Disability Insurance for Physicians: A Definitive Guide
Obtaining long term disability insurance is absolutely critical to the financial health for a physician. It’s also extremely important to buy the right policy the first time, otherwise you could waste tens of thousands of dollars on the wrong policy.
Your job is not only physically demanding but think about how your work would be impacted if you were to be injured.
Why Physicians Need Long Term Disability Insurance
Long-term refers to any disability insurance which kicks in after a longer designated period, typically 90 days. There are many types of physically limiting possibilities that could cause a need for this type of disability insurance for physicians. Some of the more common causes are cancer, autoimmune disorders, mental illness, anxiety, and burnout, in addition to injuries.
There are a couple of other major differences when you compare short-term versus long-term disability coverage, other than the time-frame.
One difference is the payout period between the two different types. For short-term disability coverage, the payout is generally within a week of filing the claim. With long-term disability insurance, you’ll have a longer period of waiting of at least 90 days. Each plan has its own specific timeline, but this further illustrates the difference between the two types.
The timing of when your funds would be paid out is referred to as the elimination period. In some cases, the elimination period for long-term disability can even be as far out as 360 days. Generally speaking, the longer the elimination period for your policy then the lower the rate of the premium.
Long-term disability insurance is one of those must-haves for physicians. As much as we’d like to think we will remain healthy as long as we’re practicing medicine, there are times when it’s not the case. This is where disability insurance can help bridge the gap between income and the ability to work.
Michael Relvas of MR Insurance Consultants says, “physicians invest an incredible amount of time in medical school to risk the financial impact of becoming disabled, especially on a long-term basis. After training, they reach a higher income earning potential, so it’s even more important to protect it.”
Statistics tell us a story. One in four Americans will experience a situation before age 65 in which they need to make a disability claim – and doctors are not exempt from this average. This is coupled with the fact, physicians are double the rate of the average person. Between accidents, illnesses, and physician burnout, there are multiple scenarios where a disability claim could occur.
Many of you reading this may assume you have enough coverage through your group disability insurance through your hospital. The group coverage can provide some benefit, but it is severely limited when it comes to replacing your physician’s income.
With today’s long-term disability policies, you can tailor them to your specialty and income requirements.
One of the greatest benefits of purchasing your own LTDI policy is how portable it is for you. If your career takes you to multiple states, then you’re still covered. If you choose to exclusively work locums or 1099 work, your policy will be there for you. The portability of your policy means you don’t have to worry about anyone else making a decision on your policy – except for you.
What Physicians Should Look For in a Long Term Disability Policy
The number one thing to start with when choosing a policy is to work with a knowledgeable disability insurance agent. You want to work with someone who specializes in working with physicians. You also want to look for someone who can quote as many carriers as possible. At this time, there are 6 carriers for LTDI policies, so choose someone who can give you access to as many as possible.
You’ll also need to choose riders for your policy. Riders are simply conditions in your policy. They can be tailored to provide greater coverage to you and they can be based on where you are in your medical career. Again, a knowledgeable salesperson will steer you in the direction you need so your policy is as comprehensive as possible and still within your budget.
The very first order of business when selecting items for your disability policy is to make sure it is non-cancelable and guaranteed renewable. This is the insurance world’s way of saying the insurance company can never take your policy away from you. Assuming you pay your premiums on time, then your policy will remain in effect.
The second most important aspect of your LTDI policy is to make sure it’s written with the Own Occupation language. Most personal long-term policies are written in this language, but confirm with your agent this is what you’re selecting.
Own Occupation means you will be paid out based on your ability to perform the job you had prior to your disability. Compare this language to the way group policies are written, which is Any Occupation language. Any Occupation means the insurance company decides which occupation you can perform after your disability claim is filed.
Purchasing an Own-Occupation policy for yourself means you will have the most comprehensive coverage in case of an accident or illness. It means you will continue to get paid, even if you’re able to perform some type of work.
Why are Riders in Long Term Disability Insurance Policies Important for Physicians?
At first glance, you may be tempted to overlook adding riders to your policy. If you’re on a strict budget as a resident, the thought of adding more to your policy is not extremely appealing.
Truthfully, you should think of riders as a way to customize the coverage and as a way to make your plan as comprehensive as possible. Riders are a way to ensure you will be able to bring in an income even if you are unable to work. What may seem like a nonessential expense right now, could end up getting your family through an otherwise stressful time.
Don’t think of riders to a disability policy as a “nice-to-have” but rather as a necessary component of building an overall strong financial plan.
Which Riders Should Physicians Include in their Long Term Disability Insurance Policies?
Before you can decide which riders you need to include, the very first step for you is to find an agent who is familiar with your needs as a physician. You’ll want someone who’s in tune with what’s occurring within the marketplace currently. Plus you’ll want to work with someone who has access to as many carriers as possible – this will allow you to receive the most competitive quotes.
With this in mind, let’s start with the riders which are important for a physician to include in their policy. If you have questions about how these riders will impact your rates specifically, then be sure to discuss these specific ones with your insurance agent.
Partial or Residual Disability
A partial or residual disability rider is a must for physicians. A partial or residual disability rider is necessary to allow you to receive a payout even if you can still work, but not to the extent prior to your disability.
Perhaps you are diagnosed with an illness that limits the number of hours you can work per week. You’re able to continue to work, but not for the length of time you could previously. This rider will allow you to receive a payout while working with your reduced schedule. If your income is dependent on the number of patients you see per day, this could be tremendously important.
When including this rider in your policy, you will want to understand the percentage of income loss which triggers the payout. It could be 15% or 20%, depending on the carrier. You’ll also want to look for whether or not you have to return to work within your specialty or if you can work within any occupation.
Cost of Living Adjustment (COLA)
You might also see this type of rider referred to as an Inflation rider. The reason for this is because your payout could be tied to the Consumer Price Index or rate of inflation. This rider allows your payout for your disability to be adjusted based on the CPI.
One important note – the Consumer Price Index is not referring to the Cost of Living. This rider isn’t guaranteed protection against the increased cost of living. There are variations to the payout of the COLA. You can have your payout tied to the Consumer Price Index or you can have a fixed, flat percentage.
If you do not have this particular rider in your policy, then your payout will remain the same stagnant amount whether you draw disability funds now or 25 years from now. This rider is important for those who are purchasing their policies in their 20s or 30s, even into their 40s. However, if you are in your 50s and still have this rider in your policy, you may find this to be an unnecessary addition.
Future Increase Option
The future increase option is an attractive rider for those who are on a limited budget but still need disability insurance coverage. This rider gives you the option to purchase additional coverage once your budget has increased. If you are still in your residency program or fellowship, or an attending physician early in their career, then this rider is highly recommended.
