In the physician disability insurance world, if you listen to any qualified agent you will consistently hear, “You need an Own Occupation Disability Insurance Policy.” This is especially true if you are a doctor or surgeon whose duties include interventional procedures as well as surgery.
While this statement is generally accurate, in my opinion there are some instances when a Transitional Own Occupation Definition of Disability would work similarly to the Own Occupation language.
The doctor could save premium dollars by having a transitional definition versus an own occupation definition.
A Transitional Own Occupation definition could save you 20-25% on your premiums. Here’s how the definition would change your benefits.
A Transitional Own Occupation Policy
Under a Transitional Own Occupation policy, the insurance carrier will pay you your entire monthly benefit, as long as your Transitional Disability monthly benefit coupled with your new occupation’s monthly income does not exceed your pre-disability monthly income. However, if your monthly disability benefit plus your new income from your new occupation exceeds your pre-disability monthly earnings, then the carrier will begin to offset your disability benefits dollar-for-dollar.
Confused? Let’s look at an example. Consider a case study for an orthopedic surgeon. Let’s say she was a very busy surgeon making $800,000 annually. Her annual income came to about $66,000 a month. Let’s also assume she has a $15,000 monthly disability benefit with a Transitional Own Occupation Rider. Let’s further assume that although the ORS can’t perform surgery any longer due to severe neck pain, she can still work at an Urgent Care facility 2 days a week, and earns $200,000 annually. Her disability insurance policy would still pay her the full $15K a month, because her $15K/month disability benefit combined with her $16,000 new monthly income (from the urgent care work) only comes to $31,000 monthly – much less than her pre-disability earnings of $66,000/month.
So doctors with very high incomes would usually be just fine under a transitional occupation rider. In the example above, the surgeon could still earn her entire $15,000/month disability benefit, as well as earn up to $51,000 a month before the insurance carrier would begin to reduce what they pay her. $66,000 (monthly pre-disability earnings) minus $15,000 (her disability monthly benefit) equals $51,000 (the amount she could still earn monthly in her new occupation before any disability benefits would be offset).
So maybe for the doctors and surgeons who still make very high incomes, they should at least consider the Transitional Own Occupation definition and then they could save 20-25% on their premiums by not having the “Own Occupation” policy. Feel free to contact us and we can discuss what may be the best option in your situation.