Disability insurance is intended to provide income replacement protection in the case of an unexpected illness or accident. While many employers offer long term disability insurance through a group insurance contract, self-employed people or people without access to group benefits through employment often purchase disability insurance from a life and health insurance agent. The most important difference in these policies is the definition of disability.

The Definition – Own Occupation

Many people purchase a private disability policy solely on the basis of the definition of disability. The goal is to insure yourself if you cannot perform the occupation which you have studied for many years and in which you invested heavily financially.

For instance, a dentist may choose to purchase a private policy because they know that if they suffer a significant illness or injury, they may be prevented from performing that occupation for their entire working life. Vision loss or a hand injury or any number of other illnesses could prevent them from continuing to practice dentistry. An own occupation policy would pay the insured amount even if the dentist could perform another occupation at a substantially lower income because the occupation insured is performing the work of a dentist.

“Your Occupation” means the occupation or occupations in which you are regularly engaged at the time you became disabled.

Total Disability

Private disability policies will pay the maximum monthly benefit which is set out in the contract if the insured is totally disabled.

Total Disability – Sample definition:

“Total Disability” means that:

1. due directly to injury or sickness you are unable to perform the important duties of your own occupation; and
2. you are not engaged in any gainful occupation; and
3. you are receiving physician’s care.

This type of policy differs from group long term disability policies because the definition of disability does not change after a specified period. If the insured person cannot perform their own occupation as defined by the policy, their benefits will continue to be paid. There is no definition change no matter how long the disability continues.

Partial Disability

Total disability is a high bar. Often an individual can be capable of performing their own occupation but at a lower level or in a less productive way – earning less income or working fewer hours for example. Many private disability income policies contain coverage for partial disability to cover the loss of income resulting from an illness or injury which prevents the insured from performing their occupation at their former “full speed’.

Partial Disability – Sample Definition

“Partial Disability” means that:

1. you are not Totally Disabled; and
2. you are engaged in Your Occupation or any gainful occupation; and
3. due directly to continuing injury or sickness, you are unable to perform either:
4. one or more important duties of Your Occupation; or
5. the important duties of Your Occupation at least one-half of the time normally required; and
6. You are receiving a physician’s care.

If partial disability benefits are payable, the insurer will pay an amount which is less than the whole insured benefit. It is important for the insurer to understand the important duties of the occupation. In making an application for partial disability benefits, you need to take care in providing detailed information about your occupation. We can help you by reviewing your application before it is submitted to the insurer.

Residual Disability/Proportionate Disability

Whereas partial disability may pay based on a calculation such as 50% of the disability benefit for an initial period of time and then 25% thereafter, proportionate or residual disability benefits will be paid based on the actual loss of income.

Residual disability benefits depend on the policy definition of prior earnings and loss of earnings. The insurer will require detailed financial information about the earnings at the time of disability and ongoing income information while the disability claim is being paid.

Residual/Proportionate Disability Contract Language – Example

“Residual Disability” means that:

1. You are not Totally Disabled; and
2. You are engaged in Your Occupation or any gainful occupation; and
3. Due directly to injury or sickness, you are unable to earn more than 80% of your prior earnings; and
4. You are receiving physician’s care.

“Prior Earnings” is defined in the policy.

“Loss of Earnings” for any month means your Prior Earnings minus your monthly earnings for the month in which you claim a residual disability. ….

If your Loss of Earnings for any month is 80% or more of your Prior Earnings, we will deem your Loss of Earnings to be 100% of your Prior Earnings.

Based on this contract language, in a residual disability claim, as long as the loss of earnings is greater than 20%, part of the monthly disability benefit is payable. If the loss of earnings, is greater than 80%, the entire monthly benefit is payable. The insurer makes a calculation of the monthly benefit based on information provided by the insured person. While this calculation requires a lot of ongoing contact between the insured person and the insurer, the benefit is valuable and the insured person is able to continue to work with some income protection from the insurer. The insurer can make mistakes in calculating the benefit payable. The insurer may also terminate benefits, claiming that the insured person could work more but has chosen not to do so. It’s important to challenge the insurer’s conclusions if disability prevents full time work. We have challenged these decisions successfully.

Presumptive Total Disability

There are times that disability is automatically assumed – this is called presumptive total disability. The insurer will pay benefits from the date that presumptive total disability started until the maximum benefit period in the policy whether or not the insured is working or under the care of a doctor.

Presumptive Total Disability – Sample Language

If injury or sickness causes you to totally and irrecoverably lose:

1. your power of speech; or
2. your hearing in both ears; or
3. your sight in both eyes; or
4. use of both hands; or
5. use of both feet; or
6. use of one hand and one foot,

we will consider you to be totally disabled whether or not you are able to work or require treatment by a physician.

Disputes over presumptive total  disability can arise from the insurer disputing whether the loss of use is total and irrecoverable. The medical information is crucial, and the loss of function needs to be clearly outlined in the application for benefits. We can help you by reviewing your claim forms before you submit them to the insurer.

Conclusion:

The majority of disability litigation involves disputes under group insurance policies. Individual/private disability policies are complex and require careful review by an experienced lawyer. Few lawyers have experience handling private disability litigation – when you hire a lawyer to challenge your claim denial, ask about their knowledge of private disability claims and their experience handling litigation involving your policy.

We have the experience and knowledge necessary to assist you in assessing your policy and your claim. We can review your claim information and assist you with your application. We can assist you in challenging the insurer’s decision to deny or terminate your private disability income claim. For advice, please text 613-777-0992 or contact us through our website to schedule a meeting with one of our lawyers.  We will provide a free consultation, in French or English, to ensure that your rights are protected.   In most cases, we can offer to represent you on a contingency fee basis.  This means that you do not pay legal fees unless you win or achieve a settlement on your case.