Abstract Referral

Purpose

The abstract referral clause is a provision in disability insurance policies. It allows the insurer to refer the policyholder, when a disability claim arises, to another reasonable occupation, regardless of whether that occupation is actually performed.

Effect and limits

Where the abstract referral clause applies, the insurer may refer the policyholder in a disability claim to an occupation that could reasonably be performed but is not actually being performed. Under case law, that occupation must match the insured’s knowledge, skills, experience, and training; the insured’s previous social standing must be preserved, and the income loss must not be materially significant.

Negotiation and practice

Because the abstract referral clause creates significant potential for disputes, many modern disability products deliberately waive it, marketing a so-called “waiver of abstract referral” as a quality feature and negotiating it as an unlimited, express waiver at inception.