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 in a cash management account is an important tactic, too. For your other insurance needs, consider checking out SoFi Protect. SoFi Protect offers insurance plans for your home and car, plus life insurance plans to help you protect your loved ones in the future.
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC . Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Ladder policies are issued in New York by Allianz Life Insurance Company of New York, New York, NY (Policy form # MN-26) and in all other states and DC by Allianz Life Insurance Company of North America, Minneapolis, MN (Policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to offer life insurance in the state of New York. Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077 and for Ladder is OK22568. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies. SoFi is compensated by Ladder for each issued term life policy. SoFi offers customers the opportunity to reach Ladder Insurance Services, LLC to obtain information about estate planning documents such as wills. Social Finance, Inc. (“SoFi”) will be paid a marketing fee by Ladder when customers make a purchase through this link. All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
SoFi offers customers the opportunity to reach the following Insurance Agents:
Home & Renters: Lemonade Insurance Agency (LIA) is acting as the agent of Lemonade Insurance Company in selling this insurance policy, in which it receives compensation based on the premiums for the insurance policies it sells.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.