Occupation Definitions influence insurance cost and benefit

This article addresses the issue of the particular occupation definitions applying to your occupation. Whilst your occupation will impact on the premium you will pay for other forms of life insurance (such as TPD, Income Protection, Business Expense and Key Person Insurance), it is only TPD and IP insurances that have the occupation defined for the purpose of a claim against these policies. The claims-based definitions are ‘any occupation’ and ‘own occupation’.

Any Occupation or Own Occupation: do you know which occupation definition you have in your policy? It can make a BIG difference!!! 

worker in high visibility safety clothing abseiling down tower

First, a little about the insurance policies: TPD and IP

TPD and IP policies are Life Insurance policies designed to provide financial protection from personal risk issues. They are often used together in a strategic way to provide financial needs when income is interrupted by illness, accident or other debilitation.

TPD (or more formally, Total and Permanent Disability) insurance is paid as a capital sum after a qualifying period of disability, but according to the definition circumstances you agreed to at the commencement of your policy.

Income Protection (referred to above as IP) insurance is paid out in eligible circumstances, as regular income instalments – usually paid on a monthly basis, 30 days after the contracted waiting period has been satisfied.

Those claims-based occupation definitions

Note that the following information is generic only and that terms specific to the insurer to whom you choose to transfer your financial risk should be read and understood before you accept them.

Any Occupation. If your policy insures you against disability from being able to derive an income from ‘any occupation’, the insurer has a lesser risk of having to pay a claim. That is because if you are able to work within the qualifying period at any task for which you are suited because of education, training or experience, then the insurer can require that you accept such a position.

Own Occupation. The risk to the insurer is higher if your policy is written with the ‘own occupation’ definition, in that if you are unable to perform any key task within your own specific field in the qualifying period stated in the policy documentation, the claim will be paid (all other criteria having been met).

An example

Take Neil who, as a qualified engineer and business entrepreneur, imports chemicals for his manufacturing business. His skills and occupation – indeed his business enterprise – rely heavily on his qualifications, his knowledge of the manufacturing equipment (that he developed himself), his ability to source quality product; and the negotiation of contracts for the supply of his input materials (tasks that require him to travel to overseas ‘trade shows’ to source suppliers and stay in touch with technology.

As a consequence of an accident at his business he incurs a disability that limits his mobility to the extent that he is unable to travel to attend the trade shows, nor to carry out the adjustments and maintenance of the manufacturing equipment. These restrictions impact on critical activities on which the business (and Neil’s livelihood) is so dependent.

The occupation definitions matter: the claim consequence of this accident for Neil are that-

a)      If the policies are written as ‘any occupation’, the insurer may suggest to Neil that he find a role as a consultant to a range of potential employers in engineering, manufacturing and/ or chemicals – regardless of the stress and practical inconvenience this may impose on him;

b)      If the policies are written as ‘own occupation’, the insurer will pay the claim in this instance because Neil is no longer able to perform at least one important element of his usual activity.

The cost impact of the occupation definitions

As you will have imagined, the cost of a policy with an ‘own occupation’ definition will be higher than the cost of one that relies on the ‘any occupation’ definition. (The cost differential in the premiums for the respective policies will be greater if the occupation is fairly generic in any event – and in fact, own occupation definition isn’t available for all occupation types.)

Changing claim-base type in existing policies

If you have protection in existence and the existing definition is not adequate for your needs (or if you are unsure as to whether the definitions governing your policy are best for your circumstances), please contact us to arrange a review of your insurance portfolio. 

Taking our advice

The experienced advisers at Continuum Financial Planners Pty Ltd have dealt with the main insurers over an extensive period of time – and with clients who have a range of specific needs and challenges to putting their protection in place. To meet with one of our team, call our office (on 07-34213456), or use our website Contact Us facility for prompt and efficient attention.

Our advisers work to the mantra that – ‘we listen, we understand; and we have solutions’: arrange that meeting for personalised, professional wealth management advice tailored to your needs.

Other general information about TPD and IP insurance policies

Continuum Financial Planners Pty Ltd website Library has a number of articles about these insurance types. The following articles are commended for further understanding of their use and the protection they offer to manage financial risk that you are unable (or unwilling) to carry yourself:

Originally published in October 2014, this post has been occasionally refreshed/ updated, most recently in July 2021.