In my last blog, I had discussed the importance of a Long-Term Disability (LTD) policy. Today, we will drill just a bit deeper and evaluate an often-overlooked definition of disability contract provision; “Own Occupation.”
Certain professions demand very specific physical skills or abilities to perform the duties associated with a job. While an injury or illness may not necessarily preclude a person from carrying on their day-to-day activities of living, it may prevent them from performing their job. For example, let’s say a surgeon injured their fingers in an accident but they are otherwise healthy and fine. For most people this would not be considered a disability. However, a surgeon typically requires fine motor skills and dexterity to perform their work. So, is this individual disabled or not?
The answer is yes! The surgeon would no longer have the required function of their hands to perform their “own occupation.” If their LTD policy contained an “own occupation” provision they would be covered. A typical LTD policy will cover someone unable to perform their “own occupation” for 24 months. This is generally sufficient as the 24-month time period would allow time for rehabilitation or physical therapy with the goal of getting the injured person back to work. If this is not possible, the individual would also have had 24 months to transition into a new position that better suits their ongoing condition. This would be a shift to “any occupation.” Basically, the injured party is still capable of working, but just in a different job. So, without a careful examination of the needs of the employer a surgeon after two years of “own occupation” LTD coverage may be considered no longer disabled as they may perform other tasks.
What about the loss of income? This is where a carefully crafted LTD plan that matches the needs of an employer and employee comes into place. The benefits should reflect the specific job descriptions and requirements so that employees would be better protected. In the hypothetical case we are discussing, the surgeon most likely would lose income shifting from work as a surgeon to perhaps an office administrator. What can be done? In this instance the employer should look for a policy that defines disability as unable to perform the employees “own occupation” until Social Security Normal Retirement Age (SSNRA). This will give the employee coverage until they reach retirement age. Conversely, including only “any occupation” coverage may save premium dollars if needed and employees can continue to work in another position without it affecting their income.
In summary, the two types of definition of disability in an LTD contract, “own occupation” and “any occupation” should be closely examined and negotiated to suit the specific needs of an employer and their employees before the coverage is placed. This minor difference in language may cause major disruption in the financial security of employees otherwise.