With this rider, your coverage (and therefore your premium) will increase annually or after a major life event. The idea behind this is your income is continually increasing and you will need to increase your coverage. The advantage to this is you will receive more coverage throughout the years, without having to undergo the underwriting process from the insurance carrier.
In the insurance world, the younger you are then the easier it will be for you to receive the most competitive quote for a long-term disability policy. You will get the lowest premium possible when you’re younger and presumably healthier, like when you’re completing your residency. Even though your budget is tight, you can add the future increase option to add coverage once you’re earning your attending salary.
Riders and Features Which Should be Avoided by Physicians in the Long Term Disability Insurance Policies
No one likes to be told they can’t do something. But after reviewing all the riders which are available, a few are questionable and should be considered very carefully before you add to your premium to cover these.
Student Loan Rider in Disability Insurance Policies
There’s one thing almost all physicians have in common – massive student loan debt. The student loan option capitalizes on this fact and has found a way to make it as an option for your policy. Though not technically a rider, this benefit would pay the reimbursement directly to the student loan holders should you become disabled. Since the average debt is easily six-figures for physicians, it could be tempting to want to add this feature to your policy.
The first problem with this coverage is it’s usually only valid the first 10 or 15 years from the date your policy became effective. This time limit could severely limit the amount of time you qualify for reimbursement.
But for physicians, there are better options. If you’re permanently disabled, you can apply to have your student loans discharged and you can get rid of the debt altogether. If you are partially disabled, you can apply for a deferment or forbearance and make payments at a later time. This rider is not ideal for physicians who have other options for loan repayment.
Any Occupation in Disability Insurance Policies
As a physician, you will want to avoid any type of individual disability policy that uses the Any Occupation definition of disability. A definition of disability is how the insurance company defines the limits and benefits of your policy. This is a constricted definition that is typically used in group policies only. Basically, it states if you can work any type of job, whether it’s related to your degree or not, then you’ll be denied a disability payout. This can quickly become disadvantageous for you for example, if you can no longer perform surgeries but you are still able to work in any occupation.
Any Occupation language in your policy will only benefit the insurance company. With this definition, you could find yourself paying for a policy for years that may or not benefit you should you need to file a claim. Instead, you should choose a policy with the Own Occupation definition of disability.
When Should Physicians Purchase a Long Term Disability Policy
Since I work with quite a few residents, I’m often asked when is the best time to purchase an LTDI policy. The answer is, almost anytime is a great time to purchase a policy. If you are an attending physician and haven’t purchased a policy yet, it’s OK because it’s something you can start looking into right away.
If you’re a resident, I strongly recommend you purchase your policy while you are in your residency or during your fellowship. Here’s why I make such a strong recommendation. When you try to purchase a policy, you will have to go through the medical underwriting process. During your residency, this will presumably be the time in your career when you are the youngest and healthiest.
Purchasing during your residency will lock in the lowest rates possible. If you’re concerned you won’t be able to afford a decent policy, don’t worry. There are riders you can purchase so your coverage can “grow” with you, as your career in medicine grows.
One more thing, the discounted rate for a resident is good for about 90 days once you’ve completed your training. So if you can’t get your policy together until then, you should still be able to take advantage of the lower rates.
The Cost of Disability Insurance for Physicians
The first question many people ask when shopping for a policy is how much the annual premium is going to be. Like many types of investment or insurance products, the price really does depend on exactly what you choose to add or delete in your policy.
But as a general rule of thumb and for your planning purposes, male physicians should plan on budgeting around 1%-3% of your gross annual income. For female physicians, you should expect to pay a higher percentage of around 3%-5%. We will explain why there is a disparity between the two later on.
For example, if you’re a male physician earning the national average of $208,000, then your annual premium would range from $2,080 to $6,240. Female physicians with the same parameters could expect to pay $6,240 to $10,400.
Depending on where you are in your career, this can definitely seem like a substantial amount to pay each month. So when your agent calls to give you the quote, you need to understand what specifically is impacting your cost of disability insurance.
The Biggest Impacts on the Cost of Disability Insurance for Physicians
What’s important to remember about disability insurance for physicians is that it’s not a “one-size-fits-all” approach. The policy you choose for coverage may not necessarily look like the policy your colleagues choose to purchase. Not only do the attributes of your policy make it unique to you, but it also influences how much your annual premium will be.
According to Michael Relvas of MR Insurance Consultants, “disability insurance is expensive, period. What makes this type of insurance cost prohibitive is adding more coverage than you need. In order to make it work for your budget, include only the riders and features that make you more comfortable with the premium.”
You may be under the assumption that the cost of your premium is mostly based on which insurance company you choose or the agent you’re working with. These might affect it to some degree, but it really comes down to do specific circumstances surrounding your policy.
Physician Specialty Matters When it Comes to Disability Insurance
By far, the area which impacts the cost of your policy the most is your specialty. There are some specialties that are considered more hazardous than others. Specialties are evaluated on their risk level. For instance, if you are an anesthesiologist, you are considered more of a high-risk versus a primary care physician.
Insurance companies also evaluate the number of claims for each specialty and determine which specialties are more prone to claims. Not only are certain specialties that have a higher risk of injury, but some of them have higher claims of mental illness and substance abuse. All of these types of claims are factored in the equation.
The rates also come down to the average salaries for each specialty. It simply costs more to provide coverage for the higher-earning specialties.
Remember, each disability insurance policy will payout around 40%-50% of your monthly income. If you are a high-earning specialty, such as a Dermatologist, it may be worth consideration to purchase 2 policies.
This is where working with an experienced agent – one who specializes in working with physicians – can become invaluable. Currently, there are 6 insurance companies that offer individual disability coverage for physicians. Each insurance company has its own classification system for specialties. What is considered a higher risk to one company, might be considered less of a risk to another. You want to work with an agent who has access to as many companies as possible and understands the nuances of your specialty.
Critical Riders and Features Physicians Need in Their Long Term Disability Insurance Policies
Another factor that impacts the cost of disability insurance is the specific riders you choose. Riders simply refer to conditions in your policy. Riders give you room to add additional coverage based on your needs, which will make your policy as comprehensive as possible.
You should choose riders carefully, based on your age and your specialty. Which riders should physicians look to utilize the most? Ultimately the decision is up to you, but in general, there are a few which are considered “standard” for a doctor to have in their policy.
Partial or Residual Disability in Disability Insurance Policies
A partial or residual disability rider for a physician’s disability insurance policy is very important. This rider will provide coverage for you when your schedule becomes limited. If you are diagnosed with an illness or suffer from an injury that prevents you from working a full schedule, then this rider will payout based on your full-time.
