Don’t Be Tricked: The Real Difference Between True Own-occupation And Medical Own-occupation
You could be leaving money on the table by not having a true own-occupation disability insurance policy.
If you’ve been shopping for disability insurance you understand how hard it can be to keep up with industry jargon.
Definitions for different types of policies can sometimes blur together, and if you don’t take the time to understand them, you could end up with the wrong policy for your situation.
One of the biggest mistakes we see physicians make is purchasing something called a “transitional own-occupation” policy — also known as a “medical own-occupation” – policy thinking it provides the same benefits as a “true own-occupation” policy.
Physicians Thrive and White Coat Investor have both warned doctors for years how so-called “medical own-occupation” policies can leave doctors without the coverage they need to protect their income and their lifestyles.
Here are three different approaches you can take to spot the difference between medical and true own-occupation policies to make sure you aren’t leaving money – and your lifestyle – on the table. Have this guide ready when you meet with an agent.
Read the fine print: Not all own-occupation plans are created equal
The type of policy that provides the most comprehensive coverage is called a “true own-occupation” disability insurance policy. This policy provides your full benefit if you aren’t able to perform the duties required by your specialty even if you can perform another job, such as teaching.
Something we’ve seen companies offer is sometimes called a “medical own-occupation” policy to appeal to physicians, but if you look closely, it’s really a “transitional own-occupation” policy.
Under this type of policy, if you can’t work in your medical specialty and you start earning income in another job, your total net income – meaning the income you earn in your new job plus your insurance benefit – can’t exceed the total earned income of your job.
Put simply, your benefit payment could be missing out on thousands of dollars per month.
These policies sound similar on paper until it’s time to calculate what your new income would be if you became disabled.
Do the math: A medical or transitional own-occupation plan leaves money on the table
Calculating your benefit payout and what your new income will be post-disability under a true own-occupation plan is simple. That’s because you are paid your full benefit whether you make more, less, or the same in your new career – full stop. Here’s how it works:
True Own-Occupation: Your insurance benefit + your new job’s salary = your net income
Simple, right? As it should be.
The first thing you will notice when an insurance agent is calculating your post-disability income under a medical own-occupation policy is that the math gets complicated. That’s because under this type of plan, your new income can’t exceed the total monthly benefit. Here’s how it works.
Medical Own-Occupation:
Step 1: Your insurance benefit – your new job’s salary = your paid monthly benefit
Step 2: Your new job’s salary + your paid monthly benefit = your net income
The important thing to remember is that under a true own-occupation policy, your benefit stays the same, but under a medical or transitional policy, your benefit decreases.
Still not clear on the differences?
Walk through a scenario: An apples-to-apples comparison will remove all doubt
Let’s say you’re a surgeon and a serious injury to your hand has left you unable to perform surgeries.
After you’ve become disabled, you begin receiving your $11,000 monthly benefit after 90 days and you start a teaching job at a local university that pays you a $6,000 monthly salary.
Here is a side-by-side comparison for how the same benefit amount would be paid out under the different types of disability insurance plans:
In this scenario, you missed out on $6,000 per month if you had a medical own-occupation policy instead of a true own-occupation policy.
Buying disability insurance can be confusing, but it doesn’t need to be. Pattern believes in making the insurance buying process simple and worry-free.
We do the shopping for physicians so they can compare true own-occupation policies from five major insurance companies side-by-side, making them confident in their choice and have their financial futures secured. It’s why 20,000 doctors and counting choose Pattern to find the right policy.
Submit a free quote request today and Pattern will compare your options side-by-side with no obligation to buy.