Your Occupation and Disability Insurance

Disability insurance is a unicorn in the insurance industry.   From own occupation disability insurance to any occupation disability insurance (and everything between), disability insurance considers much more than your health risk.

Most types of insurance concentrate on one or two major underwriting considerations.  In home owner’s insurance, those considerations are the value of your home and possessions. For auto, it’s your vehicle’s value and your driving record.  In life insurance, it is primarily your health and insurable interest.

In disability insurance, the process is focused on three key underwriting factors:

• Your occupation
• Your income
• Your health

So, unlike other types of insurance, underwriting disability insurance can be broken into three specific areas instead of one or two.   And while your health and your income will affect the pricing and benefits amounts of your policy, the occupation disability insurance component dictates everything else.

Classifications of Occupation Disability Insurance

There are no formal categories of disability insurance policies regarding occupations.  By categories, the reference is specific to the various types of occupation disability insurance: white-collar, blue-collar, and gray-collar.

No carrier is going to state specifically that their policy only applies for one worker on a consumer piece.  However, as an agent, we are privy to additional information not available to the public.

The major disability insurance carriers absolutely design products for different occupation classes.  Making sure you have the policy that fits your specific occupation is important.

White Collar Occupation Disability Insurance

A career considered white-collar is that of a professional.  Whether you’re a C-level executive earning a salary and bonus, a doctor who earns income from private practice and a hospital, or a self-employed CPA or attorney, white-collar professions have the most favorable terms of all disability insurance occupation categories.

These professionals have less of a propensity to go on claim due to the nature of their jobs.  They also typically have the highest incomes and the most specialized fields.

Let’s look at a few occupations considered white collar.

Medical Professions

For most disability insurance specialists, this is the occupation disability insurance holy grail.  However, that might not be for the reasons one might think.

Physicians and surgeons will not have the best occupation classes.  It is a profession rife with stress, long hours, and involves being on one’s feet constantly.

While physicians enjoy great policy design, as there are disability insurance policies based specifically for their use, they have limitations on occupation classes not encountered by other professions.  A medical professional can have a mental/nervous disorder rider applied to their policy, which limits his or her ability to go on claim due to health conditions such as depression or anxiety.

For insurance agencies, trying to cover physicians is attractive mainly because A) they can afford the premiums, B) the premiums are higher, and C) they are conditioned from the start of their careers to purchase disability insurance.

Our agency doesn’t intentionally focus on the first two characteristics, but the third is something that should happen in every white-collar professional industry. There is a major disability insurance statistics disconnect that exists in the marketplace.

The short version: most people think disability insurance is important but most don’t have it.

Fee-for-Service Professions

Ask a person on the street what a white-collar profession is; these would be the most popular answers.

The professions that include fee-for-service are occupations like accountants and attorneys.  These professions are normally offered the highest possible occupation disability insurance policies.  They also have the most flexible terms, meaning they are often covered for all disabilities, including mental/nervous disorders.

So, while medical professional may be the most sought-after clients, fee-for-service professionals are truly offered the best disability insurance policies.

Office Workers

All that time in the office has finally paid off!

The typical white-collar employee, an office worker, normally has a fairly low threshold to qualify for the best underwriting occupational classes.

Top classes are normally awarded to those with three or more years in the same job role, with earnings of 75k+.  These parameters are all subject to the carrier limits, but if you work in an office with some solid experience and income, you will be offered the best occupational classes.

For those that want disability insurance, an “office worker” is one of your best possible occupation classes.

As you can see, the disability insurance carriers love when you have a profession with a low incidence of claims. That doesn’t mean one of these white-collar jobs can’t easily go on claim…it just depends on the situation.

Blue Collar Occupation Disability Insurance

Blue collar professions normally have job duties that involve physical labor.  Electricians, plumbers, and bartenders are considered blue-collar.  You’ll find that some unique professions, such as tree surgeons and horse trainers, will also fall into the blue-collar category.