This rider is for physicians who continue to work but can no longer maintain their previous workload. If you are paid based on the number of patients you see, then this is a must-have for your policy.
Cost of Living Adjustment in Disability Insurance Policies
You will also want to consider adding in the cost of living adjustment rider, or COLA as it’s referred to. Having this rider in your policy will adjust your disability payout for inflation. If you don’t have this rider, then your payout will remain static over the life of your policy.
It may be tempting to forego this rider but consider the age in which you’re purchasing your policy. If you initially purchase your policy in your late twenties and then make a claim in your forties, your payout could be significantly impacted by inflation.
Future Increase Option in Disability Insurance Policies
Adding the Future Increase Option, or FIO, to your policy is also a good idea. This allows you to adjust (and purchase additional) coverage later on without having to go through the underwriting process again. You will not be subject to the medical exam either or disclose a change in your medical history.
The FIO rider is a great way for you to adjust your coverage as your income and family grow over the years.
These 3 aren’t meant to be absolutes, but rather to guide you as you start to ask questions about what should be included in your policy.
Conditions Within Your Disability Policy
Not only do the riders affect the language (and therefore cost) of your coverage, but there are a few other important terms for physicians to understand. Having this language included in your policy can also affect the rate.
True Own Occupation is Critical for Physician Long Term Disability Policies
Own-Occupation is a must for physicians. Fortunately, it is common to find this definition of disability in a personal long-term disability policy. Own-Occupation language is important because it allows you to continue to receive a payout from disability, even if you are able to return to work. The own-occupation refers to your previous duties as a physician, not the duty you are able to perform after you file a claim.
The other option is referred to as Any-Occupation. You will want to make sure your policy does not contain this type of language. Any-Occupation allows the insurance company to deem what type of work you are eligible to work, in case of disability. The insurance company could literally avoid providing a payout because you are able to work an office-type setting, even though you’ve been a surgeon your entire career. Most group insurance policies through your employer are written as Any-Occupation.
With a non-cancelable insurance policy, the insurance company can not change your premium rate as long as you’ve made your payments towards your policy.
Having a guaranteed-renewable policy means the insurance company can never cancel your policy, assuming you have maintained payments on the premiums.
Elimination Period on Your Disability Policy
The elimination period is the designated time between when you file a long-term disability claim and when the payout actually occurs. There are multiple options available to you. There are policies with 90 day elimination periods, all the way up through 2 years. The longer the elimination period is in your policy, the more it will impact your premium. It’s less expensive the further out you extend your payout.
How the State a Physician Practices In Impacts the Cost of the Disability Insurance Policy
You may (or may not) be surprised to learn where you live greatly affects your premium rates. The two most expensive states in the U.S. are currently California and Florida. If you happen to live in one of these two places but you know you could move, it may be worth your time to purchase your policy in your new state.
Conversely, if you have already purchased your policy in one of the more expensive states but have since moved, it’s worth a phone call to your agent to find out if it’s time to modify your current policy.
Since physicians could find themselves in the position of having to move after completing residency, it’s worth understanding how where you live affects the cost of your disability insurance. Make sure your agent is aware of your plans so the policy can be written where it makes the most sense, financially speaking.
When You Purchase Your Policy
When you purchase your long-term disability policy can also make a difference as to how much you pay for your annual premium.
If You Are a Resident or Fellow and Need a Long Term Disability Policy
It’s no secret your time in residency or during a fellowship is intense. The sleepless nights, the long shifts, the constant inundation of information – I’m sure you don’t need too many reminders.
And for many of you, this is also a time of major decision making for your personal life. You’re reaching an age where you could be contemplating marriage, buying a home, picking a city to call home, maybe even starting a family. There are a number of major life moments you could be faced with right now.
Residency is also a time to start getting serious with your finances. You may be on a rice and beans budget right now, but in a few years, you could literally be making quadruple what you’re currently earning. There are many steps you can take now to set yourself up for financial success, but one of the best things you can do during residency is to purchase long-term disability insurance.
Seems easy right? You think you can take advantage of your hospital’s group insurance policy. Or if you really want something specific, perhaps you’re wondering if you can call on the same person who handles your car insurance. Nope, not exactly.
It’s time to put some thought into the decision to take on a personal policy while you’re a resident, and we want to help you make the best decision possible.
7 Reasons to Purchase Disability Insurance During Residency
1. You are Your Best Asset
Let’s start with the very first reason you need to purchase long-term disability insurance during residency. You are your number one asset. You’ve invested years upon years in your education and training.
Not only have you given an enormous amount of time and energy, but you’ve paid for this as well. Yes, you probably have a mountain of student debt to show for this investment too. But if you have a proper policy in place, it’ll ensure you can meet your monthly obligations should something happen to your ability to earn an income.
In your medical profession, you’ve undoubtedly seen numerous accidents and illnesses. Some could have been prevented, others are just “wrong place at the wrong time” scenarios. As you’ve clearly seen, there’s really no warning system in place when it comes to triggering a disability.
You never know what can happen from one day to the next. As a physician, it’s easy to focus on the care of your patients, but you need to take time to make sure you’re covered in case you are out of work.
Long-term disability insurance can provide anywhere from 40%-60% of your income should you find yourself unable to work due to an accident or extended illness. As a resident, this income might not seem like too large of an amount. However, you have to think beyond your current situation. In a few years, you’ll be earning 4 or 5 times what you’re earning now.
2. Residents Can Get the Best Rate on Premiums
If for no other reason, you should purchase long-term disability insurance during residency because it’s when you will receive the best quote on your premiums. It benefits you (just as it benefits the insurance carrier) to ensure you when you’re at the youngest point of your career.
The bottom line is, by purchasing now when you have your age and health on your side, you know you are purchasing at the lowest possible rate. The longer you wait to purchase your policy, the more expensive your premiums will become.
It seems like an easy enough explanation, but sometimes it’s hard to see past your present circumstances. When you’re in your residency, it can be hard to find room in your budget for an expense such as insurance.
Choosing the Right Insurance Agent
One other point to consider when it comes to purchasing during your residency, in which the insurance agent you choose to work with for this. It may be tempting to use your friend’s brother’s roommate who is just starting out. But a disability insurance policy for physicians is too important.
You want to work with an agent who is familiar with the needs of physicians. Your specialty will be a big factor in the cost and coverage of your policy. You need to work with someone who understands the complexities of coverage for a physician, and what’s the best for your specialty.
You also want to work with an agent who has access to as many of the insurance companies as possible. Currently, there are 6 companies that write personal disability insurance policies for physicians – Ameritas, Berkshire Life (a Guardian Company), Ohio National, MassMutual, Principle, and Standard Insurance Company.
