Guaranteed standard issue disability insurance is something every professional should consider, especially doctors.
It’s a form of disability insurance protecting you for as long as you pay the premiums. It’s not a free policy like most group policies, but it supplements the free policy your employer may provide.
Without it, most doctors have a coverage gap, leaving them with financial difficulties if they need to use their disability insurance.
Ask your employer if they offer guaranteed standard issue disability insurance, and keep reading to learn what you should look for.
What Is Guaranteed Standard Issue Disability Insurance
Guaranteed standard issue (GSI) disability insurance is an employer-sponsored disability insurance with higher coverage levels than group disability insurance. It covers high-income earners who cannot survive on the limited coverage group policies offer.
Each GSI offers different coverage options, but they typically provide coverage in $5,000 increments and as high as employees need based on their income and the coverage gap.
The policy is great for anyone with underlying medical conditions or who can’t afford the much higher premiums of individual insurance, especially if they have pre-existing conditions.
Unlike group disability coverage, you’ll pay a premium for the policy. However, because it’s a group policy, most companies have highly discounted rates, making it more affordable than individual coverage.
It’s often a good supplement for high-income earners whose income greatly exceeds the monthly caps on group disability insurance, leaving high-income earners with much less than 60% of their income, which is typical for individual disability plans.
Unlike individual disability insurance policies, guaranteed standard issue disability insurance doesn’t require underwriting, which is a big draw for the policy.
But there is a catch. If you were previously turned down for an individual policy, you wouldn’t be eligible for GSI.
Where to Get It
You can purchase standard issue disability insurance through your employer. A handful of disability companies offer the program to residency and fellowship programs. Check with your administration to determine if it’s available for you.
Disability insurance usually pays a percentage of your income. 60% is ideal, but it varies by policy. The coverage limit applies no matter how much income you make. For example, you could make $50,000 or $150,000 with the same 60% limit.
The more you earn, the harder it is to live on 60% of your income. In addition, most group policies have a benefits cap, limiting your payout.
The benefits cap hurts most residents, fellows, and doctors with disability insurance. Some policies have a percentage of income cap, and others have a set dollar amount limit.
The dollar amount limit can hurt you the most because it doesn’t matter how much you make; you can only receive up to the cap.
For example, if you make $10,000 monthly, and the benefits cap is $4,000, you only receive 40% of your income. Guaranteed standard issued disability insurance can bridge the gap at an affordable rate and without underwriting.
GSI vs. Individual vs. Group Disability Coverage
You have several options when choosing disability insurance as a doctor, fellow, or resident. The key is to find the policy that offers coverage you need at the most affordable rates.
Group Disability Insurance Policies
Most people accept the group policy offered, and you should if your employer covers the cost. Even if they don’t, group policies are usually affordable and don’t require medical underwriting.
However, they have a downside. First, they typically aren’t ‘own-occupation’ policies. So you may not get coverage if you can work another job. It doesn’t matter if the other job is for lesser pay. It’s also not portable, so if you change jobs, you lose coverage.
Individual Disability Insurance Policies
Individual coverage offers the most significant benefits; however, it’s the most complex and expensive option.
You can customize your coverage based on your income and what you can afford.
In addition, the policies are portable because they don’t coincide with your job, and you can add riders to provide the most extensive coverage.
GSI policies are a cross between individual and group policies. They don’t have medical underwriting, like group policies, but they have higher coverage limits to bridge the coverage gap that group policies create.
Unlike group policies, they are typically portable, and you keep coverage as long as you pay your premiums.
Pros & Cons of GSI Disability Insurance
Understanding the pros and cons of GSI disability insurance is essential to help you determine if it’s the best choice.
- Provides more robust benefits than a group policy, especially if your income exceeds the benefits cap on your group policy.
- You don’t have to undergo medical underwriting. Despite any past or current medical conditions or injuries, you are eligible as long as your employer offers it.
