What exactly is “disabled”?
On the face of it, this question would seem a relatively straightforward one to answer, one would think…
Trust insurance companies to make this one of the most argued over and convoluted issues when it come to insurance, and Income Protection, in particular. The same can be said about Total & Permanent Disability (TPD), to a lesser extent as this cover is often never a type of cover that a healthy person will ever think they need due to those two words, “total” and “permanent”. I say this all the time but as humans, we are cognitively programmed to be positive (mental health problems notwithstanding), so matter such as investing time and money into insurance and a high quality Will, are easily justified as, “I’ll do it tomorrow”, or “that’s a lot of money I just don’t have at the moment”. Due to this cognitive bias, we just don’t spend the time we ought to on making sure the policy they are spending money on, has the appropriate fine print.
With TPD, there are two main definitions available; an “Own Occupation” and an “Any Occupation”. An Own Occupation definition is exactly as it states; If your treating specialist says that it is unlikely you will EVER return to your OWN occupation again in the future, you will meet the definition and qualify for a payment. The general wording of an “Any Occupation” definition is that, if due to disability, you are unlikely to EVER return to ANY occupation that you are suitable for through training, education or experience. With the high degree of education and skill sets that a dentist possesses, it is incredibly difficult for them to ever meet this definition! This definition is the one found within a superannuation fund so be aware of this if this is the only TPD cover you currently hold.
With Income Protection, the most commonly found definition is what is referred to as “single duty” definition. To meet this definition, there must be at least one of your important duties in your usual occupation that you cannot perform due to disability. This would keep most people happy but what if you are a practice owner? If your policy only has this definition, the minute you set foot in your practice to check on staff or appointment bookings, you are deemed to be “partially disabled” at which time you will need to provide a Profit & Loss statement each month so the insurer can calculate your ongoing income and reduce your benefit accordingly. This is an exercise in frustration and cost for your accountant to prepare these every month. Some Income Protection policies have what is referred to as “10 Hour” definition. This definition will allow you return to work for up to 10 hours every week and still be classified as totally disabled. This means that your claim is not reduced by the profit generated being offset against your benefit and you aren’t up for accounting fee’s every month as you wont have to produce a P&L statement.