Question

Which of the DI policies is typically more expensive? A DI policy with own occupation definition and a DI policy with any occupation definition. Please explain the reason.

Answer 1

Types of Disability Insurance policies :
Any occupation: One can claim insurance if he/she is disabled and cannot work in any occupation to which he is suited to by education, training, or experience.

Own occupation: One can claim insurance if he/she is unable to work in their usual occupation or the chosen field of employment.

A DI policy with own occupation is more expensive than a DI policy with any occupation. This is because chances of claim in any occupation is less than own occupation. This is because in case of any occupation there won’t be a payout if one could return to work in another field. In own occupation there will be a payout even if one could return to work in another field i.e chances of payment of a claim will be more.

Therefore the higher the return/reward/claim the expensive the policy will be.