By Dr. Jim Dahle, WCI Founder
If doctors know anything about disability insurance, it's that they should buy “own occupation” insurance and preferably make sure that their specialty is designated as their occupation. The White Coat Investor often gets inquiries from readers about just how important “own occupation” is and whether it is really necessary.
Let's get into it today and answer some of those questions.
Definition of Disability and Your Policy
The most important feature is the definition of disability. Unlike life insurance, where life and death are pretty black and white, disability has 50 shades of gray.
Own Occupation
Your policy will pay if you cannot work in your occupation/specialty, even if you can and do work in another field and make as much money as you want. Just make sure that your occupation is defined as your specialty, not just “physician.”
Own occupation policies cover people based on the occupational duties they’re performing at the time of claim. If your policy includes an own occupation definition of total disability and you are exclusively performing the customary duties of your medical specialty or sub-specialty at the time of claim, the policy will cover you when you can't perform in your specialty or sub-specialty. If you have transitioned into a different role or expanded into a new career path that requires much less direct patient contact or procedural duties, you may no longer be considered totally disabled when unable to work in your specialty or sub-specialty. This is because your “occupation(s)” involves additional material and substantial duties, no longer limited to the performance of your medical specialty or sub-specialty. In these instances, you may be considered partially disabled or not disabled at all, depending on the exact circumstances.
Transitional Own Occupation
Your policy will pay if you cannot work in your occupation/specialty, even if you can and do work in another field. But if you exceed your previous income while you now work in another field, your monthly benefit from the policy would likely be lowered.
Modified Own Occupation
Your policy will only pay if you can't work in your occupation/specialty AND if you are not working in another field. This definition is also sometimes called “Own Occupation, Not Engaged” or “Own Occupation, Not Working.”
Any Occupation
Your policy will only pay if you cannot work in any occupation. Note that some policies are own occupation for a couple of years and then transition to any occupation.
Be aware that the last two categories are common in group disability policies. Naturally, the less risk you ask an insurance company to take on, the less expensive the policy. My sense is that most procedural physicians are going to want at least transitional own occupation, and most non-procedural physicians are going to want at least modified own occupation, depending on the price difference. Though I no longer have disability insurance, I used to have true specialty specific, own occupation policies in both my individual and group plans.
More information here:
People Aren’t Buying Disability Insurance, But They Should
How Much Disability Insurance Should You Buy?
What Definition of Disability Is Important for Physicians?
You want own occupation, specialty specific coverage. The definition of disability is all-important. The most important aspect of a policy is that it actually pays you when you become disabled. This is particularly important for surgeons, dentists, and other procedural specialties, but most specialties do at least some procedures. You don't want a policy that incentivizes you to not do any work at all after a disability or, worse, won't pay you because you can still do some sort of work you don't actually want to do. There's a reason people have to hire an attorney to get their Social Security disability benefits. With a strong definition of disability, you won't have to do that. Yes, it costs more to get a top-notch policy from one of the Big 5 companies, but you get what you pay for.
We asked Travis Christy, DIA, WCI's in-house insurance guru and COO of White Coat Insurance Services, to address the question of just how important own occupation is and whether it is really necessary.
Here's what he wrote:
Q. How important are own occupation riders for non-procedural fields, and what is the role of transitional own occupation riders?
A. “This is all about how much control does a physician want at claim time. Regardless of whether a physician performs procedures, having the “true” own occupation rider on a disability insurance policy is something to consider. This rider allows more flexibility and if they become unable to perform the specific tasks of their specialty due to illness or injury, they can still receive their benefits. Without this occupation-specific coverage, an insurance company could decide that the physician is capable of working in another, possibly less satisfying or lower-paying, role, and thus deny their claim. It depends on what the definition of disability is on the contract. A “true” own occupation rider puts the control back in the hands of the physician, allowing them to receive benefits while choosing whether to pursue another medical role or even a different field altogether.
This rider is particularly valuable because non-procedural physicians often perform tasks that are cognitively demanding and tailored to their specialized training. For example, a psychiatrist who loses the ability to concentrate or an internist who can no longer manage complex patient cases effectively may not be able to continue in their role. With a “true” own occupation rider, they are protected financially, and they can focus on recovery. Without this, the physician would potentially be at the mercy of the insurance company deciding for them if they are able to do any other job they may not be passionate doing but something they can do based on their education, training, and experience: “Any Occupation Definition of Disability.”
