Without A Disability Insurance Policy
Without A Disability Insurance Policy
For those seeking an initial policy, here’s what you need to know:
Now is the time to sign up for disability insurance. As a resident, you are finally able to practice medicine, yet insurance companies view you as just starting out. Residents typically qualify for insurers’ “starter package” policies, which come at a significant discount. These policies are available during residency only, yet many insurance companies continue to honor their discounted rates throughout a physician’s career.
My advice: Obtain a quality disability policy while you are young and healthy. Get this done today, and you will be happy you did.
A note about riders: Riders are the building blocks of your policy. They are the small and large details laying out the benefits you stand to receive. Riders can be tailored to your individual needs as a physician. A resident will also want and need several riders to guarantee own occupation, residual disability, cost of living adjustment, future increase option/benefit update and catastrophic disability benefit.
A note to women: Disability insurance is more expensive for women. (Life insurance is more expensive for men.) At this stage in your career, however, many carriers will offer women unisex rates that are a sizeable discount to the standard rates for women.
With A Disability Policy:
With A Disability Policy:
If you currently possess a policy, do you know what it really says? I’ve found most physicians who own a private policy don’t know its scope. You need to be sure your disability insurance is written specifically for you, in order to cover exactly the skill set you were educated and trained to practice.
I’m happy to meet with you – no strings attached – to make sure you’re maximizing your risk management.
TYPES OF DISABILITY INSURANCE POLICIES FOR PHYSICIANS
GROUP LONG-TERM INSURANCE
Depending on your practice model, you may receive some benefits from your employer. This benefit is typically paid by your employer and covers a percentage of your income for as long as you remain employed by that specific employer. There are often several nuances you need to be aware of concerning a group long-term insurance policy.
- Does it cover own occupation or any occupation?
- How long is the benefit period of the policy?
- Are work-related injuries covered?
- How is “salary” defined?
The answers to these questions reveal how much — or how little — your employer’s group long-term insurance plan covers you, should you need it. Most group benefits are not portable, meaning if you switch jobs, you will not be able to bring your coverage with you. Many group policies for physicians do not cover for injuries or illnesses sustained on the job. Many group policies don’t cover own occupation after two to three years. Should you no longer be able to continue working at your current job, you might have to take on a new role that’s outside your field of expertise or interest at the same employer. This means even if you couldn’t perform your job anymore, an employer could insist you take any position based on your education, training and experience, such as teaching, or do billing.
Many group policies cover base salary for physicians, and do not take into account bonuses or overage payments. Many group long-term plans’ coverage diminish dramatically as time goes on. Another important thing to remember is, because this policy is employer sponsored, the benefit is taxable.
My take on it: A long-term group benefit is nice to have, but do not rely on it as your sole means of income protection.
Again, your first step: Get a copy of your disability insurance policy from your employer. Second step: Contact me.
PRIVATE INDIVIDUAL DISABILITY INSURANCE:
Private individual disability insurance is obtained by and paid for by you. A private policy is specifically tailored to your unique needs as a doctor. It can take into account all sources of income. It’s also portable; it follows you throughout your career.
Private individual insurance plans offer the most comprehensive coverage. Because you pay for with the plan with post-tax dollars, the policy’s benefit is tax-free. As with all insurance plans, the definitions, the riders, are the most important part of the policy.
GLOSSARY OF DISABILITY INSURANCE TERMS
Why these terms are important:
Carriers have various definitions for disability insurance products. Each of these definitions carries different limitations and/or benefits. Understanding this language is the key to making sure your disability insurance meets your specific needs.
One of the most important riders for physicians, a policy’s own occupation benefit means if the holder of the policy cannot perform what they were specifically educated and trained to perform, they qualify as disabled, and are therefore entitled to receive full benefit, or, as is said in the industry, to be “on claim.”
The own occupation definition is especially important in medical and surgical specialties. If your illness or injury prevents you from performing the material and substantial duties of your occupation, you are disabled. Depending on the carrier, the own occupation can allow you to be employed in another field of medicine or in a non-medical profession, and still be on claim.
For example: After my injury, as a practicing OB/GYN, I was no longer able to deliver babies or operate. My disability insurance policy’s own occupation rider entitled me to the full benefit of my policy. It didn’t matter if I found a new job elsewhere. It didn’t even matter if I elected to practice office gynecology. Because of this rider, I can still receive my full benefits.
A note on own occupation riders in employer-provided group disability policies: Many group disability policies switch from own occupation to “any” occupation after two or three years. “Any occupation” is the opposite of own occupation. Any occupation provisions stipulate an ill or injured policy holder is employable in any position based on the holder’s education, training, and experience. It means should you be able to perform another occupation with your current employer, you will not receive your benefit. Any occupation also does not take into account prior versus future income. Remember, employers that offer group policies are not obligated to give their employees the details of a disability insurance plan. If you have a group disability policy, make sure you know the nuances of your benefit package.
All physicians should be purchasing policies with their specific own occupation definition. Let me help and review your policy’s definitions.
Non-cancellable, Guaranteed Renewable
This means that the insurance company can not cancel, increase the premiums, or add restrictions to the policy. Even if the carrier stops offering the type of policy you own, you are safe as long as you continue to pay your premiums. The insurer has no right to make any change unilaterally in any contract provision.
I recommend all physicians have a non-cancellable, guaranteed renewable disability insurance policy.
Future Purchase Option
This rider is an absolute must for young practitioners. It allows you to increase your coverage as your salary ascends without having to undergo additional medical testing or underwriting. The future increase option – which some carriers call a future purchase option or benefit update – protects your future earning potential.
This benefit provides for illnesses and disabilities that worsen over time. A physician with an illness or disability may still be able to perform all necessary functions of their position, but only part time or at a decreased pace, e.g. see fewer patients per hour. In the event that your salary decreases by 15 to 20 percent, the residual disability rider aids in replacing a portion of your salary. It allows disabled physicians to continue a career without suffering a devastating loss of income.
Cost of Living Adjustment
The cost of living adjustment rider helps physicians offset the effects of inflation. A physician with a longer-term or lifelong illness or injury whose disability insurance policy has this rider will see benefits increase as the cost of living increases. In other words, your carrier will upwardly adjust your payout, in the same way your employers tend to upwardly adjust salaries.
Like with many of these benefits, the cost of living adjustment benefit varies by carrier. Some carriers have a fixed percentage increase, while others are tied to the Consumer Price Index, and therefore have a range. This rider is most beneficial to younger physicians, who stand to sustain the greatest cost of living increase.
Catastrophic Injury Rider
This rider offers extra protection, in addition to monthly benefit, from the financial impact of a more serious injury or illness. Different carriers have different definitions of a catastrophic injury. Some policies refer to inability to perform a certain number of activities of daily living (ADLs,) while others refer to loss of sight, hearing, speech, or body part. Again, make sure you understand any given policy. Ask questions. Do not take anything for granted. And, I’m here to help.