Own occupation vs any occupation disability insurance

The definition of disability in your policy decides whether a claim gets paid. An own occupation definition pays if you can’t do your own job. An any occupation definition pays only if you can’t do any job you are reasonably qualified for, which is a much harder test. Most group plans in Canada start with own occupation and switch to any occupation after two years of benefits, and claim terminations spike around that switch. Individual policies let you choose a stronger definition, at a price. How the rest of a policy works is in our guide to disability insurance in Canada.

The three definitions

The wording differs between insurers and plans, and small differences matter, so read the definitions in the contract or benefits booklet rather than relying on the label.

True own occupation

A surgeon who loses fine motor control in one hand can’t operate, but could teach or consult. Under a true own occupation definition, the surgeon collects full benefits and can earn an income teaching. This is the strongest definition, and it is the one professionals with specialized, high-earning occupations usually want.

Two limits still apply. Benefits are still reduced by other disability benefits under the policy’s offset rules, such as government or workers’ compensation payments. And losing a professional licence does not by itself make you disabled; the policy pays for an illness or injury that stops you from doing the work.

Regular occupation

Many individual policies use a definition that sounds like own occupation but adds a condition: you must also not be working in another job. The same surgeon would collect full benefits while not working, but once they start teaching, full benefits stop. Policies that include a residual benefit then pay part of the benefit, in proportion to the income lost, so working is still rewarded, just less generously. Without one, benefits can stop.

In many individual policies this test lasts only for the waiting period and the first 24 months of benefits, then switches to any occupation, unless you add a rider that extends it to the end of the benefit period. So the two-year switch below is not only a group plan issue.

Any occupation

Under an any occupation definition, the question is whether you could do some other job you are qualified for. Plans define this differently:

• Some count any occupation you are qualified for, or could become qualified for through training.
• Some only count a job that would pay a set share of your former income, such as 60 percent, or at least as much as your disability benefit.
• Several plans we read say the availability of such a job doesn’t matter. The test is whether you could do it, not whether anyone would hire you.

The two-year switch in group plans

Most group long-term disability plans in Canada pay on an own occupation basis for the waiting period and the first 24 months of benefits, then switch to any occupation. With a common four-month waiting period, the switch falls about 28 months after you became disabled.

The Canadian Institute of Actuaries’ study of group long-term disability claims from 2009 to 2015 found that about 99 percent of claims began on an own occupation definition. The study describes the change of definition as meaning a person may qualify for benefits for a period and then be ineligible even though there has been no change in the medical or vocational evidence. It found clear spikes in claims ending around 24 and 28 months, spread over about six months around the switch.

If you are on a group long-term disability claim, expect the insurer to reassess your claim before the switch. Keep your medical records current and make sure your doctors document what you can’t do, not just your diagnosis.

Not every group plan switches. Some keep their own occupation test, often called regular occupation in group booklets, until age 65, so check your booklet.

Two traps in own occupation wording

• Your occupation, not your job. Some plans assess your occupation as it is normally performed in Canada, not your particular role with your employer. If your job had unusual duties, the insurer may assess a more general version of it.
• Modified duties can become your occupation. At least one group plan treats modified duties you have done for six months before applying as your own occupation. If you have been on light duties for a long time, ask how your plan defines your occupation.

Who can get true own occupation coverage

In Canada, true own occupation coverage is usually sold as a rider. On individual policies it is usually limited to the best occupation classes. One insurer’s 2021 guide limits it to selected professionals, including physicians and surgeons, dental specialists and surgeons, lawyers, chartered accountants, architects, professional engineers and pharmacists, and only for applicants up to age 55. Some professional association plans, such as plans for physicians, also offer it.

In the professional association plan rates we reviewed, an own occupation rider added about 15 to 25 percent to the base premium. Individual policies price it differently. How the rest of the price is set is in our guide to what disability insurance costs.

Partial and residual benefits

These benefits matter most when you can work, but not fully:

• Partial disability usually means you can do some of your duties, or work part of the usual time. Policies that offer it often pay a fixed share, such as half the benefit for the first two years and a smaller share after that.
• Residual disability pays in proportion to the income you have lost. In one insurer’s guide we reviewed, it starts once the loss reaches 20 percent and pays the full benefit once the loss is more than 80 percent.

A residual benefit is what makes a regular occupation definition workable: you can return to some work without losing everything.

Which definition do you need?

• Specialized professionals. If a disability could end your specific career while leaving you able to earn in another field, true own occupation coverage is worth pricing.
• Many employees. A regular occupation definition with a good residual benefit can balance protection and cost. Ask whether the regular occupation test lasts 24 months or to age 65.
• Anyone relying on a group plan. Know when your plan switches to any occupation and what income the plan counts as suitable work. An individual policy whose own or regular occupation definition lasts to age 65 can protect the years after the switch, but insurers limit how much coverage you can hold on top of a group plan.

Frequently asked questions

What is the difference between own occupation and any occupation disability insurance?

Own occupation coverage pays if you cannot do the important duties of your own job. Any occupation coverage pays only if you cannot do any job you are reasonably qualified for, which is a much harder test to meet. Many policies, including most group plans, start with own occupation and switch to any occupation after two years.

What happens at the 24-month change of definition?

After about two years of benefits, most group long-term disability plans reassess whether you can do any occupation you are qualified for, not just your own. Benefits can end at that point even if your medical condition has not changed, and actuarial data shows a clear spike in claims ending around the switch.

Who can get true own occupation disability insurance?

In Canada, true own occupation coverage is usually sold as a rider. On individual policies it is mostly limited to professionals such as physicians, dental specialists, lawyers, accountants and engineers. In the professional association plan rates we reviewed it added about 15 to 25 percent to the premium.

Can I work in another job and still collect own occupation benefits?

Only with a true own occupation definition. Many policies use a regular occupation definition, which pays full benefits only if you cannot do your own job and are not working in another one. If you take other work, those policies may pay a reduced residual or partial benefit instead, if the policy includes one.

What to do next

If a claim of yours was denied or ended at the change of definition, appeal to the insurer and ask for its final position in writing. You can then ask the OmbudService for Life and Health Insurance, a free and independent service, to review it. In Quebec, the Autorité des marchés financiers can also examine a complaint the insurer has not resolved. Limitation periods for going to court differ by province and can start running from the denial, and an appeal or complaint does not necessarily pause them, so get legal advice early. If you are buying coverage, a licensed advisor can show you the exact definition wording in each policy you compare.