The transitional own occupation rider offers a similar but slightly different kind of protection. The definition is designed for situations where a physician can’t work in their exact specialty but decide to work in another job, even if it's in a different field. This rider covers the gap between their previous income and what they can earn in their new role, up to 100% of their original earnings. Essentially, it helps prevent significant financial loss while adapting to a new professional path.
For example, if a neurologist becomes unable to practice due to a physical disability but can still teach or consult, a transitional own occupation rider will help maintain their income level. It prevents them from suffering a severe financial setback while they find their footing in a different role. However, it’s worth noting that while a “true” own occupation rider allows for potentially unlimited earnings in another job without reducing benefits, a transitional own occupation rider adjusts benefits if the physician’s new earnings exceed their previous income. This means if they earn more in their new role, the insurance benefits will decrease accordingly.
Modified own occupation disability insurance is not going to offer the same level of protection as transitional or true own occupation coverage. With modified own occupation coverage, a physician can collect their full monthly benefits if they become unable to perform the duties of their medical occupation. However, this benefit is contingent on the physician not working. For instance, if a cardiologist can no longer practice due to a disability but chooses to work in their field or a different field—perhaps as a medical consultant or in an entirely non-medical job—they would forfeit their disability benefits. This restriction makes modified own occupation riders less flexible than own occupation policies.
Another agent, Scott Nelson-Archer CLU, ChFC, provided a counterpoint in a recent comment:
“A lot of folks in the primary care and non-technical specialties do buy own occupation not engaged once they are informed about it. Let’s face it, if one is in psychiatry, family medicine, internal medicine, pediatrics, and so on, and become so disabled that you can’t do that job even on a partial basis, it is hard to then come up with a different occupation which you could do while not having the skills to do your medical specialty. I am not saying there are no scenarios, but there are not many and then it becomes a matter of probabilities vs. possibilities and how you want to spend your money. Now, if you are an ER doc like Jim (WCI), then you certainly need true own occupation, just like anesthesia, all surgeons, interventional radiologist and several other specialties.
At the end of the day, the contract is the client’s contract, not my or any other rep's contract. Whatever the client wants is what we will get for them and they should buy, but I think having the knowledge and understanding of options is important in making a good decision on this very important topic.”
Scott also warned about the importance of understanding any group policy you may own. He says:
“Now, most employer-provided policies will tell you in the brochure, online write up, and such that they are own occupation contracts but they will also go on to tell you that ‘this brochure does alter the policy, please see the policy for exact details.' Always get a copy of the policy and read the policy or send it to someone to read for you and show you what the performance metrics are. The vast majority I see will state own occupation not working [and] then after 24 months, the carrier can force you into any occupation they think is reasonable for you. That is not a good solution for any doctor because there is too much experience and too much education and thus it opens up the opportunities for ‘reasonable occupation' way too much.”
More information here:
Medical Specific Own Occupation
Guardian Life Insurance Company of America offers an “Enhanced Medical Specialty Own Occupation” definition of disability. This enhanced coverage is only available to physicians (MDs and DOs). Under this policy, if a physician loses 50% or more of their income because they can't perform surgical procedures or do hands-on patient care due to illness or injury, they are eligible to receive full disability benefits—even if they can still work in a different capacity in their occupation. It's good to note when a physician buys a Guardian policy with true own occupation, they automatically will get the Enhanced Medical Specialty Own Occupation definition of disability. Here are examples from one of their brochures:
What About Northwestern Mutual?
In the last few years, Northwestern Mutual has changed its medical definition of disability. The new “Medical True Own Occupation” offers an upgrade from the old “Medical Own Occupation Definition,” which restricted benefits if the physician was working in a different job while disabled. The newer definition allows full benefits if the physician is totally disabled and cannot perform their primary medical duties, even if they choose to work in another field. This newer definition brings Northwestern Mutual closer to competitors that have been offering “True Own Occupation/Own Occupation” definitions of disability for several years.