Specialization in disability insurance is not considered as important for physical jobs.  A barber who specializes in a specific style of haircut is not considered the same as a surgeon who specializes in neurology.

However, blue-collar specialization is no less important than white-collar specialization and needs to be considered when purchasing a disability insurance policy.

Special policies are designed for blue-collar professions that are less expensive than a traditional disability insurance policy.  However, they are typically inferior to their more robust white-collar profession alternatives.

A blue-collar disability insurance policy likely has four components that a white-collar policy is unlikely to have:

• They are only guaranteed renewable.

This means your premiums are not guaranteed.  A non-cancelable/guaranteed renewable policy does not allow the carrier to increase the premium costs, and they cannot cancel your policy for any reason (other than non-payment of premiums).  Guaranteed renewable policies only guarantee the latter.  Although the carrier can increase your premiums, they must do so across similar policy designs (occupations, ages, etc.).  For most carriers, this needs to be considered, but it shouldn’t be something that dissuades you from buying a disability insurance policy.

• They include social offset riders.

To get the most efficient pricing, many blue-collar policies offer the ability to offset your benefits based on any social assistance you receive by being disabled. Known as social insurance supplement riders or SIS riders, this benefit can be very attractive since it reduces the costs of your policy.

This isn’t a huge negative, as the insured will net the same disability insurance income, regardless of their qualifying for social assistance.

Should the insured go on claim with a policy that does not have this feature, they would receive BOTH the social assistance and disability benefit…and might even make more money than before they were disabled.

• They have limited benefits.

Depending on the product and your occupation class, you might not get the benefit length you want.  Several blue-collar professions are limited to 2 and 5-year benefit periods as opposed to the more robust “to age 65, 67, or 70” that you see on a white-collar policy.

However, considering the average long-term disability claim is from 31-34 months according to the Council for Disability Awareness, 5 years of coverage is valuable for a profession that involves a lot of physical labor (and a higher potential to go on claim)

• They likely have an “any occupation” definition of disability (B).

This could be a long paragraph about disability definitions but to save time, let’s simplify this discussion.

There are two major definitions of disability available. Definitions of disability determine how easy it is for the insured to make a claim.

The first, and most attractive, is called “own occupation.”  An “own occ” policy essentially is a policy that says, if you lose time, income, or the ability to perform the duties of your actual occupation, then you can make a claim.

An “any occupation” definition of disability states, if you’re able to do another job, suitable of your training, education etc., then you won’t be able to make a claim.  As an example, social security disability uses an any occupation definition of disability.

Most occupation disability insurance policies will have several, if not all, these characteristics.  However, there are several alternatives for the blue-collar worker.

If you work in a blue-collar profession and have been offered a substandard policy, please contact us.  We can help.

So what does disability insurance look like for blue-collar professionals?

Trade-Based Blue Collar Jobs

These jobs normally require advanced training, schooling, or apprenticeships.

Examples of this type of profession will include electricians, plumbers, and landscapers.  Although their professions involve a lot of potential for injury, the claims data says otherwise.

These professions can be offered better rates than some of the more physically intensive jobs listed below.

There are two distinct advantages to having a blue-collar profession that is a specialized trade.

Many of these professions are self-employed individuals. With some exceptions, these careers will allow the individual to apply for a higher class and/or show more income on their financial documents.

Depending on your occupation, one or both of these advantages may apply to your disability insurance policy.  Occupation disability insurance can be very flexible, depending on your situation.

Traditional Blue Collar Jobs

A traditional blue-collar job normally involves substantial physical labor, while “blue collar” can have a connotation of hard labor, such as farming, manufacturing, or any profession that involves getting dirt on your hands.

In reality, blue-collar professions not only include the previously mentioned professions but also include bartenders, mechanics, and hair dressers (similar to the professions listed above).  The list goes on and on.

These professions are the hardest to cover due to high premiums and typically a lack of income. If one can’t cover their income with long-term disability insurance due to premium expenses, then there are other options.

Some professions are uninsurable for disability insurance.  If you think about high-risk occupations, like stuntmen and coal miners, you’ll understand why.

