DIBroker Blog

True Own Occupation Definition in a Disability Insurance Policy—Is it Worth the Cost?  (Part 2: Physicians and Dentists)

The short answer for physicians and dentists is a qualified yes, in contrast to my short answer in Part I of this blog which was usually not.

The different definitions of disability were reviewed in the Part I of this blog and I will refer you there if you are unsure of the different definitions, but I will simply restate that a true own occupation definition allows one to be on claim when disabled from one’s own occupation, even if working in another occupation. For example, the surgeon with severe carpal tunnel syndrome goes on claim and then becomes a financial planner—and even if making a million dollars in the new career, he or she would continue to receive full benefits if unable to work as a surgeon if he or she owned a disability policy with a true own occupation definition.

For IT workers, business owners and executives on the other hand, I argued that “own occupation and not working” (otherwise known as “modified own occ”) was usually the sweet spot—and that it did not usually make sense to pay more for a definition that will almost never be used. Here I will argue that usually a “true own occupation” definition is usually worth the extra money for most physicians and dentists.

Why the difference? Three reasons:

Reason One: While executives, IT workers and small business owners almost never become disabled and then return to work in a different occupation (they almost always come back to their old job or to a very similar job), physicians and dentists do, on occasion, become disabled from their own occupation and later return to work in a different occupation—one that requires different physical and/or mental abilities.

The job duties associated with the typical office worker these days, including IT experts, executives and business owners who are in primarily administrative and marketing roles, require similar sorts of physical and mental abilities. This is not to say that the average office worker and the CEO have the same skill set, but it is to say that disabilities that are likely to befall them are similar. Many people think accidents are the most common cause of disability, but musculoskeletal, nervous system conditions, cancer, strokes and heart attacks are much more likely to be the culprits than accidents1.

So when an office worker whose job requires them to sit in front of a computer, talk on the phone and maybe make presentation to a group becomes disabled, if they recover enough to return to work they usually come back to the same job. The causes of disability rarely prevent them from being able to do their own job while also allowing them to be functional if a different job. There are exceptions of course, but claims statistics bear this out. If someone in one of these categories returns to work, it is almost always a return to a previous career.

Physicians and dentists, however, have duties that require a degree of mental acuity and perhaps even more importantly specific motor skills, dexterity, and stamina that are not nearly as important to the typical office worker in the modern age.

Imagine the duties of a dentist or a surgeon, for example. They are on their feet all day, performing services that often require very fine motor skills and exceptional diagnostic skills. While a back problem or carpal tunnel syndrome can disable an office worker, we can imagine adjustments to the physical environment that could allow them to continue in their jobs, eg a desk that raises and lowers may make it possible for someone with a severe lower back issues to make it through the day by changing positions. In any event, if they cannot perform their own job, they rarely find another occupation that they can do.

A surgeon or a dentist typically does not have an option like an adjustable desk that will allow them to see patients in surgery or for a root canal, but an adjustable desk might allow them to work in an office setting. In fact, they are more vulnerable to a number of potentially disabling illnesses that might prevent them from performing their duties as a dentist or a surgeon but which might not prevent them from working in an office.

The risk of making a diagnostic or prescription error also carriers with it consequences that are potentially more severe than most jobs in the modern economy, so they may also be more vulnerable to mental and nervous disorders. Statistics on claims bear out the fact that these occupations are more likely to make use of a true own occupation definition than the average office worker.

Reason Two: While reason one lays out the logic of paying more for the additional protection of a true own occupation definition, the emotional response of the client is typically even more important. Disability insurance really offers two benefits. The obvious one is that if one becomes disabled one has a source of income even if unable to work. The second benefit comes before becoming disabled—it is the comfort of knowing that your income is protected in the event of a disability. We tend to focus on the first reason, but I believe that physicians especially, but not solely, are sensitive to this.

Many potential clients, especially if young, carry the belief “that it will happen to me.” Physicians on the other hand, and to a lesser extent dentists, see patients everyday who are ill or who have significant issues that can and do disable them. In addition, physicians and dentists have spent years in school and hundreds of thousands of dollars to get through training, typically leaving them with significant student loans. Even a short-term disability can be financially disastrous for them. So if the typical non-medical potential client never thinks about getting disabled, physicians in particular want the peace of mind that comes with knowing that they are protected and even more so that they have the best protection that money can buy. Having a DI policy with a true own occupation definition is a big part of providing this peace of mind for them.

Reason Three: If you do not sell them a true own occupation definition, someone else will come along and replace it and say bad things about you in the process. This reason might sound like you are simply protecting yourself (and your commission), but, while that is true, you are also saving your client from having to go through the sale all over again. You might also be saving them money in the long run if you save them from their policy replaced years down the road.

I would argue that there are specialties and ages where the added cost of a true own occupation definition might not make sense. Take for example a female psychiatrist in her late 40’s making about $200k a year. Psychiatry does not require the fine motor skills or physical stamina of being a surgeon or anesthesiologist (by contrast), and the odds of that psychiatrist being disabled from her job and going into another one is actually very, very small. For her, paying extra probably does not make sense, especially in her 40’s or 50’s. But if you sell her a policy that is “own occupation and not working” (like I proposed should be the default for most office workers), be prepared to have the next financial planner or insurance agent tell her she is not adequately protected. In this case, I would still make the recommendation not to pay the additional premium (which will already be quite high because of her age, gender and occupation), but I would do my best to educate her as to why not.

If I were to meet that same female physician when she is graduating from residency at say age 32, I would still provide her with all of the options but would be happy to let her choose the stronger, more expensive option. In this case the premium difference is not so great and the added protection has some real benefit. It will provide her with the peace of mind that she is buying the best and it will protect from having to go through all of this again when a month later someone else calls and tries to sell her a “better policy.”

Unlike most people who have very little concept of the need for a disability insurance policy, physicians are the exception in our field. They typically have some sort of class or workshop where they are told to buy disability insurance. Often older physicians will also even tell them that they have to have a true own occupation definition and may even recommend a specific carrier. Logic may lead you as their advisor to want to save them some money (since even for physicians and dentists, and especially for certain lower risk specialties, true own occupation claims are the exception not the rule) and suggest that they save the additional premium spent on a true own occ rider. Certainly all potential clients should be given all of the options and all of them should be discussed thoroughly (within reason—too much information can overload any client and lead them to withdraw), but it is not at all clear to me that you are doing them a favor by suggesting a lesser policy, even to the psychiatrist in my example. Especially if they are early in their career. If they buy the less expensive version upon graduating and then 10 years later they are talked into replacing it with a “better policy” they will end up paying more over the life of the policy.

With surgeons, ER physicians, anesthesiologists, and dentists it is even more clear cut, given their elevated risk to a range of disabilities the extra money required for a true own occupation definition is money is well spent.

 1) http://www.lifehappens.org/blog/lets-get-the-facts-straight-on-disabilities-and-the-need-for-disability-insurance/

 

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