While Northwestern Mutual's introduction of the “Medical True Own Occupation” definition represents an improvement in its disability insurance offerings, some limitations may still exist. Here's how the definition reads and an example:
- Medical True Own Occupation: If a medical professional is unable to perform the substantial and material duties of their regular occupation which generate 50% or more of their direct patient care billings (e.g., procedural duties), but they are still able to perform one or more of the other substantial and material duties of their regular occupation (e.g., clinical duties), they can choose not to work and still be eligible to receive their full monthly benefit.
- Example: If a medical professional is totally disabled, unable to perform the substantial and material duties of their regular occupation, and they choose to work in an occupation other than the regular occupation at the time of onset of disability, they will be eligible to receive their full monthly benefit regardless of the income they earn from working in the new occupation.
But there is a debate with Northwestern Mutual's Medical True Own Occupation definition. Based on the definition and example, what would happen in a claims scenario if the doctor could keep doing other parts of their specialty or job and if they would qualify for total disability or partial disability benefits. For example, let's say a plastic surgeon making 65% of their income from procedures and 35% from other duties. If they find themselves unable to perform surgeries but can still do clinical duties, and choose to continue working in their regular occupation or current job, there is a possibility that Northwestern's revised Medical True Own Occupation Definition of disability might classify them as partially disabled.
The Bottom Line
Listen, disability insurance is expensive, especially if you're a resident or a young attending. But disability insurance is all about mitigating risks that you cannot afford to self-insure against. It doesn't make sense to calculate your return because you really do have a need for this insurance. If you become disabled as a doctor before you're financially independent, it is a financial catastrophe.
Long-term disability insurance shields the most valuable financial asset of a doctor—your ability to trade your time for money at a high rate for the next 30-40 years. Doing it with an own occupation policy is the best protection you can get.
Obtaining quality disability insurance is a must for any physician, so you can be sure to protect your hard-earned income. Get a quote from one of our recommended insurance agents and cross this task off your to-do list today!
What do you think? Is your disability policy true own occupation, modified own occupation, or something else? Do you think it's adequate for you? Why or why not?
[This updated post was originally published in 2014.]
The White Coat Investor may receive compensation from White Coat Insurance Services, LLC; licensed in all states including MA and DC; CA license #6009217; NY license #1758759 (exp. 6/2025); Registered address: 10610 S. Jordan Gateway, #200 South Jordan, UT 84095. This does not affect the cost or coverage of insurance.
For trans-occ, benefits cannot surpass your previous salary, is this salary based on when you went on disability? And is this salary adjusted for inflation? If I get fully disabled at age 30, is my salary at that point the same salary used in this trans-occ calculation at age 65?
I became disabled from my specialty due to an injury very early on in my career. My policy is an own occupation policy with the definition of total disability being unable to perform the usual routines and practices of my occupation. In the definitions I see that there is a change in the definition of total disability at age 65 to being unable to perform any occupation. My question: If I went out on claim 20 years ago and have been on claim since and have a lifetime coverage due to disability from an accident will the change in definition of total disability apply when I turn 65 or will it be the definition that was in place when I became disabled which is being unable to perform the usual routines and practices of my own occupation. I was a surgeon. Thank you.
Good question. I would assume it changes to any occupation at 65 since that’s what the policy seems to say, but you could call up an independent agent and ask them.
It will be based upon the policy language and not the definition of disability at the time of claim.
Good advice here. I would like to add: I am an ER doc and recently suffered a catastrophic illness and had to collect disability from my policy from Principal. Some things I learned: 1) the 90 days til payment is actually 120 days. They pay on the last day of the first month you can collect. Make sure to have 4 months of savings or a short term disability policy. 2) As soon as you suffer an illness that might be long term make a claim. It is easy to cancel a claim but your payment starts 120 days from the claim not the illness. I had a feeling my illness was going to be more severe and long term so I claimed very early and it was helpful. 3) review your coverages and add more as needed every 5 years. You make more or have kids? Need more coverage. I was fortunate to have added nearly double my coverage 5 years prior. That helped save me financially. 4) make sure to pay with post tax $ so your benefits are tax free. That also has been very helpful for me. Especially now that I am part-time, having half my income be tax free really is nice. 5) make sure to get the rider that allows you to work part time. Some are all or nothing. This also has allowed me to work more as I am able. 6) even if your employer gives you a big fat policy for free buy your own. If you leave your job you will be older and buying coverage will be more expensive. Having your own policy gives you continuous good coverage and if you get more through your job that is just a bonus. 7) get your policy as soon as possible. A lot of Med schools and residents get offered cheap coverage that is very good. If you can, buy it. I was too poor and did not until I started my first job.
