WHAT IS 'Any-Occupation Policy'

Any-occupation policy is a type of disability insurance that describes when the insured is unable to work in a job that is reasonably suitable for them based on education, experience and age.

BREAKING DOWN 'Any-Occupation Policy'

An any-occupation policy is not the only kind of disability insurance. The other common type of disability is own-occupation policy. This considers an individual disabled if unable to perform the same job as prior to an accident or injury. For example, a surgeon who injured their hands would be considered disabled under own-occupation terms. Own-occupation disability insurance is preferable because it is more likely to pay a benefit if the insured becomes disabled

Any-occupation versus own-occupation

Any-occupation terms in a policy means it pays if the insured is too disabled to do any kind of work. If they are capable of still working, even if it is at a much lower-paying job, an any-occupation policy would not pay benefits. The insured loses out on their disability insurance benefit and may not be able to earn enough income to cover their expenses. For example, if the insured was an airline pilot before becoming disabled, and afterward is able to teach aviation to students, they probably would not qualify for disability benefits. However, if their disability prevents them from performing any occupation for which they are reasonably qualified, such as being unable to teach aviation, then they probably would qualify for benefits. Employer-provided disability insurance may only be available as an any-occupation policy. Employees may purchase a supplemental disability policy for additional protection.

True own-occupation is for the insured’s specific occupation with no other stipulations. If they are unable to perform the material and substantial duties of their pre-injury occupation, the benefit is paid, regardless of whether they choose to work elsewhere. For example, if the pre-disability airline captain found a new occupation as a marketing director for a software company, they would still receive full benefit. If the insured meets the definition of totally disabled and becomes employed in a new occupation, their total disability benefit will not be affected by any income from the new occupation, regardless of the amount.

Transitional own-occupation coverage is own-occupation with an adjusted benefit. If the insured chooses to work in any other occupation, the earnings from the new occupation might reduce the benefit amount. If the airline captain’s full benefit amount was $8,000 each month and their new marketing position paid $6,000, the benefit could be reduced to $2,000.

A bonus hybrid version is offered by some insurers. It starts with one of standard own-occupation definitions, but after a defined period of months or years changes to a stricter definition. For example, it may only continue to pay the benefit if the insured remains unable to work at an occupation for which they are qualified and does not work at any other occupation. The airline captain might be paid full benefits for the first 24 months regardless of their ability to work elsewhere, but after that, if they decide to teach aviation or take the marketing director position, they would no longer be eligible for benefits.

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