Your disability policy’s occupation class impacts three major components of your coverage. For one, your premiums are directly affected by your occupation class. The more specialized and less physical your profession, the less expensive your premiums. The second factor comes into play should you need to go on claim. Different professions, by policy design, will allow different types of disability to qualify for claims. Last, the policy design will be dictated by your occupation class. Some occupations allow longer benefit length, while others require a shortened benefit period. If you would like us to analyze the elimination period of your existing disability insurance policy to see if it fits your goals, please contact us.
What is an Occupation Class?
Your occupation class dictates the coverage for which you’re eligible. It will consider everything about your profession, from earnings to how physical your job is. It also will look at professions with historically high claims and classify them lower than professions with fewer claims.
How Your Occupation Class Impacts Your Premium
This is one component of your disability coverage, where you have little flexibility. Most carriers have an occupation guide they use to assign you to a specific occupation class. Some carriers have advantages over others in how they classify a particular profession, so it is imperative to shop ALL available companies for the best option.
The occupation class is normally expressed as a letter or number or a combination of the two. The higher the number, the more coverage you’ll be able to purchase for your premium dollar. A CPA might be classified as a 6A, where an Interior Designer could be a 3A. That means the CPA could get more coverage for the same premium.
Besides changes to your premiums, your occupation class can affect your benefit length and your definition of disability.
An occupation with a lot of manual duties will normally have a shorter benefit length maximum (2-5 years versus to age 65 or 67) and have a stricter definition of disability (own occ for 2 years, then any occ). Certain occupational classes may only purchase policies with social supplements.
Occupation Period Examples
To show you the occupation class to which some common high-income professionals will be assigned, I looked at 10 of the top professions from this U.S. News Article.
To keep it simple, we are using Guardian’s Provider Choice occupation guide. For each given client, we look at all the major carriers (Principal, The Standard, and many others) before selecting a policy.
From the website:
- Nurse Anesthetist 3M
- Dentist 3D
- Pediatrician 5M
- Psychiatrist 4M
- IT Manager 4
- Attorney 6
- Obstetrician 3M
- Pharmacist 5M
- Actuary 6
- CPA 6
Professions that are manual labor intensive have much lower occupational class ratings than the professions listed above. An electrician can be a high earning occupation, yet would only be assigned a class 2. This will not only make for higher premium payments, but has the potential to reduce the allowable benefit amount and definition of disability.
Sometimes, one company might have an advantage over another in ranking an occupation. For instance, Ohio National has a business owner program that, depending on how long the potential insured has owned the business and how much income they’re making, they can qualify for up to a 2 occupation class upgrade.
This business upgrade option allows for occupations historically lower on the occupation classification guide to be increased. Let’s say a potential insured owns a successful boutique travel agency. There are only two employees, the agent and an administrator. They have been in the business since before the internet dominated this market and have a loyal following of clientele. Because of this, the agency owner is very successful, netting north of 180k annually. Typically, a travel agency owner would be a 3A with Ohio National (or 4 with Guardian, with a similar program albeit with more stringent criteria for an upgrade). Using the business owner upgrade, the agency owner could move to a 5A (since she satisfies the criteria for a 2 class upgrade), lowering her premiums and increasing potential benefits.
The occupation class plays a major role in how your disability policy is priced and what benefits you may select. It may also restrict your definition of disability (forcing a modified own occupation or a social supplement). Because occupation classes and various upgrade programs may vary from carrier to carrier, you should look at each policy option and company to see what best fits your goals.
The most important fact to note is this: No disability insurance client is the same. Each of you have different financial situations, goals, and overall objectives. Purchasing a plan from an unbiased, independent expert is the best way to get the proper coverage in place. Please contact us today or fill out the quote form on the left for a complementary analysis.