Who Needs Long-Term Disability Insurance?

What is long-term disability insurance, and who needs it?

Long-term disability insurance (LTDI) provides replacement income for policyholders who become unable to work because of an illness or injury. In theory, any worker could benefit from LTDI, but these policies are most often held by company executives and professionals who specialize in a particular field and cannot easily transition to another line of work should they become disabled from performing their specific job. For this reason, LTDI is especially attractive to doctors in general and specialists such as surgeons in particular.
Millions of medical doctors and other professionals in the U.S. currently have LTDI coverage, either as a fringe benefit through their employer or professional association, or purchased privately by the individual policyholder. LTDI is not one-size-fits-all, however, and understanding the different types of LTDI policies is essential to ensuring you have the right type of coverage to meet your needs.

LTDI Can Be “Own Occupation” or “Any Occupation”

When looking into LTDI policies, they are likely to fall into one of two categories: “own occupation” or “any occupation.” If you have an “own occupation” policy, then coverage will kick in if you become disabled from performing your particular job or profession. For instance, if you are a surgeon who can no longer perform operations, an “own occupation” policy would pay benefits for the term of the policy. If, on the other hand, you have an “any occupation,” you would only get benefits if you were so disabled that you could not perform any other job that you may be qualified to do, such as seeing patients in a general practice setting.

As you might have guessed, the premiums for an “own occupation” policy are steeper, since the insurance itself is much more valuable. If reviewing and comparing policies, look closely at the language of the policy itself to make sure you are getting what you think you are getting. Even a policy that claims to be “own occupation” might only pay benefits when you can’t work in any occupation for which you are reasonably suited considering your formal training, education and experience. That type of policy might be billed as “own occupation” by the insurer but seem more like “any occupation” to the insured.

If you have an “own occupation” policy and take a job in another field, can you still receive benefits? Some policies will still pay but will offset their benefits by the amount you are earning. Other policies will only pay if you are not working at all, even if you could. You can also purchase a hybrid form of LTDI, which starts as “own occupation” but shifts to “any occupation” after a defined period.

Do I Need Long-Term Disability Insurance?

If you are a working professional in a highly specialized or technical field, you might find LTDI especially attractive, as an illness or injury could prevent you from practicing your profession and maintaining a suitable income stream. LTDI policies typically replace as much as 60% of your income for a defined period of months or years. Here again, you’ll need to understand the terms of your policy, as the payment of benefits often depends on whether you are considered partially disabled, totally disabled, or “presumptively disabled.” Some policies pay a portion of benefits for partial disability when the policyholder can work at less than full capacity. Others pay only if you cannot work at the present (totally disabled) but might later recover. Being “presumptively disabled” means the condition is presumed permanent, such as loss of hearing, sight, speech or the use of limbs. Carriers pay benefits for the entire payment period to the “presumptively disabled.”

If Insurers Don’t Understand Your Occupation, They Might Not Respect Your Claim

Doctors with LTDI coverage often have a particularly hard time getting benefits paid under an “own occupation” policy. Insurance carriers might know the insurance industry inside and out, but they may not have the capacity to understand the nature of a particular doctor’s or surgeon’s specialty. They are thus more likely to dispute a doctor’s claim that the doctor cannot perform in his or her occupation. If this happens, it’s a good idea to get a legal expert on your side who speaks the insurer’s language and can argue your case to get you the benefits due under the policy.