Using products such as accidental disability insurance and critical illness coverage, one can cover a lot of the crucial exposures to which his or her financials are exposed.

We can help with these strategies too.  Please contact us if you’re looking for alternatives to disability insurance.

Gray Collar Occupation Disability Insurance

Gray-collar occupation disability insurance covers professions not quite blue-collar but not white-collar either.  People in gray-collar professions typically have licenses, degrees, or some technical training.  It can be more challenging, for a gray collar worker simply to learn an “on the job” basic skill set is normally necessary for these careers.

Examples of Gray Collar Occupations

Police offers, firefighters, and registered nurses are examples of gray-collar occupations.  Skilled tradespeople and paralegals would also be jobs that fit this description.  Looking at these professions from an occupation disability insurance perspective, one will find that insurance companies have different views.

First, several carriers have variations of their products built to serve various occupations.  While one type of profession may be expensive with one carrier’s disability insurance policy, the same company may offer another policy where the pricing will be much more reasonable.

This is where working with an independent agent who can shop the major disability insurance carriers for not just an occupation but for the variations within each company is so important.  We help people with gray-collar jobs purchase the right coverage for reasonable premiums.

Characteristics of a Gray Collar Occupation Disability Insurance Policy

Like blue and white-collar, gray-collar disability insurance costs are largely based on your health, occupation, and desired coverage.  Unlike the other two, a gray-collar policy does not have options that are as clear.

For instance, gray-collar professions are normally eligible for benefits not available to blue-collar professions.  Longer benefit lengths, occupational upgrades, and own-occupation definitions of disability are typically available to someone with a gray-collar profession.

However, even though these additional benefits are available, it doesn’t mean they are affordable.

The gray-collar worker is normally caught between a rock and a hard place.  Often earning less than their white-collar counterparts, paying for a fully loaded disability insurance policy might be a challenge.  The issue is that, with a more technical job than a typical blue-collar profession, their coverage must be more specialized.

This is the type of policy design that must have some give and take.  Going through each policy feature and understanding which components are important (needs) and which ones are attractive (wants) is important. Anytime a profession has a less than substantial income (under 150k) but requires technical expertise, training, or advanced certifications, a disability insurance policy is not only necessary but crucial.

These policies need the most customization and discussion.  We proudly insure gray collar professions and take the time to help our insureds select the best policy for their needs.

No Collar Disability Insurance

A semi-made up term, there are several occupations that, from a disability insurance perspective, don’t fit the traditional model.

Occupations that are difficult to insure include chiropractors, pilots, flight attendants, and professional athletes.  Thankfully, we represent a cardholder of Lloyd’s of London, who can cover the majority of these challenging occupations.

If you’ve been declined for disability insurance due to a hard to cover occupation, please contact us and we’ll help you purchase a policy.

Disability Insurance Definitions

Your occupation dictates a lot.  From premiums to coverage and benefits, the job loss (and income loss) you’re trying to protect is ultimately driven by the job itself (and your income and health).

Paycheck protection insurance is very important, but it also important you know what entitles you to go on claim.

What does it mean to be disabled and unable to do your job?  The definitions of disability spelled out in your policy will dictate this.  There are two main types of coverage in the disability insurance world: own occupation and any occupation.

The one that is right for you will depend on your income, your occupation, and what you hope to protect by purchasing a disability insurance policy.

Own-Occupation Disability Insurance

Viewed as a “must have” for many occupations, own occupation disability insurance covers the insured if they cannot perform their actual profession.

The easiest example of “own occ” comes in the form of own occupation disability insurance for physicians.  Physicians, especially surgeons or any doctor with a specialty, typically have highly specific jobs.  And while their profession can be easily derailed by something as benign as an essential tremor (shaking of the hand), their vast wealth of knowledge would allow them to play many other roles in the medical profession.

While there are several varieties of own occupation disability insurance, the one that pertains most to the example above is typically called “true own occ.”

