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Why small words take on such big meaning in the context of disability insurance

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Why small words take on such big meaning in the context of disability insurance.png

When a person makes the brave decision to start his or her own business, it can prove to be equal parts exhilarating and excruciating. Here, the exhilaration comes from finally breaking free of an unfulfilling occupation and realizing a lifelong dream.

The excruciation, on the other hand, comes from the process of getting the new enterprise up and running, and the accompanying need to make a host of critical decisions on perhaps unfamiliar issues. For example, if an individual is planning to launch a sole proprietorship, meaning they will serve as both the sole owner and operator, they'll have to make decisions about benefits that they once received from their former employer, including disability insurance.

Rather than just selecting any coverage, however, it's imperative for people in this scenario to carefully research the language of any prospective disability policy so that they know exactly they'll be getting in the event the unimaginable transpires.

Indeed, they'll want to know whether the coverage under consideration is an "own occupation" policy or an "any occupation" policy.

Own occupation policies

Under the terms of an own occupation policy, a person is considered disabled whenever he or she is unable to perform the daily activities of their chosen profession.

For example, if the insured individual is an orthodontist who suffers a serious finger injury leaving them unable to fix dental irregularities, they will qualify for disability payments -- regardless of their ability to perform other types of work.

Any occupation policies

Under the terms of an any occupation policy, a person is considered disabled whenever he or she is unable to perform the daily activities of their chosen profession, and there are no other suitable employment opportunities.

For example, if the insured individual is a package handler who suffers a serious hand injury leaving them unable to perform their everyday duties, they will only qualify for disability payments if left unable to perform virtually any other type of work from store greeter to security guard, to name only a few.

We'll continue examining differences between these two types of disability policies in our next post, and the factors considered by an insurer concerning each.

Source: The Investment FAQ, "Insurance-Disability," Richard Reich, February 2016

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