By working with someone who has access to as many of these companies as possible, you can get a plan which is tailored to you and offers the best coverage. You will also get the most competitive quote possible.
There are nuances between each insurance company, particularly some of their coverage and language. An experienced agent will understand this challenge, and be able to point you in the right direction.
3. Your Salary Influences Coverage
If you’re at the beginning of the research phase for your personal long-term policy, then you’re probably most anxious to understand the cost of the premiums. You need to know how much to budget and if what you’re considering will truly provide enough income.
How Much to Budget
Generally speaking, male physicians should plan on budgeting 1%-3% of their salary, and female physicians should budget 3%-5%. But here’s the important thing to remember – this is initially based on your salary as a resident, not your salary when you’re a full-fledged attending.
There are several factors that determine how much you will ultimately pay for your policy. The biggest factors are your specialty, the state you purchase your policy in, and your age. Again, it’s another reason why purchasing in your residency is a smart way to make sure you’re paying the least amount possible.
There are opportunities to increase your coverage – along with your premiums – once you are earning your higher salary. You can do this by purchasing what’s known as a Future Increase Option, or FIO rider, for your policy. If you purchase long-term disability insurance now with the FIO, then you will be able to increase your coverage as your budget expands. You will be able to do this without going through the medical underwriting process and exam again.
As far as where you live is concerned, certain states are more expensive than others. California and Florida have the highest disability premiums. If you know you are moving to either of these states – or moving away from them after residency – then you can make your decision to purchase accordingly.
What to Purchase
In addition to the FIO rider, there are 3 other important items to include in your disability policy: The Partial or Residual Rider, the Cost of Living Adjustment (COLA) Rider, and your policy should include Own-Occupation language.
The Partial or Residual Rider will allow you to receive a payout if you have to reduce your hours after your disability. No matter if you return to the same line of work or not, if you have reduced hours then you’ll receive a payout.
The COLA rider will allow your payout to be adjusted to keep up with inflation. This could be very important if you purchase long-term disability insurance in your 20’s and then need a payout in your 40’s or 50’s.
Own-Occupation is a Definition of Disability used by insurance companies. It will pay you even if you are no longer able to perform the job you had prior to your injury. You will still be eligible to receive a disability benefit because you can not perform your original duty. It’s then up to you which type of work you will perform (if any), while still drawing disability.
These will affect your cost but will make your policy much more comprehensive. Many of you are trying to purchase the most budget-friendly option available, but you also want to make sure you have adequate coverage in case you need it sooner than later.
4. You Have Access to Other Discounts
One option which is available to both male and female physician is to purchase a Multi-Life Discount policy. This will allow you to harness “strength in numbers” so you can get an even lower rate on premiums.
Let’s say you’ve spoken with an agent and you’re working to get the most competitive rate possible. The agent comes back with a couple of quotes and they are still too high. How do you find room in your budget then?
You should ask your agent about a Multi-Life Discount. This is where you and at least 2 other residents can go in together and purchase your own personal long-term disability policies.
This is another reason for you to purchase during your residency – you are working with more people who are in the same financial boat as you. Your chances are higher of finding people who are also looking to take on personal disability policy.
As long as you work for the same employer, you can get a quote for the Multi-Life Discount. The applicants can also be either male or female – they do not all have to be the same gender. A Multi-Life Discount basically utilizes a unisex rate for applicants.
Not only is this an effective way to save on your policy, but for female physicians, this is a highly effective way to avoid paying the higher premiums.
If you’re a female physician, then the higher percentage of how much to budget for premiums probably jumped out at you. Yes, it’s true. Female physicians should expect to pay more for their premiums. This is mostly due to the fact women have unique challenges with pregnancy and childbirth. Insurance companies are also utilizing statistics that claim women make more disability claims versus men.
Female physicians have two options to help lower their premiums: the first being the Multi-Life Discount. The second option (if Multi-Life isn’t really an option for you) is to ask your agent about a unisex policy. Have your insurance agent quote a unisex rate for you so you can see compare the savings, versus a “female” policy.
5. You Can Update Your Policy as Life Changes
Many residents have a hard time justifying the cost of a policy during residency. It’s understandable because your salary is quite low. You may think it’s virtually impossible to take on another monthly obligation.
Personal long-term disability policies can be modified and updated (even canceled) when necessary. The issue seems to be most physicians “set it and forget it” once they’ve signed on the dotted line. You will want to revisit your policy periodically, to make sure your coverage is still adequate based on your ever-changing needs.
Not only can you modify this when your budget can take on more of a premium, but you can also do this when you have a major life event. For instance, if you get married or have a child, and you have the FIO, then you can modify your policy.
Don’t be afraid to look at your long-term disability policy as something which will change throughout your career – just as your circumstances will.
6. Your Group Policy Isn’t Enough
If you haven’t put a lot of research into a long-term policy, you may be wondering why you can’t just utilize your hospital’s group insurance policy. This is a common question, but for physicians, the hospital’s group policy doesn’t provide enough coverage for you.
Terms are Different
The major reason you can’t rely solely on the hospital – either now or later in your career – is because the terms of the policy are quite different. The coverage provided by a group policy has completely different parameters around it, which also includes if you get a payout or not.
Typically a group policy is written with what’s referred to as Any-Occupation language. Unlike Own-Occupation, this type of language will restrict your payout if you experience a disability but still have some capacity to work. The insurance company will then define what type of work you’re eligible to perform, and potentially not allow you any disability payout.
You do not want an insurance company telling you what type of job you can perform. You may be a surgeon but if you experience a trauma to the hand then obviously this could affect your ability to perform surgery. The Any-Occupation language would allow the insurance company to define the type of work you could perform, such as an office job, and therefore you wouldn’t receive a payout.
The Best Coverage Is with a Personal Policy
Compare the Any-Occupation to the Own-Occupation language of a personal policy. Own-Occupation works to the physician’s advantage – not the insurance company. Own-Occupation is the least restrictive Definition of Disability.
But there’s good news about your group policy. Although it’s best to not rely on it solely, you can use the group policy in addition to your own personal plan. Yes, that’s correct! The policies can be stacked and you could benefit from both the group and your personal policy.
7. You Can’t Cover a Disability with Your Savings
Let’s be honest. When you’re a resident or fellow, chances are extremely high you do not have adequate savings built up yet. You’ve focused on your education for the last several years and have had to do what you could in order to get by financially.
An emergency fund is an important step in improving your overall finances. But even if you have set aside the suggested 3-6 months of your salary, it may not be enough to cover you if you’re out of work due to an extended illness or injury.
