Income Replacement Insurance

This has become the most common definition of total disability in the industry today. Most insurance carriers that have stopped offering own-occupation disability insurance have moved to an income replacement definition. You will find the first part of the definition is very similiar to an own-occupation definition, but it is with the second part that the major change occurs. A typical income replacement definition will look something like this:

Because of sickness or injury you are unable to perform the material and substantial duties of your occupation, and are not engaged in any other occupation.

As you can see there is a major difference between an income replacement and an own-occupation definition of total disability. The income replacement definition will penalize you during a claim if you make the decision to go back to work, or earn another source of earned income while on a claim. I have found that most people if given the choice would go back to some work if possible, under this plan if somebody wants to go back to work in some capacity, the insurance company may offset your monthly benefit check. There is a common misconception that own-occupation disability insurance costs a lot more than an income replacement policy. While I am certain that in some scenarios this is true, as a blanket statement it is false. There are many professional occupations where an own-occ contract is actually less expensive than an income replacement policy. Many companies, as an example, do not like writing individual disability insurance on physicians. It is very likely that an own-occupation disability insurance policy may be less expensive from a company that still enjoys writing disability insurance for doctors.