The Role of Specialty Language
Specialty language makes it easier for a lawyer to qualify as Totally Disabled, even if it is possible to work in another specialty of law. With specialty language, a trial attorney who is disabled as a trial attorney can still qualify for Total Disability benefits even if it would be possible to work as a probate attorney.
Total Disability claims are favorable because the full benefit is paid in whatever amount the policy was issued for. No calculation is necessary. In simple terms, if the policy was issued for $10,000 per month, then $10,000 is the monthly benefit regardless of earnings or other sources.
True Own Occupation Definition of Disability
Whether the attorney is allowed to moonlight in a different specialty (or other occupation) while on claim depends on how Total Disability is defined. To permit this, specialty language is traditionally coupled with a true occupation definition of Total Disability, which doesn't have a requirement to be not working. This results in income replacement rates much closer to 100% of pre-disability earnings, and theoretically more.
It may sound like an extra frill at first, but the importance of true own occupation disability insurance lies in the fact that disability benefits often prove inadequate to maintain living standards over a long period of time. Plus, a little introspection tells us that anyone that had the tenacity to earn a law degree will eventually get restless and want to do something. Having the option to moonlight in a different occupation acts as a financial and psychological release valve that doesn't jeopardize Totally Disabled status.
"Specialty" language and "True" own occupation are distinct features that go together like wine and cheese, but can be enjoyed separately.
Why The Compensation Model Matters
The performance sensitivity of compensation for attorneys introduces the risk that compensation may decline in the period leading up to a claim as health problems gradually get worse, which may take years before getting to the point where a claim is justified. Most claims are caused by illness, often preceded by years of disease management and the slow and gradual deterioration of performance. A benefit that is based on a percentage of reduced earnings does not provide a lot of financial security in an eat-what-you-kill compensation model.
Even if the underlying cause is fast-moving, natural earnings volatility creates a possibility that a claim might coincidentally be triggered after coming off of a down year.
To decouple the relationship between pre-disability earnings and the potential benefit amount, the claim must be made through an individual policy, not a group policy, because only individual policies are designed to pay benefits as a fixed dollar monthly indemnity amount (e.g., $10,000 per month). Additionally, the claim must qualify for Total Disability, which does not involve calculations. To improve the chances of this, it helps to have a true own occupation definition of Total Disability, preferably enhanced with specialty language.
Incidental Work Within Your Legal Specialty
Attorneys that want the flexibility to work on an incidental basis, even within their own specialty, will want to know their claim might be affected. Incidental work allows an attorney to stay in the game, so the question is bound to come up at some point.
Incidental work within one's own specialty will almost always disqualify the claim for Total Disability benefits. In order to keep benefits coming, the claim must pivot to a loss of income basis, which is typically provisioned through an optional Partial Disability rider.
When pivoting to a loss of income claim, a calculation becomes necessary. The amount of the loss of income, of course, depends on the lookback period in which pre-disability earnings is measured. Since there is no escaping the link to pre-disability earnings in loss of income claims, the focus turns to how generous the formula can be.
What attorneys need is a range of choices to exclude blocks of time in which earnings were low. Having choices about the lookback period used to calculate pre-disability earnings can make a major difference in the benefit amount. For more information about Partial Disability provisions, refer to our blog post How to Choose the Definition of Disability You Need in a Disability Insurance Policy.
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The Importance of Delayed Compensation
To the extent compensation is delayed after it is earned, attorneys have even more special needs. Delayed compensation introduces two problems for attorneys.
One is that any definition of disability that requires an income loss to qualify will cause benefit accruals to be delayed as well, until the income loss threshold is met. Ideally, no income loss should be necessary, even in a Partial Disability claim.
The other relates to recovery. Before returning to work, the question attorneys ask themselves is "what exactly am I returning to?" What is the book of business? Until the pipeline can be rebuilt and revenues start rolling in, recovery can be financially painful. In the business of law, medical recovery does not necessarily equate to economic recovery. There are provisions out there designed to deal with these situations, and attorneys should consider them.