What are the chances you could be required to dip into savings to cover a disability? According to the Social Security Administration, you have a one in four chance of filing a claim from the time you are 20 years old until you reach retirement age and the claim will last for at least one year.
This is yet another important reason why purchasing your policy as a resident is the best route. If you do have emergency savings already, then you won’t have to wipe out what you’ve worked hard to build up. However, if you don’t have any savings, by having a disability policy in place, you can make sure you do have some income still coming in, should something happen to your ability to work.
A Purchase During Residency is One You Won’t Regret
Your plate is full right now, which makes it difficult to think about purchasing a long-term disability policy. Although it may be tempting to put off this important task, it will be worth your time to make sure you have coverage in the event of lost income.
As physicians, you’ve invested too much and worked too hard to have your income cut short by a disability. Don’t put off investing inadequate coverage for yourself any longer.
If You are an Attending Physician
There are still some of you who choose to wait after this 90 day period. By waiting past this point, you do run the risk of having premiums quoted at a higher rate, compared to when you were in training. But don’t worry, You can still work with an agent to put together a quote for you, no matter where you are in your career. A common reason for putting off purchasing a disability insurance policy is simply the cost. Before becoming an attending physician, your salary is paltry at best. You have student loans, rent or a mortgage, maybe even a credit card payment or a car payment too. All of these expenses make it hard to stomach the thought of adding another payment.
A tight budget is certainly understandable during this time. However, you can rest assured that if you can find room in your budget, you are making a very wise financial decision. Adequate disability coverage is worth making adjustments to your spending habits. There is never a better time than now to put together a monthly budget, and one that incorporates the cost of a comprehensive disability policy.
Other Important Considerations with the Cost of Disability Insurance
You know your specialty, your state of residence, and riders have an impact on your annual premium. But is there anything else you have control over?
Male or Female Physicians
Where women receive a break on premiums for life insurance, it’s the men who pay less in premiums when it involves disability insurance. Women are considered more of a “risk” of making a disability claim. This is due to childbirth and complications from pregnancy.
Insurance companies would say women historically file more disability claims than men. All of these factors drive up the annual premium amount for female physicians.
One way to mitigate the higher costs for female physicians is to look for policies that have a unisex rate. Again, this is where working with an agent who has access to as many companies as possible will be helpful. If a female physician purchases a unisex policy, it could actually end up saving upwards of 50% off the normal premium.
As an FYI, the state of Montana automatically utilizes a unisex rate for their policies. Soon the Commonwealth of Massachusetts will also offer unisex rates only. The bottom line is, if you’re a female physician then it will be very important for you to inquire about the availability of a unisex rate for your policy.
Another option to help with the cost of disability insurance is to purchase a Multi-Life Discount. This is where 3 or more employees from the same practice purchase a disability insurance policy. The 3 (or more) employees do not have to all be physicians, and the policyholders can be either male or female.
One area which you have the most control over is your lifestyle. Not surprising but if you are a non-smoker then your rates will be lower versus a smoker.
You will also be asked about your extra-curricular activities. A physician who is active in rock-climbing or skydiving could pay more than a physician who doesn’t participate in these types of activities. Your agent can help you understand which activities can make a difference in the amount of your premium.
How Physicians Can Save Money with a Long Term Disability Insurance Policy
There are a few ways you can save money on the cost of your long-term disability policy. The first way to save, according to Michael Relvas of MR Insurance Consultants, is to purchase while you’re a resident (or shortly thereafter). The second discount is what’s referred to as a Multi-Life discount. If you can find one other person in the same practice as you, then you can both apply for disability policies and receive a discount. The beauty of this discount is it can be anyone in the practice – another doctor, nurse, or administrative personnel.
If you purchase a policy and then move states, make sure you have your rates re-evaluated. There are states where the insurance premiums are much lower versus other states, so it’s worth looking into to see if your premium could be lowered. States like California and New York are notoriously high with the premiums so it pays to consider the location.
If you’re a female physician, have your agent use a unisex rate so you’re getting the lowest quote possible. A policy for a female physician can be 3-5 times the cost of a male physician’s policy (the insurance companies will say this is due to increased risk with childbirth). However, if your agent is savvy enough to run your quote as a unisex rate, then you can benefit from a lower premium.
Lastly, try checking any association you belong to as a physician or your affiliation through a hospital. There may be discounts available through one of these avenues.
Purchasing long-term disability insurance as a physician should be seen as a must-have on your physician’s insurance checklist. Having this coverage in place will ensure you and your family can still have a decent income even if you are injured or have an illness.
Disability Insurance Through Your Employer Versus Purchasing Your Own Policy
At this point you might still be wondering why you need your own long-term policy versus solely relying on the plan through your employer. While it’s certainly a benefit from your employer that you’ll want to take advantage of, it’s simply not enough- and there are several reasons why.
The number one reason you should purchase your own policy is that group policies are written in a language that is referred to as Any Occupation versus Own Occupation.
You may find yourself moving quite a bit in your career, whether it’s to a new city or a new venture in your backyard. Having your own disability insurance that stays with you throughout your career is beneficial if you end up as a 1099 contractor or working locum tenens for another practice. It’ll be one less decision you have to make as you look for ways to grow in your career. Think of your own disability policy as being portable- wherever you go, so goes your policy.
If you are a high-income specialist, such as an Orthopedic Surgeon, Neurosurgeon, Anesthesiologist, or Plastic Surgeon, you could benefit from the purchase of multiple disability insurance policies. Unlike health insurance or medical coverage, there isn’t a “Primary” or “Secondary” insurance provider. You can receive the benefits from both (or multiple) carriers, which could potentially cover more of your high-earning salary. Even if you aren’t practicing in one of these specialties, it’s still worth looking into and making sure you have as many gaps covered as possible, financially speaking.
Yes, it’s true your employer absorbs most of the cost of the premium for disability insurance and you can benefit from being a part of a group plan. But as previously mentioned, there are several disadvantages to relying solely on your employer. You’re better off combining this benefit with your own disability policy.
Disability Insurance Terminology: What a Physician Needs to Know to Make an Informed Decision
Definitions and terminologies seem to follow you your entire career, don’t they? You’ve learned your fair share of medical terms, with some you’d love to forget if possible. As you’ve probably realized after finishing your residency, your days of learning are hardly over. But something tells me when you embarked on your medical career, you weren’t planning to have to become so familiar with insurance terms either– much less disability insurance terminology.
As you have probably figured out by now, long-term disability insurance for a physicians is no longer a nice to have, but a necessary component of overall financial health. But a simple search on the topic can cause more questions than answers for you.
