IDI Occupation Analysis

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Disability insurance policies for small business owners are tailored to provide income protection in case the owner is unable to perform their work due to a disability. A critical aspect of these policies is how they define and determine the owner’s occupation and the specific duties associated with that occupation. This definition is fundamental because it influences the conditions under which the policy will pay out benefits. Here’s a detailed analysis of this process:

Definition of Occupation

  1. Own Occupation vs. Any Occupation: Insurance policies differentiate between “own occupation” and “any occupation.” Own occupation policies provide benefits if the insured is unable to perform the duties of their specific occupation, even if they could work in a different capacity. Any occupation policies require that the insured be unable to perform duties of any job for which they are suited by education, experience, and training.
  2. Specialty Definitions: For business owners with specialized roles, the definition of occupation can be very specific. For example, a surgeon might have a policy that defines their occupation in terms of their medical specialty, ensuring that they receive benefits if they can no longer perform surgeries, even if they could still work in a general medical practice.
  3. Duties-Based Definition: The policy defines the occupation not just by title but by the specific duties the owner performs. This is crucial for small business owners whose roles often encompass multiple functions, from management to hands-on work. The policy will specify which duties are considered material and substantial to the insured’s occupation.

Determination of Business Duties

  1. Detailed Job Description: Insurers often require a detailed job description at the time of application, outlining the key tasks and responsibilities of the business owner. This helps in assessing the risk and setting the terms of the policy.
  2. Percentage of Time: For each duty listed, insurers may consider the percentage of time the owner spends on that task. This helps in distinguishing primary duties from incidental ones. A duty that occupies a significant portion of the owner’s time is more likely to be considered material to their occupation.
  3. Skill and Experience Level: The determination also takes into account the level of skill and experience required for each duty. Tasks that require specialized knowledge or expertise are more likely to be deemed essential to the occupation.
  4. Financial Contribution: Duties that are directly tied to the generation of revenue for the business are often considered critical. This includes activities like client acquisition, product development, and strategic planning.
  5. Documentation and Verification: Insurers may require documentation to verify the nature of the owner’s duties. This could include business plans, financial statements, or contracts that outline the owner’s role in the business.
  6. Regular Review and Adjustment: The definition of occupation and duties can be revisited and adjusted over time to reflect changes in the business owner’s role. This is especially relevant for growing businesses where the owner’s focus may shift from hands-on work to more strategic management.
  7. Partial Disability Considerations: Policies may also define how they handle partial disabilities, where the owner can still perform some, but not all, of their duties. This can involve a proportionate benefit based on the degree to which the owner’s ability to perform their usual business duties is impaired.
  8. Impact of Disability on Business Operations: The assessment may also consider the broader impact of the owner’s disability on the business operations, especially in small businesses where the owner’s role is critical to the business’s success.

When making a claim for disability benefits, your insurer will look at the definition of your occupation in the insurance policy.  The definition of the occupation in the policy controls, even if the scope of your duties has changed over the years you owned your business. That is often an issue, and insurers will use that as an excuse to deny a disability claim, or suggest that you are at most partially disabled based on your duties.

Your insurer will gather information from you in the form of documents and interviews to determine the scope of you current job. Working with an experienced attorney advocating for you from the start of an individual disability insurance claim can help ensure that you present your current job duties and all supporting documentation in the correct light to support full disability and maximize your benefits.

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