One of the most important definitions in a long term disability policy is the definition of total disability. How the insurance company defines total disability can make a huge difference in how much and how long your benefits will be paid.

Many professionals rightly seek out an Own-Occupation (Own-Occ) disability policy to protect their hard-earned incomes. However, when is Own-Occ truly Own-Occ? Many companies advertise their disability policies as Own-Occ policies and the unsuspecting consumer often considers them to all be the same.

A true Own-Occ definition will look something like this:

Total disability means that, solely due to injury or sickness, you are not able to perform the material and substantial duties of Your Occupation.

Some companies modify this definition by adding words such as and are not engaged in any other gainful employment to the definition. We call the former definition a True Own-Occ definition and the latter a Modified Own-Occ definition.

While the addition of those few words seems like a minor adjustment to the definition, the difference in benefits paid can be substantial. For example, let’s say a surgeon with an annual income of $350,000 has a disability policy with a monthly benefit of $10,000. She permanently injures her hand and can’t perform surgery anymore. As she is still generally healthy, she goes into private practice and earns $120,000 annually.

If her disability policy had a True Own Occ definition, her earnings would be $240,000 ($120,000 income plus $120,000 disability benefits) annually (of which $120,000 would be non-taxable). If her policy had a Modified Own-Occ definition, her annual income would be $120,000.

Which definition would you choose?