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Disability insurance 101: "Own occupation" and "noncancellable and guaranteed renewable" explained

Nov. 18, 2022
In part one of a series on disability insurance for dentists and students, learn about what the authors say are insurance must-haves: own occupation and noncancellable and guaranteed renewable.

Editor's note: This is the first article in a three-part series on disability insurance for dentists and dental students.

Buying your disability insurance is overwhelming. Where to start? Internet searches can be confusing and contradictory. There are many terms and riders to consider. Even though we admire them, dental instructors might not be up-to-date with the newest opportunities.

Our advice is to start with what are, in our opinion, two must-haves that are the most important and non-negotiable for every dentist or dental student: own occupation and noncancellable and guaranteed renewable.

Own occupation (“own-occ”) insurance

This is the preferred definition of disability for dentists and other medical professionals. This determines whether a claim (and how much) will be paid…or not.

Some policies ask you demonstrate a loss of earnings, a loss of duties, a loss of time, or some combination of some or all of these. Carriers also ask what your occupation is. For clinical dentists, this can be very specific. Let’s say you go on claim and get paid out for a few years, then you get restless and reenter the workforce, but not as a dentist. You might go work at the local dental school, or perhaps you invent the next great implement of dentistry. Either way, if your illness or injury continues to preclude you from practicing clinical dentistry, then you can continue to receive your insurance payout each month and make income from your new profession with zero offsetting.

Here's an example:

2023: You buy an "own-occ" disability policy

2025: You get hurt and go on claim (say it’s $10,000 per month that you’re paid by the carrier)

2030: You get restless. You are still injured but you write the next great American novel. You earn millions.

Because your policy was own-occ, you get both the revenue from the book AND the $10,000 from the carrier.

If you didn’t have own-occ definition of disability, then the insurance carrier would stop sending payments because you are likely earning more than your predisability earnings.

Own occupation might prove to be the most important aspect of your policy. It literally determines if there is a claim to be made and paid for the long haul.

Noncancellable and guaranteed renewable (“non-can”) insurance

This means three important things when it comes to your disability insurance policy. Noncancellable insurance:

  • Can never be cancelled by the insurance carrier (except for nonpayment)
  • Cannot have a pricing change as outlined in your contract.
  • Cannot have terms or language changed.

By contract, during the noncancellable period, you will never receive a letter in the mail saying that the price you’ve been paying for the past 18 years needs to be increased to keep up with the rising demand in claims, or the rising cost of labor, or for any reason at all. Counter examples of this can be found as you go to renew your health insurance, auto insurance, or homeowners’ insurance policy each year.

Example: If you have auto insurance and receive a couple of speeding tickets in a relatively short window of time, you might receive a letter from your insurance carrier reading something like this:

“Dear [faithful, long-paying and non-claims filing] customer,

It has come to our attention that you have [fill in the blank with any number of infractions.] Effective at midnight on [XX/XX/XXXX], your coverage with us will cease.”

You could hypothetically file a dozen claims over the years, recover each time, and make a new claim with no concern of receiving such a letter.

The policy you signed up for should have the same words in it 20 years later. It’s important. Just imagine if you dust off your policy from the filing cabinet, give it a read, think all your ducks are in a row to file a claim, and then the insurance carrier sends you the newest version on the policy. What if the two contracts did not match? What if the words in the new contract were more in the carrier’s favor than in yours? This can all be avoided by having your policy be “Noncancellable & guaranteed renewable” when you first buy it.

Having own occupation and noncancellable and guaranteed renewable language in your policy is imperative. It means you can recreate yourself professionally after a career-ending illness or injury or begin a new nondentist career and stay on claim—all this while you maintain the right to control your policy. It can only change if you choose to make any changes to it.

In the next article, we'll discuss important riders, such as inflation, and ways to increase your policy without answering any new medical questions. In the third of this three-part series, we'll talk about practice ownership and policies to consider when buying your first practice.

James Kachmar, Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. DOCTORS DISABILITY SPECIALISTS is not an affiliate or subsidiary of Guardian. CA Insurance License Number - 0I61892, AR Insurance License Number - 5747747. Richard Lunetta, Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 990 STEWART AVE, SUITE 200, GARDEN CITY NY, 11530, 516-7455600. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. DOCTORS DISABILITY SPECIALISTS is not an affiliate or subsidiary of PAS or Guardian. CA Insurance License Number - 0K73805, AR Insurance License Number - 17470723. Also, update the Pinpoint # 2022-146821 Exp 11/24