Hidden “Own-Occupation” Traps in Physician Disability Insurance

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When it comes to disability coverage, beware the fine print.

The difference between “own-occupation” and “any-occupation” coverage is one of the most important distinctions in physician disability insurance. True own-occupation coverage provides doctors with essential income protection, while lesser policies can leave physicians exposed to extreme financial risk in the event of a disability.

Own-occupation coverage is unique because it pays benefits in the event that a physician becomes too sick or injured to work in their own specialty. Even if the doctor can still work in a different medical occupation or a new field altogether, he or she will still receive full benefits.

By contrast, “any-occupation” coverage will only pay benefits if your disability prevents you from working any job. Imagine a cardiothoracic surgeon who earns $575,000 a year. If that surgeon develops rheumatoid arthritis, they will no longer be able to work in their specialty. However, the surgeon could probably still work as a teaching doctor earning an income of $150,000. Despite losing nearly 75% of their income due to a disability, this surgeon would not be eligible for any benefits with any-occupation coverage.

When comparing policies, you might expect it to be easy to differentiate between “any-occupation” and “own-occupation” coverage. Unfortunately, this is not always the case. Many insurance companies mimic own-occupation language while slipping in restrictive clauses to undermine your actual coverage. As a result, physicians should beware of these common “own-occupation” traps:

Restrictive Definitions

Group disability plans will often claim to use an “own-occupation” definition of disability without advertising the prohibitive language surrounding the definition. For example, language in a group disability plan might stipulate that you are entitled to benefits in the event that:

“…you are unable to perform each and every material duty of your own occupation.”

In this case, the definition does technically include the phrase “own-occupation,” but the devil is the details. According to this language, a physician would have to be too sick or injured to perform every single material duty of their job in order to receive benefits.

A disability could prevent you from performing major functions of your role, but if you were still able to fill out paperwork or conduct patient consultations, this policy would not consider you disabled. This kind of trap is actually nicknamed a “coma clause” because in order to receive benefits, you essentially have to be unable to move or go to work at all.

Restrictive Benefit Periods

Here’s another common trick: a policy will use an own-occupation definition of disability, while tying an early expiration date to the payable benefits. For a certain period of time, physicians will receive benefits if unable to perform material and substantial duties of their own occupation. However, after a specified period of time, benefits will then be paid according to an “any-occupation” definition of disability.

Insurance companies justify this timeline by arguing that within a certain amount of time, such as two years, physicians should be able to return to work or find alternative employment outside of their specialty. In the most restrictive policies, own-occupation coverage can expire in as little as six months. Depending on the policyholder’s disability and their financial obligations, income from an alternative employment may not be sufficient to compensate for their lost specialty salary. As a result, doctors must pay close attention to the defined timeline for own-occupation coverage.

Restrictive Residual Benefits

One final area to review carefully is your policy’s residual disability benefit provision. The majority of disabilities are caused by illnesses rather than accidents, and illnesses are often degenerative. Conditions such as arthritis, back pain, MS or Parkinson’s tend to slowly diminish a physician’s ability to work. Over time, affected doctors may have to reduce patient volume or work fewer days, leading to a loss of income. These conditions are partial disabilities, rather than total disabilities.

Unfortunately, group plans usually require a period of total disability, before any partial benefits are paid. Consider the following language:

“Following satisfaction of your waiting period and a period of total disability for which you received benefits, a residual benefit is payable directly to you, if you thereafter return to work on a part-time basis….”

Under this policy, the physician is not eligible for residual payments until after they have experienced a total disability. This stipulation essentially precludes physicians’ with degenerative conditions from receiving partial benefits. A physician with MS could work for nearly twenty years before becoming totally disabled. During those two decades, the physician might lose hundreds of thousands in income due to disability without qualifying for any benefits.

The strongest residual disability benefits replace income when a physician’s earnings drop below 85% of pre-disability levels, without any total disability prerequisite.

The Bottom Line

Deceptive own-occupation language is a common tactic used to lure physicians into seemingly less expensive policies and trap physicians into accepting deficient disability coverage. As a result, every doctor should carefully investigate his or her policy to determine if it offers true own-occupation coverage or if the fine print contains dangerous restrictions.

At Physicians Thrive, our financial advisors offer free quote comparisons and evaluations on disability insurance. To avoid hidden traps and lock-in valuable income protection, talk with an advisor today.

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