Physician Disability Insurance
As a physician disability insurance is extremely important. Disability insurance for doctors is one of the number one topics our clients ask us about. Why does a physician need disability insurance? What do doctors need to look for when purchasing a disability insurance policy? Are you looking for a specialty specific disability insurance policy? We will address some of the highlights of disability insurance for doctors here, but please contact us if you are looking for a specialty specific policy to protect your income. As an independent company, we can help you find a policy though whichever disability company is most beneficial for you.
Why Is Disability Insurance Important for a Physician?
Disability insurance is important for anybody who needs to work to earn income. If you have a mortgage or rent to pay, if you want to eat, if you have student loan payments, you need income. Your ability to work and earn income is your most valuable asset.
As a physician, you will likely earn upwards of $10 million over the course of your career. Your career earning potential is the most valuable thing you possess. The catch is, you have to be able to work in order to realize all of it. If you cannot work in your specialty due to injury or illness, that can be problematic for you financially.
Imagine if you are in a procedure based specialty and you develop a tremor. Good luck operating. Not many hospitals or private practices want to hire a surgeon who cannot operate. Goodbye income. Now, you may be able to work as a consultant, or teach at a medical school. But that isn’t what you spent all those years training to do and took out all of those student loans for. And that probably won’t pay you as well.
In order to replace your income, you need a disability insurance plan that covers you if you cannot perform your specific job duties.
Specialty Specific Disability Insurance for Doctors
As a doctor, you have probably been told you need a specialty specific or an “own occupation” disability policy. This type of policy will pay you a benefit if you cannot perform the specific duties of your own occupation, aka your medical specialty.
A good policy will have a definition of disability along the lines of:
You are totally disabled if solely due to injury or illness you cannot perform the substantial and material duties of your occupation. Your occupation is the occupation you are in at the time of disability.
That’s it. Concise. Simple. Not ambiguous. No qualifiers. No contingencies. If you can’t perform the specific job duties required to do your specific job, you are eligible to file a claim and collect benefits. How the company defines disability is the most important part of the contract.
What Company Offers the Best Physician Disability Insurance?
Contrary to what some insurance agents might want you to believe, there isn’t one company that is the best for physicians. There are a handful of companies that offer policies with a true own occupation definition of disability. That is what you care about most.
From the handful of companies with the true own occupation definition of disability, the “best” one really depends on what features are most important to you and how much you are willing to pay.
Some companies are more competitively priced for certain specialties and less competitively priced for others. Same with age. A 30 year old might find company A is less expensive than company B, but company B may be less expensive than company A for a 40 year old. Some companies offer a lot of optional bells and whistles, others keep their policies more basic.
At Finity Group, we can help you determine what disability company to go with and help you structure the policy to best fit your needs.
What if My Employer Provides Disability Insurance?
If your employer provides you with disability insurance, that is fantastic. Not all employers provide that benefit. The employer provided policy, however, generally isn’t enough.
Most policies available through an employer only protect a percentage of your income up to a maximum monthly benefit. For example, it might cover 60% of your earnings up to $10,000/month. If the employer is paying for the policy, then the monthly benefit will likely be taxed as ordinary income.
Most doctors will need a supplemental disability insurance policy outside of work to cover their earnings that aren’t covered by their employer’s plan. If you are earning $25,000 per month and your employer’s policy only covers $10,000 per month of earnings, you have $15,000 of unprotected monthly earnings.
Also, the language in the policy is key. We often see the employer-sponsored disability plan lack the true own occupation definition of disability. Or it might cover your specialty for two years, but after two years on claim, if you are capable of performing any job, you are no longer considered disabled. It is important to read through the contract to understand what you are actually covered for.
The plan through work is usually pretty bare bones and will sometimes lack important features, such as benefits for partial disabilities, or benefits that increase over time to account for inflation.
Keep in mind, everyone at the employer has the same coverage and didn’t have to go through medical underwriting to get it. All of the young and healthy people have the same policy as the old unhealthy people. The insurance company realizes this, so they often limit the features on the policy to limit the amount of claims they have to pay.
The employer can change or cancel the policy at any time. If you leave the employer, you usually cannot take the policy with you and your next employer may not offer disability insurance.
Having benefits though work is great, but you can secure more comprehensive coverage through a disability company outside of work if you can qualify medically.
When Should a Physician Purchase Disability Insurance?
Now. Yesterday would have been ideal. The sooner the better. The ability to qualify for coverage is based on health. The cost is based on age and health. Rarely do people get younger and healthier over time, so you want to get a disability policy as soon as possible.
Obviously getting a lower price when you are younger is attractive. The bigger concern for doctors who wait to get a disability policy is health. You never know when you might have a change in health for the worse. As a physician, you should know better. You see people’s health change for the worse on a daily basis.
Any little hiccup in your medical file can potentially make it difficult to qualify for coverage. Or, you may have an exclusion on the policy for certain types of disability. For example, if you recently were experiencing back pain and went to a chiropractor to get an adjustment, a disability company may put a back exclusion on your policy. This means they won’t cover any claims for disabilities due to back problems.
Everything is reviewed on a case by case basis, but the cleaner your medical history the better. Get a policy before you have anything show up in your medical file. If you depend on your income, you need coverage now, so get it now.
What Does Physician Disability Insurance Cost?
The cost of disability insurance for doctors can vary widely. Age affects rates. Medical specialties are priced differently. Procedure based specialties are generally more expensive to insure than primary care doctors. This is due to a broader array of ailments that can impact the ability to perform the job duties of the specialty.
The nice thing about a disability policy is it is completely customizable. You can structure a policy to be as expensive or as inexpensive as you want. The more expensive it is, the more benefits and features you will likely have. The less expensive it is, the less you will have on the policy. Having something is better than nothing though when it comes to protecting income.
If you are still in residency or fellowship and cost is a concern, you can design a policy today with a small benefit at a low cost and add a rider to the policy that allows you to increase your benefit in the future, without answering medical questions again. This is a good way to lock in a budget-friendly policy now that will enable you to protect your future earnings when you get into practice, regardless of any health changes that may occur. This of course assumes you can qualify medically at this time.
Also, some insurance companies offer discounts to residents and fellows at various teaching hospitals across the country that allow you to lock in extra savings.
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