4 Things Doctors MUST Know About Disability Insurance
You’ve invested time, costs, and postponed income to position yourself to make a sizable income. Your skill set in your specialty is your most valuable asset. As you know, life presents many situations whereby your ability to engage in income producing duties may be compromised. Disability insurance protects against this loss.
It’s important to critically and carefully review disability insurance policies. Following is a checklist for you to consider:
1. Pick the TYPE of disability insurance aligned with your objectives
Below is a list of three definitions of disability insurance.
True own occupation: Under this type of disability insurance policy, an insured is considered disabled if they aren’t able to perform the income producing duties of their specialty. This definition provides benefits if you aren’t able to work in your specialty while also allowing you to earn an income in another occupation; medicine or not.
For example, an Orthopaedic surgeon injuring her hand and is no longer able to work in her specialty, but who starts teaching at a university. With this definition, she will continue receiving her disability benefits even though she has found work in a different capacity. There is not a limit on the additional income earned in her new profession to offset her received disability benefits.
Transitional own occupation: With this definition, your policy will pay benefits if you cannot earn income in your specialty and start earning income in a new occupation. However, your total income (including benefits) cannot exceed the total original earned income. If your new occupation/income is greater than your medical specialty income, the disability benefits will be offset until your total income is equal to the benefits plus your new income.
Modified own occupation: According to this definition, a person receives benefits when they can’t work in their own occupation, are totally disabled and are not working. This type of coverage is usually used as a base level of coverage for company employees.
2. What are the benefits and riders to consider?
Specialty-specific coverage: Do you want True, Transitional or Modified Own Occupation definitions. Correct classification of your specialty is extremely important. Also, Independent representatives specializing in providing disability insurance to specialists will help you find the company assigning the most favorable class to your medical specialty, resulting in potentially paying lower premiums.
Future increase options: While in training, naturally, you are eligible for less coverage than what is available when you begin your actual working career. However, you have the ability to lock-in the right to increase your policy in the future based on income alone (no additional physicals or labs). It’s important for your disability insurance to be commensurate with your income. This rider allows for those increases.
Partial/residual disability riders: A good partial benefit rider, sometimes called a residual benefit rider, is key to making sure doctors will have any partial loss in income replaced if this much more likely scenario occurs.
Non-cancelable and guaranteed renewable: A policy that is both non-cancelable and guaranteed renewable means that premiums can’t be raised nor can the contract be changed so long as the insured is paying premiums.
3. Control what you can control
- Choose the right company
- Highly rated
- Appropriate definition
- Quality claims experience
4. When should you purchase coverage?
Residents and fellows have the opportunity to use available training program discounts to receive disability insurance at lower rates than at any other point as long as disability insurance is requested before graduation.
If you purchase disability insurance while you are in training, your policy will stack on top of whatever group coverage you receive from your employer. This feature not only makes physician disability insurance unique, but it makes residency or fellowship the best time to buy it.
So, the question is, when should you acquire coverage. The answer is two-fold:
- You should have purchased it already, and
- At the latest, prior to completion of training.
These discounts can provide career-long savings of up to 45 percent of the normal rate. If you receive medical approval for coverage now, you will protect yourself from the impact of potential injuries and chronic ailments in the future.
Most residents don’t consider health as being a potential obstacle to gaining coverage. In general, they are young and healthy. However, what happens as we age and Father Time begins taking hold. Injuries and chronic conditions could prevent you from gathering coverage in the future.
By purchasing disability insurance now, you protect your future income, even if your health changes. Since disability insurance rates never change (so long as your premiums are paid on time and your policy is non-cancelable guaranteed renewable) it’s important to secure your policy as early in your career as possible.
If you would like to learn more about this subject or receive a free quote then please contact us and we’ll be happy to help.
By Anthony C. Williams, CWS, ChFC, MRFC, CLU | Investment Advisor Representative | President & Founding Partner of Mosaic Financial Associates & Orthopaedist Advisory Group | Securities and advisory services offered through Cetera Advisors LLC, Member FINRA/SIPC, a broker/dealer and a Registered Investment Advisor. Cetera is under separate ownership from any other named entity.