1) Interesting. Kind of a jerk move isn’t it? I guess they look at it like a paycheck. It starts accumulating at 90 days but the payment comes at 120 I suppose.
2) Are you SURE? That’s not the way most policies are written in my understanding.
3) No need to add more coverage because your income went up. You do need to add it if your spending goes up though, and that often happens when income goes up and certainly happens when kids come along. But your nest egg is also growing, lowering your need for DI and LI.
4) It’s actually pretty hard to pay with pre-tax dollars unless it’s an employer provided group policy.
I am not sure beyond what I was told. My first payment was 120 days from the date of claim. Perhaps I was told wrong. Would be interesting to find out. In my case the date of illness beginning was just 4 days prior to my claim so I never bothered to inquire if I was told wrong.
I did not say you HAD to get more coverage if income went up, only that you should review your coverage when it does as many policies like mine allow you to add coverage based on increased income. Whether you add or not is up to you and your unique situation. Yes it has to do with how much you spend. But just bc you earn a lot and have a plan to not need DI in the future does not mean it is guaranteed. For instance, my collecting disability meant that I was not destitute but I still had a monthly shortfall. I had to cut expenses too. Including saving for retirement. A young person who gets a new higher paying job and has low expenses should continue to increase DI to a level that would enable them to collect and be able to invest to be safe for the future. I do have an inflation adjusted policy so my benefits adjust upward for inflation— also a good thing to have. I was old enough to have had a cushion of investments to make it so I did not need to invest during my illness and still be fine for the future. A younger person with income but no nest egg would need more DI until they have enough saved to make DI less needed IMO.
It is very easy to pay with pre-tax $. I have an s-corp and I could pay from my business account vs my personal account. I assumed many of your readers are incorporated as well. If so paying pre-tax is simple and needs to be avoided.
I agree you need enough DI to cover your expenses and to save for retirement. I’m sorry to hear you did not have that much, but hope it all works out okay with minimal economic pain for you. Even the doc I know living on a $2500/month disability benefit is very glad to have it!
No, you cannot deduct premiums as an S Corp. Trust me, I looked into it. MassMutual gives a good explanation here on page 5. Basically the S Corp deducts it but then it gets added back into the 2%+ owner’s income. It is also similarly difficult for a partnership or sole proprietorship.
https://www.massmutual.com/efiles/di/pdfs/di90032.pdf
I actually would PREFER to pay pre-tax. The reasons why are:
# 1 The premium is guaranteed, the benefit is not
# 2 Your income after disability is almost surely lower, so the benefit will be taxed at a lower rate than the premium.
Naturally, that means you need to buy MORE DI than you otherwise would, but I think you’d still come out ahead on average unless you were already buying the max they allowed you to buy.
This guest post will also give you a better understanding of what you can and cannot do in terms of deducting your disability insurance premiums.
https://passiveincomemd.com/can-you-deduct-the-premium-payments-for-your-personal-disability-insurance-policy/
Should doctors self insure for disability and life once they hit FIRE?
Yes.
I wouldn’t do it the second you hit your FI number, personally. I’ve thought about the (highly unlikely) but possible scenario that you hit FI, drop your policy, then become fully disabled and need in home care, wheelchair, etc, the whole nine yards. You may have been FI, but now after a six figure remodel of your home to make it wheel chair accessible, full time nursing care, medications, etc your new monthly expenses are 3x what they were when you hit your FI number and now you don’t have any income.
Maybe I’m just too conservative in planning, but I’d definitely wait until I have a solid buffer beyond FI before dropping disability insurance.
The market may go down too. A buffer is wise. But that buffer tends to grow very quickly once you hit FI. We’re only talking a year or two usually.
