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Trevor Tarpinian, CEPA®
Licensed Insurance Counselor
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trevor@tfi4insurance.com

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Disability Income Insurance 101 - Occupation Class

Your occupation and the type of work you do in your vocation affect your coverage and rates in a disability income policy. This aspect of the policy is known as an occupation class. Why is this so important? Imagine you're the insurance company and I approach you asking to insure $500,000 of my future income. You ask what I do. I say that I throw explosives all day for a living. Another person asks you to insure their income. They're an accountant and sit at a desk all day. Would you give both of us the same rates? 

Notwithstanding other factors, if you were an insurance company, you would assess how much you would set the price at and how much coverage to give based on what a person does. Insurance companies have essentially created "classes" under which they group several different occupations. The following lists out the basics you need to know about occupation class.

The Types of Occupation Classes

Companies are going to lump together a multitude of occupations into classes. Every company does this slightly different and may label the classes uniquely, but the following are your general categories: 1A, 2A, 3A, 4A, 5A, 6A, 4M, 5M. Generally speaking, the higher the numerical value, the lower the rate of insurance will be (notwithstanding other factors like age, health, and income).

The "M" designation is for medical professionals. Most skilled labor will fall under 1A and 2A. Salespeople will fall under 2A-5A depending on the income, nature of the sales, and length of employment. Nurses tend to classify as a 2A with most companies. Most engineers will be a 4A or 5A. A disability policy on a CPA will typically be a 5A occupation class. Lawyers generally are a 5A or 6A. Most executives will fall under 5A or 6A.

The above are generalizations for illustrative purposes. However, what is important is that there is no universal classification. Every company approaches different occupations different. If you're a realtor trying to insure your income, most companies will give you a 2A or 3A occupation class, but there are a few that may offer a 4A.

How does Occupation Class affect coverage?

There are at least 3 major areas of the disability income policy in which occupation class can affect coverage: 

  • It can determine the amount of monthly benefit you can receive. A 4A and 5A classification can usually obtain up to $15,000 of monthly benefit if their income justifies it. With 4M and 5M classifications, some companies will allow up to $17,000 of monthly benefit with another possible $8,000 in participation from another carrier. Occupation class has an impact in the total amount of coverage you can obtain with companies.
  • It can limit whether you can obtain own-occupation definitions in your coverage.  For many companies and most policies, the occupation class of the insured determines whether the base policy will have an "own-occupation" or "any-occupation" definition. I've seen companies offer "own-occupation" as the base definition of the policy for only 4A or 4M occupational classes or higher. Any other occupation classes (like 2A and 3A) get an inferior "any-occupation" base definition. Additionally, some higher risk occupation classes, like 1A and 2A, may not be eligible to receive own-occupation definitions with certain companies. So the base definition of disability depends largely on how a company structures coverage for each occupation class.
  • It can limit the amount of Mental/Nervous coverage you can get. This is no small matter. Most companies now limit disability benefits to only two years of the disability is mental or nervous in nature. See a fuller explanation on this in our blog on mental/nervous coverage. However, some companies will give more lenient or strict coverage in this area depending on the occupation class. One prominent national company at the time of this writing gives up to 5 years of benefit for mental/nervous disability claims for 3A and 4A benefit classes, however they limit the benefit period to only 2 years if you are a 4M or 5M occupation class. Basically, if you're a medical professional, this company does not want to deal with you and consequently will give you inferior coverage to that of a normal working professional. Just the policy you want to purchase if you're a doctor, right? Occupation class can directly affect the extent of coverage you get, particularly with regard to mental/nervous coverage.

Occupation class can directly affect how much maximum monthly benefit the policy will allow, eligibility for own-occupation definitions of disability, and the length of mental/nervous benefit.

Does your Income Effect your Occupation Class?

Both your occupation and job description as well as the amount of income you earn can determine what occupation class you'll land in. This is also company specific. The difference between a 3A, 4A, and 5A occupation class may simply be income with a company. If you are an engineer in your first 2 years of work making less than $60,000/year you might be a 3A. As soon as you earn more than $60-70k/year, you might be eligible for 4A occupation class with certain companies. When you reach a specific threshold with regard to your earnings, a company may offer a different occupation class despite the fact that your occupation and duties on the job may be essentially the same.

Practical Application:

There are several things I'd like you to take away from your new knowledge of occupation class. 

  1. Every company organizes their classes and sets their criteria differently. You could be a 3A for one company and a 2A for another. A captive agent that only represents one policy is expected to say their company's product is the best. Doing some due diligence and investigating multiple policies - or working with an independent agent that has contracts with multiple companies - will help ensure you're getting the best occupation class and coverage for your situation.
  2. Occupation class affects coverage. This is significant. Your mental/nervous coverage may be limited by your occupation class and your eligibility for own-occupation definitions of disability are also affected by this. If your coverage is limited, is your occupation class part of the cause?
  3. As your career progresses, it is wise to assess your occupation class and see if it cannot be optimized. 
Consider the following two examples:

If you've changed careers and are now in a new occupation, you may be eligible for an occupation with better rates. Now is the time to review your current coverage.


If you've had a significant increase in earnings the past several years, you also may be eligible to be classified in a more optimal occupation class.

Click the "contact us" button and ask me to review your your mental/nervous coverage with you to see if your occupation class is negatively affecting your coverage.

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