Your disability policy’s definitions impact one of the most important components of your coverage: how you make a claim. In this section, we’ll discuss how various disability policy definitions affect your ability to partially or totally receive your benefit amount. If you already own a policy and would like an analysis of what situations would allow you to make a claim and for how much, please contact us. Our consultations for this service are complimentary.
What is a Policy Definition?
Your policy definitions outline the conditions and circumstances where you’re eligible to go on claim. Typically, it will define what it means to be totally disabled, presumptively disabled, and partially disabled. For this article, various types of disability claims will also be discussed, even though those classifications are actually spelled out in your type of occupation class.
How Your Policy Definitions Impact Your Premium
Policy definitions are largely dictated by the carrier that you’re purchasing coverage from, as well as the product type that your particular carrier offers.
The more your policy allows flexibility for submitting a claim, the more expensive that policy will be. Conversely, a policy with very rigid definitions will be cheaper than the latter.
Policy Definition Examples
At this point, you might be thinking, why does all this matter? If I’m disabled then I’m disabled, right?
Not necessarily. Let’s look at the different types of disability where you could be classified:
Let’s start with one of the most serious potential disabilities, presumptive. Most carriers will define a presumptive disability as the loss of your eyesight, hearing, speech, the use of both or your hands, feet, or one hand and one foot.
Should you fit this definition, then you will be considered totally disabled, even if you’re able to work.
Total disability is going to be defined in a variety of ways. In an “own occ” policy, you will be considered totally disabled if (and I’m paraphrasing because each company is nuanced in their wording) due to injury or sickness, you cannot perform the material and substantial duties of your occupation.
Depending on the type of own occupation coverage, what you’re allowed to do while totally disabled (and still collect your entire benefit amount) will vary:
- A “true own occ” policy will pay your full benefit even if you’re gainfully employed in another profession.
- A “transitional own occ” will pay full benefits if you’re not working, and a partial benefit (up to your previous income) if you’re working in another profession.
- An “own occ not otherwise engaged” will pay full benefits only if you’re not working in any other job.
In an “any occ” policy (like social security disability), you’re only considered totally disabled if you can do no job for which you’re reasonably suited, based on your training, experience, or education.
Lastly, a “modified own occ” will have policy definitions that allow for a period of “own occ” (often 2 years), followed by a change in definition of total disability to “any occ”.
If a disability causes a drop in income but doesn’t totally prevent you from doing your occupation, then you could be considered partially disabled. The most flexible policy definitions will allow for a partial disability before being totally disabled. This is often found in many individual disability insurance policies, whereas some group policies have wording that requires a total disability prior to claiming a partial benefit.
Typically, the triggers for a partial benefit are loss of hours, loss of duties, or loss of income (or a combination of the three). Benefits availability will vary from carrier to carrier and normally have a period attached to the qualification process.
For example, the first 6 months of a partial disability might qualify you for higher benefits initially, where after 6 months, a calculation will be performed on your actual loss of income.
As bad as it sounds, catastrophic disability is normally added as a policy rider that will provide an additional benefit amount for a specified benefit length or period should the insured qualify.
The definition of a catastrophic disability is typically an injury or sickness that causes severe cognitive impairment, or the inability to perform 2 of 6 activities for daily living (bathing, continence, dressing, eating, toileting, and transferring). In addition, you might also be considered catastrophically disabled if you fit the definition of being presumptively disabled.
A catastrophic disability rider adds more benefit amount to your base benefit. It typically has the same limitations as your base benefit, such as an elimination period, benefit length, and benefit amount.
Your disability policy definitions are critical. They dictate when and how your benefit amount is paid. Terms such as “total disability” can certainly be misinterpreted based on connotation alone. The most important takeaway from this is to understand your policy and how your policy definitions affect your ability to make a claim.
Everyone is different, so making sure that your disability insurance policy fits your objective is essential. Working with an unbiased, independent expert is the best way to make sure that the policy you purchase protects you as needed. Please contact us today or fill out the quote form on the left for a complimentary analysis.