Does the Definition of Disability Really Matter?

Most financial professionals will tell you the most important contract provision in a disability policy is the definition of disability.  That’s because the definition serves as the policy’s ‘triggers’ and determines when a benefit is paid.   More specifically, the definition does three things in a disability policy:

  1. It defines your occupation.
  2. It defines the criteria, or ‘triggers’, you must meet to be considered disabled.
  3. It defines what happens if you return to work in another occupation.

Let’s first look at the two commonly used definitions found in disability insurance contracts.  One, referred to as “own occupation”, is a definition most commonly found in policies geared towards professionals, like physicians and lawyers.  The second, called “any occupation”, is a more broadly used term and is defined by a person’s inability to work in any occupation they are qualified for by education, training or experience.  As you might expect, a contract with an own occupation definition is typically more expensive than a one using any occupation language, assuming all other aspects of the policies are equivalent.