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How to Insure Your Income: "Your Occupation" Coverage

Harvey, a sales representative for a tool company, has a disability income policy that provides $2,500 per month for total disability due to accident or sickness, following a 30-day EP. Benefits are payable to age 65.

Harvey's policy defines total disability as the inability to perform the duties of his job for the first 24 months of a disability; thereafter, the inability to perform the duties of any job relative to his education, training and prior economic status. Harvey currently averages about $5,000 in monthly commissions.

Harvey suffers a major heart attack and is hospitalized for 30 days, during which he undergoes bypass surgery. Following his release from the hospital, he is unable to return to work and needs some physical rehabilitation. This process causes him to be out of work for an additional 60 days.

After the initial 30 days of Harvey's disability, the EP is satisfied and he begins to accrue his $2,500 monthly benefit. For the next two months of his disability, he will collect $2,500 per month.

After 90 days, Harvey's physician advises him that he has improved enough that he can begin to resume his normal sales activities. However, the doctor requires that he only work one hour a day for a week, followed by two hours a day for another full week, then a half day for a week, until he is able to resume his normal work activities.

Harvey begins his one-hour-per-day routine on Monday, June 1. At this point, he is performing some of the duties of his occupation, but not all of the duties of his occupation. However, he is no longer totally disabled and is now off claim.

Harvey was collecting $2,500 per month due to his total disability. Now, one hour per day results in no disability income benefits. How much commission is he earning by working one hour per day? Certainly not $2,500.

This scenario is typical of the mechanics of the your occupation disability policies. When benefits are triggered by the inability to perform functions of a job, then the claimant must be totally unable to work. There appears to be little incentive for a person to return to work on a part-time basis, unless the policy contains a partial disability income benefit.

Frequently, a traditional disability income policy contains a limited partial disability benefit, which will pay the claimant 50 percent of his total disability benefit for up to six months. Generally, the definition of partial disability will be the ability to perform some, but not all, of the duties of your occupation.

Without a partial benefit, a worker simply may be unable to return to work financially until he can do so on a full-time basis. This will tend to prolong the claim, which is not good for either the insurer or the insured. Yet, for many decades, this was the only type of disability income insurance sold.

Today, this type of policy is still sold, most often to those who are employed in higher-risk occupations.

Applicants for disability income insurance are classified according to the risks inherent in their occupations. For example, a dentist or a doctor works in a safer environment than a truck driver or a factory worker. Generally, most insurers will offer all occupational classes the your occupation type of coverage.

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