A true own occupation policy would allow for this doctor to go on claim if they cannot perform their specialty.  That means, if he or she decided to work in an administrative role or maybe in a teaching role, they could still collect their full disability benefits AND the salary from their new career.

As has been mentioned on this site, having true own occupation disability insurance is the Ferrari of occupational definitions.  It is the absolute best and, for those who can afford it, you should purchase one of these policies.

However, not everyone needs this high-definition of disability.  Everything else being equal (premium cost, benefits, etc.), this is the best option for your policy.

However, it is rare that everything is equal.  One of the interesting situations that can occur involves human nature.  People want to work, they want to feel productive, and they want to feel they are earning money for their family.

What most people aren’t concerned about is making MORE money while disabled than when they were productively working at their previous profession.

For most people, maintaining a standard of living acceptable to themselves and their family is important.  That they’re essentially able to profit from a disabling illness or accident is not high on their list of priorities.

The lesson here is simple: all things being equal, you purchase the best occupation definition possible.  If not, then consider your lifestyle and what you hope your policy can provide you with should you become disabled.  You might be surprised once completing this exercise.

If a true own occupation policy isn’t available for whatever reason, be it cost or product related, it doesn’t mean you shouldn’t consider modified own occupation-type policies.

Other variations of own occupation are described as transitional, not engaged, or modified.

A transitional own occupation definition of disability would apply if the insured went back to work in a profession that paid less than their own occupation. Continuing with our surgeon who developed an essential tremor, if he or she were to secure another job, they would continue to make similar income as they were making before their disability, even if the new career paid substantially less than a surgeon.  Transitional own occupation disability insurance coverage helps to offset any income loss should the insured desire to return to work in a new role.

Own occupation not engaged is another sub-class of a definition of own occupation coverage. Although it is still considered own occupation coverage, not engaged coverage is the least desirable. This definition of disability requires the insured not to work in any other career if they want to continue receiving their disability insurance benefits.  While this might sound like a like an ideal scenario, receiving your full disability insurance benefits while not being required to work, most people don’t want to not work if they can do so.  Having this as the classification of your disability insurance plan, if you’re still able to work in another job but unable to do your own occupation, you won’t be allowed to make income in another profession and still collect your disability insurance benefits.

Modified own occupation is typically temporary.  That means, if you have a modified definition of disability, you’re likely to own a policy that is both own occupation and any occupation (which is a term covered shortly).

Essentially, a modified own occ definition will stipulate a period of time for which your disability is deemed unable to perform the duties of YOUR occupation.  Then, after a period of time, such as two years, the definition will transition to your ability to perform the duties of ANY occupation you’re suited to do through training or experience.

Again, the easy example here is a physician.  If for whatever reason, the physician suffers a loss of time, duties, or time (based on the definitions of disability found in the policy), he or she would be considered disabled.  If, after two years, that individual still cannot be a physician but could perform diagnostic tasks, such as reading and interpreting X-rays, then they would no longer be considered disabled and would have to go back to work.

Modified own occupation disability insurance coverage is not ideal, but can still be important with degenerative diseases or conditions that are relatively short-term.

The bottom line is that own occupation disability insurance is important for many professions, but what is critical is that you have the RIGHT disability insurance coverage for YOUR occupation.

Any Occupation Disability Insurance

Having disability insurance is important for everyone.  The average long-term disability lasts 31-34 months.  Most people cannot go without income for almost 3 years. Without disability insurance, the majority of individuals would enter a catastrophic financial situation.

Having something is better than nothing.

Having an any occupation definition of disability insurance doesn’t mean you have a bad policy.

There are several situations where an any occupation definition might make sense.

Any occupation disability insurance is defined as your inability to work.  That means you cannot do the work you did before nor can you perform the duties of a new occupation suited to you based on your education and experience.

Essentially, an any occupation definition of disability means you cannot do most jobs.

Where would this definition of disability be acceptable?

Let’s look at a few blue-collar/gray collar professions.

Mostly, any job involving physical labor with little education beyond the technical aspects of the job could consider this type of coverage.

