The definition of disability serves as the basis for benefits under a disability income insurance policy. Producers, agents, brokers, and insurance company staff need a thorough understanding of the nuances of the various definitions of disability to know how benefits are ultimately paid to clients who incur a disabling injury or illness.
Own Occupation
From an insured's perspective this is the most desirable definition. When "own occupation" is the basis for contractual benefits the insurer will pay benefits if the insured is unable to perform the substantial and material duties of her regular occupation because of illness or injury.
Any Occupation
This definition is more restrictive as benefits are only paid if the insured is unable to perform the duties of any gainful occupation for which he is suited by education, training, or experience.Partial Disability
Under this policy benefit, the insurer pays a benefit when the insured is only able to return to work (as authorized by his doctor) in a partial capacity. The concept is that an insured who is able to perform some, but not all of the duties of his occupation, is entitled to some benefits.
Residual Disability
This benefit encourages employees to return to work, at least part-time, following an injury or illness. A residual disability is one that results in the inability for an insured to perform some of the duties of her own occupation full-time, leading to a loss of income and therefore a benefit is paid.
John's diabetes has worsened to the point where he can no longer perform as a full-time over-the-road long distance truck driver. Instead, upon returning to work John is reassigned to a full-time logistical desk job of managing the itinerary's and logistics of his company's other drivers. This new position causes John an income loss of $700 per month. Under his disability income insurance policy he receives a benefit making up the difference.
John's policy has a "own-occupation" definition of disability.
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