- You get approved fast. After completing a simple application, you have coverage.
- The premiums usually cost less than an individual policy.
- You can take the policy with you if you leave your employer, unlike group disability insurance.
- There may be a waiting period for pre-existing conditions. Even though you don’t need underwriting, if you have a serious pre-existing condition, some policies may exclude them for the first year.
- The premiums aren’t always lower. It’s a good idea to get a quote on an individual policy to compare, especially if you are a high-wage earner.
- If you applied for individual disability insurance before and were declined, you may not be eligible for GSI.
Characteristics of a Good GSI Policy
Like any disability insurance policy, it’s essential to understand the characteristics to look for to ensure you get the best policy.
Before purchasing a GSI policy, be sure you can take it with you if you change jobs. Most GSI policies are portable but don’t assume. Portability means you can take the policy with you anywhere you work.
Knowing you don’t have to worry about getting new insurance when you change jobs is a tremendous benefit. Securing new policies can be more challenging and expensive as you get older or have more medical issues.
Every insurance company has a different definition of disability. Read the fine print to determine what the company considers a disability.
Also, determine if they offer own-occupation or any-occupation coverage. Own occupation is better because you get coverage if you become disabled and cannot work your specialty.
However, any occupation only pays out if you can’t work ANY job, even a lower-paying one.
COLA, or the Cost of Living Adjustment Rider, is crucial in your younger years. If you’re in your residence or fellowship or just starting your career, COLA will provide increased benefits if you become disabled early in your career.
As time passes, inflation increases, and the value of your benefits decreases without COLA.
However, COLA is only necessary early in your career. As you age and become more established, you may consider canceling the rider, as it’s not as beneficial the closer you get to retirement.
Elimination or Waiting Period
Determine how long the insurance company requires you to go without pay when disabled. The average elimination or waiting period is 90 days, but each company differs.
Option to Increase Coverage
Look for a GSI policy that allows you to increase coverage as your income increases, especially if you take out a policy early in your career. For example, as a doctor, your income will most likely increase, and having the option to increase coverage without going through medical underwriting is invaluable.
Non-cancellable and guaranteed renewable policies are also invaluable because the insurance company can’t cancel on you for any reason. You can also automatically renew your coverage annually without an increase in premiums.
The benefit period states how long you can receive a payout if you make a claim. Most policies offer payouts through the retirement age of 65 to 67 but read the fine print to be sure.
- Disability Insurance for Physicians
- Disability Insurance for Residents
- Disability Insurance for Nurses
- Disability Insurance for Attorneys
Frequently Asked Questions
Guaranteed standard issue disability insurance helps doctors and other medical professionals, especially high-income earners. Here are some of their common questions.
Who benefits most from guaranteed standard issue disability insurance?
High-income earners, including those starting their careers, like fellows and residents, benefit from GSI. According to LIMRA, only 14% of Americans have disability coverage, many because of the strict underwriting guidelines of individual policies.
If your group policy doesn’t protect at least 60% of your income, a GSI policy provides guaranteed coverage to help you through difficult financial times.
How do I best compare policies?
It is best to shop around and compare rates and coverage for multiple providers. Compare essential features, including the benefit period, portability, elimination period, and options to increase coverage. Common reputable disability insurance providers include:
Is it hard to qualify for GSI Disability Insurance?
Guaranteed standard issue disability insurance is guaranteed if you haven’t been turned down for an individual policy before.
The best way to ensure approval is to apply for GSI as soon as you start your career. You’ll lock in the most affordable rates and reduce the risk of needing additional coverage in the future.
Should You Buy Guaranteed Standard Issue Disability Insurance?
Guaranteed standard issue disability insurance is a good replacement for individual disability insurance.
In addition, it allows you to not rely on group disability insurance alone since most policies don’t cover a high enough percentage of a doctor’s salary.
Check with your employer to see if GSI is the right choice for you!