If you’re working as a bartender with aspirations of becoming an actor, the chances you can perform another occupation if you’re unable to tend bar are relatively small.  The same might hold true for the nurse who cannot stay on her feet due to a chronic condition.  Although she has training and certifications, her role largely involves her moving around administering treatment, which would likely disqualify her from a host of other occupations.

As much as any occupation disability insurance might be vilified in the disability insurance industry, it has its place. And in certain fields that may qualify as gray collar, the premium savings can be substantial by going with a weaker definition of disability.

Any occupation disability insurance can also supplement a potential social security disability insurance claim.  Social security disability insurance (SSDI) has a similar definition of disability to an any-occupation disability policy purchased privately.

SSDI offers little by way of benefits.  It is often severely limited in both qualification and benefit amount.

So, what are your options if you need high-income disability insurance to supplement a potential federal benefit?

Usually, people who make incomes of 50k-100k would suffer financially on just social security disability insurance, but they cannot afford a “true own occ” disability insurance policy with all the bells and whistles.  The solution is to look at any occupation policies (or lesser/temporary own occupation policies) with social insurance supplements to reduce costs drastically and insure yourself against catastrophic loss.

Social insurance supplements are riders that reduce the overall cost of your disability insurance policy.  They do this by reducing the company risk.

FOR EXAMPLE

A tree surgeon purchases a disability insurance policy with a social insurance supplement. Making $120,000 per year, he is entitled to $6,000 per month in benefits. 

Using a social security offset rider for $1,500 per month, he can reduce the overall costs of his policy. That means he has a $4,500 base and a $1,500 social offset.

Should he go on claim, he is likely to be unable to do any other profession, so even under the more stringent “any-occ” definition of disability, his benefits are likely to be paid.

But who pays them?

With a typical disability insurance policy, the insurance company would be on the hook for the full monthly benefit of $6,000.  With a social supplement, our tree surgeon would still receive a minimum of $6,000 per month, but whoever pays it would depend on where the money came from.

For instance, if he received $1,000 per month from a governmental agency, such as social security, his carrier would pay only $5,000 per month.  He would still net $6,000, but where the money comes from would be separated. That is why these policies are less expensive.  The carrier is not on the hook for the full benefit amount.

If he received $2,000 from social security, he would net $6,500 per month.  Because his policy has a $1,500 per month social offset, that amount would be picked up by whatever governmental agency had to pay.  Since he is receiving more than his rider amount, the excess would still be paid but not offset by the policy.

The $4,500 benefit is payable no matter what (if he meets the definition of disability for his policy).  The $1,500 benefit is offset by the $2,000 payment from social security. However, there is still $500 dollars left unaccounted for since his supplement only covers $1,500.  That amount is still payable to the insured.  So, in this example, the carrier pays $4,500 and the government pays $2,000. The insured nets a total benefit of $6,500.

In Depth Occupation Disability Insurance

Each profession has its own unique set of challenges in purchasing disability insurance or income protection insurance.  We go into greater detail on each occupation that we insure in separate posts.  Let us know if you would like a post dedicated to your chosen field!

Summary

You can’t control your occupation.  It is detailed in every agent’s occupation guide and has a specific classification assigned to it.

What you can control is your ability to work with an independent agency that understands the nuances between the carriers and how those subtle differences affect your coverage and how much you pay for your benefits.

Don’t leave this to chance.  Whether you’re a high-income professional and high limit disability insurance or you’re a business owner who needs something complex, like a disability buyout policy, we can help.

We also recognize small business owners and blue/gray collar professions face additional challenges in securing disability insurance, and we’re happy to help these folks shop the best disability insurance companies for their needs.

No matter the color of your collar, High Income Protection is here to provide you with expert, unbiased advice in your search for the best disability insurance policy for your situation.

If you’d like to learn more on your own, then check out Your Complete Guide To Buying Disability Insurance.  If you’re ready to have us guide you, then contact us today for a complimentary consultation to identify your needs and options.  We hope to hear from you.