What does ‘own occupation’ executive income protection mean?
If you’re too ill or injured to carry on doing your usual job, own occupation cover may pay out – even if you’re still able to work in another role.
For company directors, this is an important part of executive income protection. The definition of incapacity used by the insurer helps determine when you can claim and can make a significant difference to the cover you receive.
What does own occupation mean?
Under an own occupation definition, the insurer assesses whether your health prevents you from carrying out your own occupation.
It does not normally require you to be incapable of doing any paid work at all.
For example, a building contractor who develops a serious back problem might no longer be able to perform the physical aspects of their job, but could still be capable of office-based work.
Under an own occupation policy, the insurer would look at whether they could still do the job they were doing when they became ill or injured.
Why does the definition of incapacity matter?
Income protection pays because your health affects your ability to work, rather than simply because you have been diagnosed with a particular condition.
The definition of incapacity sets the test the insurer uses when deciding whether a claim can be paid.
Three definitions you may come across are:
| Definition | What the insurer looks at |
|---|---|
| Own occupation | Whether you can carry out your own occupation |
| Suited occupation | Whether you could do another occupation suited to your experience, training or education |
| Any occupation | Whether you are capable of working in another occupation |
The precise definitions vary between insurers, so check what applies to any policy you’re considering.
Why can own occupation cover be better?
Own occupation cover is based on the work you actually do.
You could be medically capable of doing another job but still be unable to carry out your normal occupation. This matters if your work requires particular physical abilities, technical skills or responsibilities which your medical condition prevents you from performing.
It can also be important for company directors whose day-to-day role involves much more than sitting at a desk.
How does own occupation work for company directors?
The title “company director” does not tell an insurer very much about what you actually do.
One director might spend most of the week working from home on a computer. Another might visit construction sites, operate machinery or carry out manual work alongside their employees.
A director of a small consultancy might also be responsible for winning new business, travelling to clients and personally delivering most of the company’s work.
Insurers therefore need information about your actual occupation and duties when you apply.
Your occupation can also affect what you pay. Read our guide to the cost of executive income protection for more on this.
What if you can still do part of your job?
You don’t necessarily qualify for the full benefit just because you can no longer do part of your job.
The insurer will look at what your job normally involves and how your illness or injury affects your ability to do it.
You may also be able to claim a reduced benefit if you return to work on fewer hours or at a lower income.
During a claim, you’ll usually need to provide medical evidence as well as details of the work you were doing before you became ill or injured.
For more information on what happens at this stage, read our guide to making an executive income protection claim.
Does your occupation affect whether own occupation cover is available?
Yes. Insurers assess occupations according to the risks involved and may not offer the same terms for every type of work.
An accountant working from an office presents a different income protection risk from a director who spends much of the week performing manual work.
Insurers can also classify the same occupation differently. The cover and price you’re offered can therefore vary from one provider to another.
What happens if your job changes?
Your occupation may change considerably during the life of an income protection policy.
You might move from contracting into consultancy, take on more managerial responsibilities or stop doing the physical parts of your job as the company grows.
Alternatively, you could move into a more hazardous type of work.
Check the policy terms to see whether you need to tell the insurer about a change in your occupation or duties, particularly if your new role is substantially different from the one you originally declared.
Does your medical condition have to stop you working completely?
Not always.
Some policies can provide support where illness or injury reduces your ability to work rather than stopping you completely.
You may, for example, be able to work fewer hours, carry out fewer duties or return to work gradually. Depending on the policy, a reduced benefit may be payable in these circumstances.
Previous health problems can also affect the cover you’re offered when you first apply. For more information, read our guide to executive income protection and pre-existing medical conditions.
Is own occupation the only thing to compare?
No. It is an important feature, but there are several other things to check:
- The amount of monthly benefit.
- The deferred period.
- How long a claim can be paid.
- Any medical exclusions.
- Whether benefits can increase over time.
- The premium.
For directors, it’s also worth checking how the insurer treats salary and dividends when working out how much cover you can have.
Read our guide to salary vs dividends for income protection for more on this.
Check how your occupation is covered
Before taking out executive income protection, check which definition of incapacity applies and how the insurer has classified your occupation.
Two policies offering the same monthly benefit may provide quite different cover if they use different definitions of incapacity.
This is particularly worth checking if you do specialist, physical or technical work that you might be unable to continue, even though you could still work in another capacity.
If you’re considering executive income protection, a specialist IFA can answer your questions, check how different insurers treat your occupation and compare quotes from leading providers.