Here’s the good news. We’ve put together this guide of common disability insurance terms to help you answer some of these common questions. No one wants to try to guess what these mean or call their insurance agent every time they have something to ask. And another benefit – you don’t have to come up with clever acronyms or use a stack of index cards to memorize these terms either.
Let’s dive right in with the list of terms you might come across as you’re purchasing or reviewing your long-term disability policy.
Insurance companies pay out disability benefits based on whether or not you can work, but where the rub comes in is how the company defines work. It can vary from company to company too.
A policy that pays out for any occupation means you can only receive benefits if you’re unable to do any form of work whatsoever, including jobs you have no interest or experience in. It’s very difficult to qualify for any occupation benefits because most people who become temporarily disabled can technically do some form of work. If you’re a surgeon and develop a slight tremor in your hands, the insurance company can easily prove you’re capable of doing other work. They don’t care if working in a grocery store is a massive step down from being the head surgeon at a major hospital. Simply put, if you can work at all, you won’t qualify.
You will usually find this any occupation language written into your group policy. This is yet another reason to purchase your own policy and not rely only on what your employer provides.
You should always avoid buying a policy with an “any occupation definition of total disability” language written into it. You’ll just be throwing away your money on a policy that may not support you as a physician when the time comes.
Attending Physician Statement (APS)
The written summary of an applicant’s medical history provided by the doctor or hospital. This is commonly requested as part of the application process for long-term disability coverage.
Automatic Increase Benefit
This is an optional rider you can choose which will automatically purchase additional coverage for you throughout the years. Your monthly benefit would increase but your premium will also increase. It’s a way for you to purchase additional coverage without having to spend too much time thinking about it.
The monthly amount (as determined by your policy) you will receive should you make a claim with your long-term disability policy.
The Benefit Period is the amount of time you will receive your benefit payout as defined by your policy. Physicians who purchase a long-term disability policy on their own should look for a benefit period that pays out at least until age 65.
Business Overhead Expense (BOE) Coverage
This is a type of rider (or condition) written into your disability policy which provides coverage to physicians who own their own practice – either as a partial or full owner. This extra coverage goes towards expenses needed to continue to run a practice, such as rent, salaries, and wages, office supplies, etc.
Catastrophic Disability Rider
A catastrophic disability rider is an additional purchase option for your policy. This rider would allow you to receive a 100% payout if you were classified under the catastrophic disability terms. This is typically defined as being unable to perform two activities necessary for daily living, such as feeding or bathing yourself, due to an injury or illness. It could also be the result of severe cognitive impairment or permanent disability from the loss of vision, hearing, or in the extremities.
The Catastrophic Disability Rider is an option many physicians should consider, but only under certain circumstances. This rider is relatively new to the insurance world. This rider would provide an additional $8,000-$12,000 a month if you were to experience a catastrophic disability. Think of it as not being able to perform at least two Activities of Daily Living such as bathing or getting dressed on your own.
This rider isn’t recommended for purchase unless you have maxed out the amount of individual disability insurance that is available to you. You could also consider this one more seriously if you’re in your 20s or 30s since you have 30+ years ahead of you in your career. If you don’t fall into either category, then the additional cost of this rider is probably money which is better spent elsewhere.
A claim is a formal request you make to the insurance company to payout or compensate you according to your policy. The insurance company will then make the payment based on the claim being validated.
The form used to file a claim so you can receive benefits from your policy. This is the form submitted to the insurance company.
Cost-of-living Adjustment (COLA)
This is a type of rider that increases your disability benefits based on inflation. If your policy does not contain a COLA rider, then your payout will remain the same for the life of the policy – no matter when you purchased it. A COLA rider can either be a flat percentage rate or tied to the Consumer Price Index.
This is the term used to refer to the amount which would be paid out by the insurance company, should you need to file a disability claim.
Definition of Disability
In order to receive your benefit from your policy, your insurance carrier will use a Definition of Disability. There are several different types of definitions (such as partial, total, catastrophic) and this will determine the amount of benefit you will receive. It could also impact your elimination period in which you would receive your benefit.
This is the amount of time in which your benefit will be paid out should you need to file a claim. Typical elimination periods are 30, 60, or 90 days. Elimination periods can even be as long as an entire year. The length of time you choose for an elimination period can have an impact on your premium.
Exclusions can be written into the disability insurance policy by the insurance company. This type of language includes what an insurance company will not insure, based on the policy. Examples of exclusions are pre-existing medical conditions or multiple injuries to the same body part.
Foreign Residency and Travel
Assuming you are a U.S. Citizen, you need to verify the Foreign Residence and Travel condition within your policy. If you were to become disabled, some policies will limit payment of funds if you choose to move outside of the United States.
Most people are completely unaware of the residency restrictions of their policy. If you think there’s a possibility of moving outside the United States, then it would be worth understanding the language within your policy. This condition could vary from state to state, so if you are moving or planning to move, then you should be aware of any potential impact of this condition.
Future Increase Option
The Future Increase Option (FIO) Rider is as in you can choose your disability policy. This allows you to purchase additional coverage in the future without having to go through the medical exam or underwriting process again. This rider will allow you the ability to purchase additional coverage without disclosing your change in medical history.
Particularly popular for Residents, this feature allows you to purchase a policy at a lower rate while you are a Resident. The premium rate will increase over the life of the policy.
Group Disability Insurance
Group Disability refers to the policies typically available in your workplace which cover multiple employees. This is a policy tied to your place of employment, therefore it is not portable should you no longer be employed. These policies cover all employees, regardless of the individual’s medical history, and is usually written with an Any-Occupation Definition of Disability.
A guaranteed renewable policy means your insurance provider can not cancel your policy, as long as you have maintained payments on your premiums. A guaranteed renewable policy could still have a premium rate change, but only with approval through the state insurance office and policyholders.
Guaranteed Standard Issue (GSI)
Guaranteed Standard Issue refers to a group disability insurance policy that covers multiple employees, no matter what their health or medical history is.
Long-term Disability Insurance (LTDI)
Long-term Disability Insurance is a type of policy that provides an income if you are unable to work due to an accident or illness. This policy usually takes effect 90 days after an injury or illness.
A standard procedure for acquiring a disability insurance policy. This is an exam of your medical history and to confirm the medical information you have submitted on the application. An underwriter will also review any underlying medical conditions. The exam itself is similar to a medical checkup.
Mental Illness, Nervous Conditions, and Substance Abuse
A condition written specifically for mental illness or substance abuse is an important condition to consider, as difficult as it may be to imagine yourself needing this type of language in your policy.
