available.