Many make the mistake of defining their number with no margin for unexpected higher expenses. If their spending perfectly matches projections and they have been conservative in their withdrawal rate, then they are fine. A 10% increase in costs will compound over time and leave them far underwater.
Not only for the case of a disability that increases costs, one should plan for annual expenses well above what you think you will spend. Then you can be surprised by the future and still be OK.
Hello all – 29 year old male Gastroenterologist here. I’m almost finished my residency and just began shopping for disability insurance. I️ have spoken to 2 agents. The first recommended Guardian because of their definition of disability. The other presented me with the pricing for all 6 of the carriers including a Guardian quote that was similar to the one that I️ was presented with from the other agent. During my discussion with the second agent and after going through each of the policies, she recommended a policy with Principal. This was after I️ decided that I️ was not concerned with the difference between the BU Rider and the FIO’s that I️ could have with Guardian or MassMutual. The difference in cost between the Guardian policy and the Principal policy is about $50-60/mo, Principal being less than Guardian.
My question is, is Guardian’s Definition of Disability that much better than all of the other carriers? The agent pushing the Guardian policy said that he wouldn’t even think of selling someone in my specialty a policy from another carrier since I’ll be performing invasive specialties, and that Guardian’s policy and definition was built exactly for someone like me. The other agent mentioned that the way that Guardian will determine me totally disabled is the same way that all of the carriers will determine me to be disabled. The example she provided was that if 70% of my duties involved performing invasive procedures, that all of the carriers would determine me totally disabled if I️ could not perform these procedures due to a disability, even if I️ could still do, and was doing my diagnostic responsibilities.
Can someone shed some light on this?
I like the second agent’s process much better. I had a policy from the Standard, but I once shopped it out and if I were buying a new one at that point, I would have gotten one from principal. So no, I don’t think “Guardian is the only way to go.”
The “Big 5” (or 6) policies are all great policies with strong definitions.
I bought Mass Mutual disability insurance during EM residency (2019) that defines own occupation as what you are doing when you are injured, but does not have specialty specific language. Is it worth buying a new policy that specifies own specialty? MassMu says they look at CPT codes at time of injury to determine occupation so it isn’t necessary to have it specify specialty language. Premiums would be more than double, ~350/mo vs ~800/mo.
If it’s the same, why are they selling own specialty separately? That’s weird. Or is it another company? Or just more because you’re older/sicker now? At any rate, this is a discussion worth having with one of our recommended independent agents:
https://www.whitecoatinvestor.com/websites-2/insurance/
They eat, drink, and breathe this stuff all day and will gladly give you an honest opinion of whether it’s really worth paying twice as much. I bet the answer will be no.
Part of the difference is that I would no longer get the residency discount. But that doesn’t account for why it is more than double. And that is for all of the big companies, not just Mass Mutual. I am only 3 years older, same level of health. I have asked several agents, I am getting different answers on what I should do :/ … Thanks for your input
If your policy includes the “Own-Occupation” Rider, you are in good shape. It just does not include “medical specialty” language (this is nothing that is sold but in the contract language). Any claim is administered the same way as other carriers.
From the premium difference and short period of time you own the policy, I also suspect you have unisex rates and will not do better elsewhere.
Great thread! I left clinical medicine 10 years ago after being diagnoses with MS and went out on my employer’s “own occ” LTD policy since I could no longer do procedures and was deemed totally disabled. Six months after my diagnosis I negotiated a non-clinical administrative role with the same employer. Due to the new progression of my autoimmune disease, I now am unable to work and my employer has changed to a new policy for faculty. I am in the process of applying for SSDI and I am trying to navigate the new LTD policy that covers my administrative job and my existing group LTD policy, which covered my clinical practice and has paid for the past 10 years due to me making a lot less administratively than clinically. My main question is how will the 2 LTD group policies determine benefits?
Here is the verbiage from my new LTD policy I am currently filing a claim with – Other Income Benefits include: any proceeds payable under any franchise or group insurance or similar plan. If other insurance applies to the same claim for Disability, and contains the same or similar provision for reduction because of other insurance, we will pay for our pro rata share of the total claim. “Pro rata share” means the proportion of the total benefit that the amount payable under one policy, without other insurance, bears to the total benefits under all such policies.
