Long-term disability (LTD) insurance policies typically include confusing terminologies and provisions that can make it challenging for an insured person to understand if they’re entitled to benefits when making a claim. What is outlined in your policy determines how your claim is processed. While each case is decided on its specific facts, the framework of your policy guides how these facts are looked at.
A particular “test” of disability exists within every disability policy. The test requires that the insured person be unable to perform the material and substantial duties of either their own occupation or any occupation. The test must prove the claimant considered “totally disabled.” This does not mean they are entirely immobile or helpless. Totally disabled means that a claimant cannot engage in any gainful occupation that the insured person is reasonably suited for based on their education, work experience, and other individualized factors.
When purchasing LTD insurance, you will usually get to choose whether you want own-occupation or any-occupation coverage. The latter is the cheaper option because it is less likely that you will receive a successful payout. The difference between whether you choose “any occupation” or “own occupation” for your policy could be the determining factor if you are eligible for LTD benefits or not.
Own Occupation Test
If you have an own-occupation policy, you will receive LTD benefit payments if you are unable to work at your occupation and perform the essential duties of your job. If you are able to go to work but still unable to complete the specific tasks for which you are employed, not just minor or menial tasks, you will qualify under the disability standards. Even if you can work in a different field, you will still be able to claim LTD benefits with an own-occupation disability policy.
The own-occupation test generally applies for a specific limited period. This period, called an own-occupation period, is often two years or 24 months. A slightly different definition of total disability during the limited period is employed between different policies. Regardless of how clear the definition is in one’s policy, there will always be questions, challenges, and nuances of satisfying the own-occupation test.
A common challenge faced by many claimants is defining the “occupation.” An insurer will often argue that a claimant’s regular occupation should be classified as to how it is performed in a typical work setting for any employer in the general economy. However, a good lawyer will argue that the definition should be limited to the claimant’s actual workload when the disability occurred.
Those who have been denied benefits with an own-occupation policy often end up in court because of a dispute. The Courts have addressed several cases that have resulted in highly technical distinctions in the definition. Understanding these distinctions can help you know what the standard is all about, and if you meet the definition.
The key is that the claimant must be considered reasonably incapable of doing their job. The standard would not say that, for example, even though it causes you immense pain, you can still manage to climb stairs and, therefore, should continue to work. Instead, the question of “would any reasonable person desist from work in your circumstances?” is asked. A reasonable person would not choose to climb stairs if it caused them immense pain.
It’s important to note that your “occupation” does not just mean the “job” you are employed for. To meet the own-occupation disability test, you must be unable to work a different job in the same class of occupation as your current job with a different employer.
Any Occupation Test
An any-occupation disability test does not literally mean “any” occupation, as one might think. Any-occupation disability takes into account your experience and unique qualifications and character into consideration. With these considerations, “any” now means an occupation that you are reasonably suited for, given your experience, education, and training. The occupations often must also be considered “gainful.” The definition of gainful usually means an occupation, including self-employment, that does or is expected to provide you with an equal income of at least 60% of your indexed monthly earnings.
After the own-occupation period passes, your eligibility for continued LTD benefits may depend on if you pass the any-occupation test. This means that to receive LTD benefits for more than the own-occupation period, you must be able to prove that you are unable to work in any gainful and reasonably suited occupation.
The any-occupation test can be challenging to satisfy because it is essentially subjective. How your occupation, past experiences, and “employability” are perceived can differ between everyone. Your insurer, who is not looking to make a payout, may try to push the limits of what can be considered a reasonably-suited position to find an occupation you can work in, rather than receiving LTD benefits. The insurer will likely consider the claimant’s salary history and conduct a wage analysis of other available occupations. This will help them determine what other gainful occupations the claimant could be reasonably expected to engage in. If adequate performance in “any occupation” can be made with the addition of workplace accommodations, this may be legitimate grounds for denying benefits.
The burden of proof rests on the claimant to establish total disability when own-occupation benefits are terminated after the own-occupation period expires. Once the claimant has made their case for total disability, the burden shifts to the defendant (the insurer) who proves that there is a specific occupation that the claimant would be reasonably suited for and capable of substantially performing.
Own-Occupation vs. Any-Occupation Summary
- The inability to perform essential tasks and duties of your job is what will satisfy the conditions.
- Being able to perform only minor or menial tasks will not satisfy the conditions.
- An own-occupation disability period exists and is usually 24 months long.
- The claimant must be considered reasonably incapable of doing their job, meaning any reasonable person would also desist from working in the same situation.
- The test looks beyond your current job. You must be unable to work a different job in the same class of occupation as your current job with a different employer.
- After the own-occupation period expires, the any-occupation disability standard comes into play.
- Any-occupation does not literally mean “any” as in every single job in the economy.
- “Any” is defined as an occupation that you are reasonably suited for, given your experience, education, and training.
- The relevant occupations often much also be considered “gainful.” This frequently means that the new occupation will provide equal or at least 60% income compared to the claimant’s past position(s).
Which occupation type should you have for your Total Permanent Disability (TPD) insurance?
The occupation type you should have for your TPD insurance depends on each individual. The nature of your occupation and your financial position are the main factors to consider when comparing regular occupation vs. own occupation.
Your Occupation: An own-occupation policy makes the most sense in many cases. For example, if your occupation is one that you’ve invested a lot of time, effort, and money into, then own-occupation is likely your best option. If you are a skilled worker, it is highly unlikely that you’ll be able to find a job that earns you close to the same income in the event that you become disabled. The own-occupation disability policy helps protect the many years of dedication, hard work, and training that you put into your profession.
Your Financial Position: While an any-occupation policy does not provide the same level of protection and peace of mind you would experience from an own-occupation policy, chances are you will pay less for it. The premiums are lower because the possibility of you becoming disabled to the point that you are unemployable in any reasonably suitable position is lower than being unable to work only in your own occupation.
An any-occupation policy might be a good option for you if a disability that stops you from working would likely also stop you from working most other jobs. For example, if you spend your days working at a desk, an injury severe enough to prevent you from going back to work would probably prevent you from working most other jobs too.
Excluded Professions: Because of the likelihood of a payout, certain professions may not be eligible for own-occupation policies. Many insurers will not cover employees in trades such as carpenters, scaffolders, electricians, and more.
Contact an Experienced Disability Lawyer at Valent Legal
Having a clear understanding of your LTD policy from front to back will increase your likelihood of being able to make a successful claim. Knowing your policy can pave a smooth path straight to LTD benefits, and avoid any bumps in the road along the way. If you are unsure about your policy and the many terminologies, provisions, and legal terms within, contact an experienced disability lawyer at Valent Legal.