Disability Insurance policies, often referred to as DI, have many important terms found and defined within the contract. But perhaps one of the most important to the insured (you) would be how your policy defines what qualifies as a disability.
In order for your Disability Insurance policy to kick-in and begin paying you after you become disabled, you must first meet the definition of disability.
When considering the purchase of disability insurance, it is vital to look at the definition of disability in each policy. In addition, you must consider how that definition applies to your specific job situation.
Disabilities are typically classified in four categories: total, permanent, partial and temporary.
1. Total Disability
In this situation, the disability prohibits the insured (you) from performing any part of their job responsibilities until fully recovered from the injury or disease.
2. Permanent Disability
The injury or sickness suffered by the insured (you) is permanent.
3. Partial Disability
In these situations, the insured (you) is unable to perform certain responsibilities of their job, but is able to perform some functions.
4. Temporary Disability
The insured (you) is expected to recover from the injury or sickness that caused your disability.
The combination of these terms is often used to describe the level of disability.
For example, a construction worker that falls and suffers from a broken hand and leg might be totally disabled for several weeks, but could make a full recovery and return to work. This would be classified as a Total Temporary disability (assuming he couldn’t perform any other functions of his job while injured).
Alternatively, if his hand was injured so badly that he’ll never make a full recovery, he could be classified as having a Partial Permanent disaibility.
Frankly, most disabilities are partial and temporary.
Tip. As such, if you are considering the purchase of a disability policy that covers total and permanent injuries or illnesses only, you may be wasting your money.
Disability policies also have definitions relating to your occupation. The best, and most expensive, coverage is that which kicks in when you are unable to perform your specific job.
Example. Say a neurosurgeon loses his or her hand in an accident. The person could still be a physician, but probably could no longer perform the duties of a neurosurgeon. By the definition of so-called “own occupation” policies, this person is disabled.
In contrast to “own occupation,” there is “any occupation” coverage. In this case, if the person can perform a job that requires the same skills and training, he or she would not be disabled.
In the case of the neurosurgeon, if he or she could continue to serve as, say a general practitioner, that person would not be disabled. However, some disability policies will pay some of the difference in salary that results from having to change job duties.
Please keep in mind that some disability policies define “any occupation” to be truly that – any occupation, regardless of the amount of skill and training required.
If you’d like to learn more, contact one of our Licensed Advisors . We’re here to help.