Many of us rely on a job for our income. If that includes you and you find yourself unable to continue performing your job duties because of a physical ailment, disability insurance can be a godsend. It replaces a portion of the income you lose when you can’t work.
However, disability insurance comes in two distinct flavors: own-occupation (also called own-occ) and any-occupation (or any-occ) disability insurance policies. And although they may sound similar, there are some key differences in how much coverage these options offer.
What is Disability Insurance?
Let’s start with a review of what exactly disability insurance is and how it works.
Disability insurance is an insurance product that protects workers against income loss due to a disability. In other words, if a disability or illness keeps you from being able to do your job, disability insurance can provide you with a source of income. Typically, though, the payments don’t replace the full amount of your lost wages.
Furthermore, disability insurance usually has an expiration date. Short-term disability insurance may generally pay between 40% and 0% of your lost wages for three to six months, while long-term disability insurance may pay 60% of your lost wages for two years or until your retirement, based on your specific policy. (Typically, the duration may be reflected in the premium amount.)
There’s also public disability insurance through the Social Security program: Social Security Disability Insurance (SSDI), which is free and can pay for as long as you are disabled or until you reach retirement age. Those payments are calculated based on your average indexed monthly earnings, which means they might be higher than the 60% to 80% range offered by private insurers. However, SSDI can be difficult to qualify for and the process can be lengthy. Even if you are approved, you must wait five months after approval to receive your first payment.
Own-Occupation vs. Any-Occupation Disability Insurance
When purchasing private disability insurance, you’ll find both own-occupation and any-occupation coverage options. (Your employer may offer only any-occupation coverage, so be sure you read your paperwork carefully to understand what you’re getting.)
Own-occupation is a more robust disability insurance product. It insures you against an inability to complete the specific job you have. Typically, it’s more expensive than any-occupation disability insurance.
Any-occupation disability insurance, by way of contrast, insures you only if you’re unable to work any job you’re reasonably qualified for, even if it’s at a lower pay rate.
Let’s dive deeper into the differences between these two products.
Own-Occupation Disability Insurance
Own-occupation disability insurance, as its name suggests, covers any disability that keeps you from performing your own current occupation. In many cases, you’re still eligible to receive benefits even if you find another job.
There may be language in the contract stating that you have to have been working at the moment you became disabled. But there are also policies available that cover people who become disabled outside work if their disabilities still prevent them from performing their job duties.
Highly skilled surgeons, for example, frequently get own-occupation insurance, since their jobs require such finely-tuned motor skills. For instance, if Grey’s Anatomy heart surgeon extraordinaire Dr. Preston Burke, who suffered from hand tremors after surviving a gunshot injury, had had own-occupation insurance coverage, he could have chosen to move into a different role in the hospital and still received benefits for losing his ability to perform his original job. He could also have chosen not to work at all and still have received benefits.
Any-Occupation Disability Insurance
Any-occupation disability insurance changes the occupational disability definition. Instead of providing coverage if you’re unable to perform your job, this kind of insurance provides coverage only if you’re unable to perform any job you’re reasonably qualified for.
“Reasonably qualified” is determined by the insurance company, based on your age, education, and experience level. And if you’re still considered “capable” of working with the disability—even if it’s at a lower-paying job—you would likely not receive any disability benefits at all.
This means that any-occupation insurance is a much less flexible and reliable form of disability insurance coverage. However, it’s often the only option available through an employer. Read your benefits package carefully, since you might want to purchase additional coverage to ensure that you’ll receive benefits if you do find yourself unable to do your work.
Let’s go back to the Dr. Burke example to see how the difference between these two insurance coverage options plays out. Because Dr. Burke was still a talented doctor who could perform other medical services and assessments, any-occupation disability insurance wouldn’t have covered him at all after he sustained his gunshot wound. Although he was unable to perform delicate heart surgeries, he could have taken another job in the hospital or even a job outside the medical field entirely. Thus, his any-occupation disability insurance wouldn’t have kicked in unless he sustained a more incapacitating injury, rendering him unable to work at all.
Disability insurance helps you replace part of your lost income if you become unable to perform your job duties due to an illness or injury. But when you’re covered depends in large part on whether you have own-occupation or all-occupation insurance. Own-occupation disability insurance coverage kicks in if your disability prevents you from performing the specific occupation you hold. Any-occupation disability insurance coverage kicks in only if you’re found to be unable to perform any job you’re reasonably qualified for. That’s why it’s key to know what kind of insurance you have. And understanding your options is just as important for any kind of insurance, whether it’s health insurance or homeowners insurance.
While selecting appropriate insurance coverage is an important way to protect yourself against unforeseen circumstances, keeping a savings cushion is an important tactic, too. By maintaining a liquid emergency fund of approximately six months worth of expenses (depending on your individual circumstances, you may need more or less than that), you can feel confident that you’ll have your basic needs met if you find yourself out of a job, whether or not it’s related to a disability.
Although there are many ways to build up your emergency fund, SoFi Money® members can benefit from our unique Vaults feature. Vaults allow you to set aside cash for specific purposes, including unplanned expenses; in fact, “Emergency Fund” is one of the first categories you’ll see listed when you create a Vault on the SoFi mobile app.
To make it even easier, you can set up a recurring transfer to move a set amount of money into your emergency fund Vault on a regular basis. It’s a lot easier to save when you don’t have to move the money yourself, and once it’s out of sight, it’s out of mind until you need it for a rainy day.
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