According to Lawrence Keller, here’s what you should keep in mind as you’re reviewing the language in your long-term disability policy. “While some carriers will cover claims for mental and nervous conditions in the same way as any other accident or sickness, the majority of companies limit these claims to a lifetime maximum of 24 months. This limitation is invoked if the primary cause of disability was solely a psychiatric or substance abuse disorder or a diagnosis including, but not limited to, post-traumatic stress syndrome, anxiety, depression, and or alcohol abuse/addiction. Although many physicians will opt to purchase a policy with the least amount of restrictions, some willingly accept a policy with this limitation in order to take advantage of the cost savings associated with it”.
Keller goes onto say – “Keep in mind that certain medical specialists such as Anesthesiologists, Emergency Medicine Physicians, and Pain Management Physicians might not have a choice and even if the insurance company’s policy they are considering normally does not normally have a limitation for these types of claims, it may be required. However, even if a policy does include a limitation for this types of claims, it typically would not apply to disabilities as a result of dementia as a result of stroke, head injury, viral infection, Alzheimer’s Disease or similar organic disease processes, such as Parkinson’s disease and Multiple Sclerosis. The same would be true if an insured has a physical medical condition, as well as a psychiatric condition, if the physical condition, in and of itself, would be considered a disability under the terms of the policy.”
A Multi-Life discount is a type of discount available if two or more employees from the same office or practice apply for a long-term disability policy. This type of discount isn’t available everywhere but is worth asking if your policy would qualify.
This means the rate or terms on your policy will not be increased or raised over the life of the policy, as long as you have maintained payment on your premiums.
Over insurance is in reference to purchasing too much coverage versus what you really need. This results in paying too much for your premiums.
If you are looking for a comprehensive individual disability policy, then you need to make sure the own occupation language is used in your contract.
Own occupation disability insurance pays out when you are no longer able to perform the job you had before your injury. Whether you get a new job in a related field or end up working in an entirely different occupation, you’ll still receive disability benefits because you can’t execute your previous responsibilities.
This particular condition of total disability is an absolute must for a physician’s policy as it is much more liberal with the definitions. It will truly protect your ability to perform the duties of your medical specialty. Even if you are able to work after becoming disabled, it’s unlikely your new gig will pay as well as your former position. Own occupation insurance will allow you to maintain your current lifestyle while you take the time to figure out your next steps.
You should be aware that currently there are only six companies that offer this definition of Total Disability to physicians – Berkshire Life (a Guardian Company), Standard Insurance Company, Principal, Ameritas, MassMutual, and Ohio National. Your state of residence or your medical specialty could impact the availability of your own occupation definition as well.
Partial Disability Benefit
Partial Disability can also be used interchangeably with Residual Disability. This is an optional rider you can purchase to protect a loss of income, should you experience at least a 15-20% loss of income within your specialty due to injury or illness. See also Residual Disability Benefit.
A policy is an actual document that outlines the agreement you have with the insurance company to provide long-term disability coverage. Your policy will include specific information such as how much you will be charged for premiums, the conditions (riders), and the Definitions of Disability. Other important information such as Elimination Period, Exclusions, Benefit Period, etc. should also be included.
A pre-existing condition is an illness or health condition which was known to exist prior to signing a long-term disability contract.
A premium is the amount of money you must pay in order to be covered by an insurance policy. The premiums can be paid monthly, quarterly, or annually. The premium is based on not only the type of policy but also the options or conditions the policyholder chooses to add.
A recovery benefit is a monthly benefit paid to you to supplement the gaps in your income from the time of pre-disability to the time you return to work. This is typically included in a Residual Disability benefit.
Regular Occupation refers to the type of work the policyholder is regularly working in when a disability claim is filed. A regular occupation is not necessarily the work the policyholder was practicing in at the time of the application.
Residual Disability Benefit
Residual disability is sometimes referred to as a partial disability benefit. This is an optional rider for your policy which pays out if you’re still working within your profession (own occupation) but you still have a loss of income due to lower productivity. This rider closes the gap in pay when your disability limits the amount you were able to previously work. This could be especially important for physicians since your pay could be based on the number of patients you see.
Also referred to as Retirement Protection, this is a rider you can purchase and would be paid out during your retirement. This is additional coverage to offset the amount you were not able to contribute towards your retirement accounts (such as a 403b) while you were drawing from your long-term disability. The money you pay towards this rider is put into a trust while you are contributing, then the funds become available during your years of retirement.
A rider is a condition added to your policy, above and beyond the standard coverage being offered. Adding a rider to your policy is a way to customize the language so the coverage works best for your situation and makes your policy more comprehensive. Adding riders almost always results in additional costs to your disability insurance premiums.
Short-term Disability Insurance (STDI)
A short-term disability insurance policy is usually sponsored by an employer. The benefit period is anywhere from three to six months, with the elimination period typically starting around 14 days after a claim has been made.
Student Loan Reimbursement
Many long-term disability insurance policies will try to sell you an additional service-related reimbursement of student loan payments. Sounds like a must for physicians, right? No, and here’s why.
This product targets physicians because they know most doctors have a large student loan burden. But this condition doesn’t provide any extra benefits above and beyond a regular disability policy. You will waste your hard-earned money and spend too much time trying to show proof of loan repayment.
While the maximum payout on student loan “coverage” can approach $450,000, this condition doesn’t benefit most physicians. It’s usually only valid for the first 10 or 15 years of your policy, and the time period begins the day your policy is effective. Instead, if you were to become permanently disabled you should apply to have your federal student loans discharged. If you’re temporarily disabled, you can also apply for deferment or forbearance. Remember, if you’re on the PAYE or REPAYE student loan repayment plans, then your amount will be $0 per month because you will not have an income during your disability period.
A survivor benefit is a type of rider that can add to your long-term disability policy. This would pay out a lump sum to whomever you designate as the beneficiary if you are collecting a disability benefit at the time of your death. Also referred to sometimes as a Death Benefit.
True Own Occupation
True Own Occupation is similar to the Own Occupation language and definition of disability. This type allows you to be defined as disabled if you are unable to perform the duties of your medical specialty even if you can continue to bring in an income from another specialty or another occupation.
Underinsurance is the exact opposite of over-insurance. This is when you do not purchase enough coverage to cover your potential loss of income, should you need to draw disability.
Underwriting is the process by which the insurance company will assess the degree of risk for an applicant. Since the insurance company is taking on the risk with the insured, this process will determine how much they should charge to adequately cover the applicant.
Don’t let unfamiliar terminology slow you down when it comes to researching disability insurance. If you think you need to modify or replace your existing policy, then take a few moments to read these terms and you’ll be well on your way to making an informed decision.