Best to discuss with an agent or attorney, but sounds to me like you won’t be getting the full benefit from both policies to me.
We’ve found using agents to be very helpful in understanding differences between policies (i.e., we went with a policy from Principle becasue it was cheaper for us than Guardian). But in talking with others who have submitted claims, the agents are not helpful after a policy is signed. It seems their M.O. is to capture commission revenue from new sign-on’s. We’ve tried calling and emailing folks at our agent for about 2 weeks to no avail. The case worker we were sent to initially has been there for 2 years, but said he was not familiar with the process becasue he hadn’t filed a claim yet.
Long story short, ask your agent what they do to help support a successful claim and how many they have helped, not just how many clients do they get to sign through them.
I agree there shouldn’t be a high expectation of assistance there, but the best agents will at least provide some help in getting things going.
When is the right time to discontinue an own-occ policy? I’m a primary care doc approaching my 6th decade and I have a 8 wks accrued disability leave plus a group policy through my employer.
Thanks!
Are you financially independent or do you still have to work for money? I dropped my LTDI policy when I became financially independent. The only other reason to consider dropping it is if you don’t think it’s worth the money anymore. For example, if you’re 63 and it’s only going to pay until 65, well, maybe that isn’t worth the premiums to you.
If you need DI, then you need to decide what the right policy or policies for you are. Maybe your group policy is all you want. It’s probably cheaper than your good policy, but it’s also less likely to pay. Examine both carefully, consider what you want to happen if you get disabled and see if you can get that outcome without one or either of the policies.
I purchased an Own Occupation disability policy through Pearson Ravitz, a site who was previously recommended by WCI. I am trying to go through the process of exercising a benefit update and I could not find this to be more difficult. It has been over three months of communicating with them, I have found the communication to be horrible, and at times, downright dishonest. I have been “assured” that I am speaking with the most knowledgeable person in their office. Do I have options to move it over to a different office for future policy navigation? Thanks so much to anyone who knows more about this!!
Yes. Call up one of our recommended agents and you should be able to switch the policy over to them and have them service it including selling you the update (the new agent will get the commission for that.)
I’m a resident looking to get a good plan. I’ve seen that the AMA offers their own plan, and it seems cheaper than other options. Does anyone have any experience with it? Is it a good option?
The AMA plan has some issues. There’s a reason it’s cheaper.
https://www.whitecoatinvestor.com/ama-disability-insurance/
I work as a physician in a big pharmaceutical company. My short-term disability is covered by the company. I bought Long Term Disability through the company which is through Prudential. I don’t know much about it other than it starts at month 7 and covers 60% of eligible pay.
Do they have private own-occupation disability coverage for pharmaceutical physicians? I need to be able to read, concentrate, analyze and present data. I guess neurological diseases are what would take me out and make me unable to do my job (like stroke, dementia, neurodegenerative illnesses).
Sure.
And there is plenty more that would keep you from being able to work other than neuro diseases. Cancer, head injury, heart disease….all kinds of stuff.
I’ve had a medical own occ policy with NWM for 10+ years, with a $4-5k annual premium for $15k monthly benefit. I left EM clinical practice entirely 4 years ago and now have a desk job at a major global healthcare company. Should I drop the NwM policy and just go on the company’s standard LTD for a premium of something like $700/yr?
Put the policies side by side, preferably with the assistance of one of our recommended agents, so you can make an informed decision. Look at all of the definitions, riders, costs etc. Neither of those options is “the best”, but sometimes we decide not to buy the best in order to save money and call it “good enough.”
Any coverage is better than no coverage of course.
I need some advice here. I have been a primary care physician for 20 years. I have term and disability through the job. I was thinking of getting both disability insurance and term life insurance at age 49 from a company like Guardian outside of work. Is it advisable to get both as a sole breadwinner and do you have any other recommendations outside of Guardian.
You should meet with one of our recommended insurance agents to evaluate your options.
https://www.whitecoatinvestor.com/insurance
Depending on where you are at in life, you may not need either type of insurance for much longer, might decide your group policies at work are adequate, or might choose to buy new portable, individual policies. Given your current age, be prepared for sticker shock on the disability side and possibly also on the term life side if you nee da policy longer than another 5-15 years.