Look Beyond The Definition Of Disability
Theres a tired debate that keeps rearing its ugly head in the disability income protection business: “Which definition of total disability is better–true, pure own occupation, or (fill in the blank)?” (See chart below.)
But thats off the point of what consumers need, which is help selecting the policy best for their situation.
This is an important issue to consider not only for the traditional individual DI market, but also for the group disability market.
Thats because, in the employer environment, supplemental individual disability products can offset sources of income not covered by most group policies. (For example, many group products have a standard offset for Social Security disability that individual policies provide by rider.)
So, lets unpack the issue. The “which definition is better” argument has taken many forms over the years.
Theres been own occ vs. any occ, own occ vs. loss of earnings, true own occ vs. own occ not working, and own occ vs. loss of time and duties, among others.
But all these variations miss a crucial point: By setting up the argument as an exclusive “either/or” comparison, the question may be easier to understand, but a lot gets lost in the simplification. This is especially true now, as product evolution in recent years has made the definition of total disability less important.
Let me explain. The typical policy comparison, done this way, is based on total disability that prevents the insured from working in his or her own occupation. Here, the producer asks: “If the client cant perform his or her own occupation but can earn income in another occ, which definition pays more money in benefits to the client: the own occ definition or that other definition?”
The problem is, when the question is asked that way, the producer stacks the deck in favor of the own occ definition–primarily because its a backward-looking comparison. It starts with the situation own occ was designed to address 20 years ago and tries to use it as a litmus test for judging any other definition of disability.
These days, most income protection clients are not well served by that kind of quasi-nostalgic, own-occ-centric view of income protection.