It’s also in your best financial interest to work with an independent insurance agent who can go into greater detail with these terms and how they might affect you. Remember, you only purchase a disability policy once – maybe twice – in your career, so it’s worth the time to understand what you’re paying towards.
Reevaluating Your Disability Insurance Coverage Throughout the Years
Similar to how you go through financial checkups with your investments and retirement accounts over the years, the same goes for your disability insurance. There are several questions you need to ask yourself as you evaluate your policy each year and as your financial situation changes.
Some of the questions should be:
- Are my student loans paid off?
- Am I married now with a working spouse?
- Are children in the picture, if not now, could they be?
- Is my mortgage paid off now or will it be in the near future?
- Am I finally at an age where my savings could bridge the gap until I turn 65?
All of these factors determine how much disability coverage you actually need. Depending on how you answer these questions will determine whether or not it’s the right time to modify your policy. A modification to your policy could simply be adding or reducing the payout amount, or dropping a certain rider.
Another common question is whether or not you should replace your disability policy and switch carriers. This would be beneficial to you to replace the policy if you could save a significant amount on the premium. This is especially true if you’re a female physician and can obtain a unisex policy at a much lower rate.
As mentioned earlier, if you are in a high-earning specialty, you should give thoughtful consideration to purchasing two plans. Remember, carriers have limits on the amount of coverage for each of their own plans or in conjunction with other plans.
If You Can Secure a Fixed Premium
When you first acquired your policy as a newly practicing physician, it’s possible you chose one where the rates for the premiums gradually increase. If you have the opportunity to switch to a policy where the premium is fixed then it could be worth considering.
A fixed premium is similar to how a fixed APR for a mortgage or credit card works. You’ll never have to worry about the rate increasing, which is beneficial as you age (assuming you pay your premiums on time).
One point to make sure you’re considering is how much you’ll pay over the life of the policy. While you may not see a huge percentage of savings each month on a fixed-rate policy, you have to calculate how much you will save until the age of 65. In other words, make sure you think about this for the long-term and not just as a quarterly or annual expense.
If You’re Female and You Can Switch to a Unisex Policy
Female physicians almost always have to pay higher premiums versus their male counterparts. There are several reasons for this gap in the cost of their premiums. One of the reasons is that women face unique challenges from pregnancy or complications from pregnancy. Pregnancy-related issues are one of the leading causes of disability claims.
It’s not all bad news for women when it comes to paying higher premiums though. If a female physician can work with an experienced insurance agent – especially one who works with physicians – the agent should be able to move them to a unisex, gender-neutral policy.
A unisex policy can save as much as 50% on the premiums. The agent can move them into a Multi-Life program or a Guaranteed Standard Issue plan in order to get the lower premium. In the state of Montana (and soon to be the Commonwealth of Massachusetts) all policies feature unisex rates.
If you aren’t currently living in one of these two places then you could see a major benefit by moving into a new policy.
You Move to Another State
Where you live is one of the biggest determining factors for how much you will pay for your disability insurance.
There are certain states, such as California and Florida, which are notoriously more expensive to purchase a policy versus other places. If you purchased your policy in either of these places and find yourself in a position where you’re moving, you should definitely inquire about replacing your policy.
If you’re unsure whether or not the state you bought your policy in is more or less expensive, then it’s worth picking up the phone and having a conversation with your insurance agent.
Deciding to replace your current policy with a new contract is not a decision to be made lightly. You have many factors you have to take into consideration. Another consideration is whether or not you would be better off replacing or simply modifying your current policy.
If Your Retirement Age has Changed
Similar to evaluating as your income changes, it’s possible your retirement age has also changed. If this is the case, then it could be time to modify your policy. Most policies will cover you until age 65, however, if you’ve been working towards a number which could come well before age 65, then a review is definitely in order.
Not only would your coverage amounts potentially change (you might not need as much coverage if you have quite a bit of savings) but your needs for specific riders and features could change. The way you set up your policy in your 20s as a resident could be drastically different then what you need as you’re moving closer to retirement.
Your Savings Have Significantly Increased
Since the idea of disability insurance is to provide you with a financial supplement if you are unable to work, then a modification could be needed if you’ve built up your savings. If you have a healthy emergency fund set aside, your debt is paid off, and you have investments you can draw from, then perhaps you no longer need as much coverage as you’ve purchased.
It’s not ideal to dip into your savings to cover a time period where you may be out of work. Especially given the fact you never know how long of a disability claim could have to last. However, if you are still comfortable with the amount of savings you have to bridge the gap until retirement, then you could consider a modification.
When your Riders and Features Need to be Updated
When you review your current policy, you’ll notice you most likely have certain conditions written into your policy. These conditions are referred to as riders. There are a multitude of riders for your consideration. While there are a couple of different riders which a physician should confirm is included, there are some riders that may no longer be necessary.
One example of this is the Cost-of-Living-Adjustment Rider, also referred to as COLA. This is a rider that is especially beneficial for physicians early in their career but might become less beneficial the older you are. It’s tied to inflation or the Consumer Price Index and can be a fixed percentage or flat rate. But the older you are and closer to retirement, you may not be as concerned about your coverage amount increasing to keep up with inflation.
Other examples are if you’re in your late 40s or 50s then you could probably go without the Catastrophic Disability Rider or maybe the Future Increase Option. Again, these are all points to review with your insurance agent on how you could modify your policy to fit your needs at this point in your career.
When a Physician can Drop a Disability Insurance Policy
There are only a couple of circumstances that might justify dropping a policy but let’s take a look at why you could consider this action.
You Are Financially Independent
If you’re financially independent and could draw from your savings to cover a loss in income, then you could definitely consider dropping your policy. At this point, it’s a simple math equation for you. Assuming you’re still practicing medicine, then you need to evaluate how much you spend each year in premiums and determine which accounts you would pull your savings from.
You are Close to Retirement
There will come a point where you will be so close to your retirement age, you could conceivably bridge a gap with your income until you retire. For instance, if you are in your early 60s and your goal is to retire at age 65, then it’s entirely possible you have enough savings to cover a loss in income until you can draw from a retirement account in a few years.
Either scenario means you have worked quite hard to meet your goal. You should be proud of these accomplishments which have brought you to this point and you can consider dropping a policy!
Disability Insurance For Physicians is a Must for Financial Success
The bottom line is, as your earnings increase, it’ll be more and more important to make sure your finances are protected in case of an accident or illness. It may seem as if you are paying money each month for something with very little return. Unfortunately, though, the statistics show there is a very real possibility you may need this type of insurance one day.
You’ve already taken an important step in researching the basics of disability insurance for physicians. Now it’s time to work with an agent and find the right coverage for your future.