5 Things Physicians Need to Know About Disability Insurance
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I would love to say I that everything I ever engaged in, signed up for, or purchased was well thought out and logical.
But of course by now you know that that statement would be a blatant lie (otherwise I could not rightfully say that I “Made Every Financial Mistake In The Book.”)
Well chalk it up to being naive and too trusting, but I essentially enrolled in a physician disability policy because I got an offer in the mail from the AMA (American Medical Association).
I hadn’t the foggiest clue about specialty specific disability clauses, as well as a myriad of other possible exemptions, in my coverage.
I had no inkling even how much coverage I should get or if this level of coverage would interfere with my group policy at work, thereby reducing those benefits.
Nope, I just thought to myself that, since it was sponsored by the AMA, they had my best interest at heart and just signed away.
I believe my policy dues were around $53/month when I first started (sometime in the mid 2000s) and had risen to around $120/mo up until the time I canceled it last year (when I felt like I was truly financially independent and didn’t need additional coverage over my mandated work group policy coverage I was enrolled in).
Fortunately I never had to put my individual (or group) policy to the test.
So that others may avoid my footsteps, I am pleased to present the following article provided by one of the sponsors of this blog, Pattern.
Who better to talk about what you need to look for in disability insurance products than experts who deal with these issues on a daily basis?
So without further ado, I will hand the reins over to Pattern.
Be careful when you look at disability insurance policies!
It’s a particular product that works in a unique way.
Disability insurance is complicated and confusing so we want to help you with an easy-to-follow checklist on what you should consider as you look at disability insurance policies.
We’ve rounded up the more important things to consider as you go through the process of picking a disability insurance policy.
1. What is the Right Type of Disability Insurance for You
True Own-occupation Disability Coverage for Physicians.
Physicians reviewing their long-term disability insurance options need to confirm the policy contract contains a “true own-occupation” definition of disability.
True own-occupation means that you would be deemed disabled if you are unable to perform the material and substantial duties of your occupation (medical specialty) AND your benefits do not change even if you make an income (gainfully employed) in another occupation or specialty.
The most important aspect of a physician disability policy is the definition of disability.
The true own-occupation definition is the strongest and provides the most flexibility to receive benefits when disabled.
There are a few other definitions of disability that are often confused with true own-occupation.
Most insurance companies (except the “Big 6” insurance companies) will say they have “own-occupation” disability insurance but contain one of the other definitions of disability like:
● Transitional own-occupation
● Modified own-occupation
● Any occupation
True own occupation coverage is the only comprehensive coverage that will fully protect your income in the event of an injury or accident.
So when looking at different policies, make SURE it is a true own occupation policy.
2. What is Included in Your Policy
If you’ve decided that you want your own disability insurance policy, the next step is to look at the policies themselves.
There are specific add-ons, known as “riders,” that provide additional benefits to the policyholder.
We’ve put together a list of the most important riders that you should make sure that your policy has.
These riders make sure that you have the coverage and protection that you want so that your income is protected in the case of injury or illness.
This kind of coverage will pay you the full benefit amount if you are disabled and unable to perform the duties of your specialty, even if you can still work in medicine or any other occupation.
Correct classification of your specialty is extremely important in determining the premium rate that the insurance company will charge.
Different insurance companies may even assign specialties to different classes, with the result that premiums rates may vary widely across companies.
Independent insurance agents that specialize in disability insurance will be able to help you find the company that assigns that most favorable class to your medical specialty, which results in you paying lower premiums.
High guaranteed increase limit.
When you are in training, you are eligible for much less coverage than you will be as an attending.
However, you can “lock in” the guaranteed right to increase your policy in the future without any more physicals or labs.
Since physicians’ incomes increase substantially once they leave training and throughout their careers, it’s important to make sure that the cap or maximum is high enough to allow you to protect a large percentage of your income without a health checkup in the future.
Partial/residual disability riders.
More physicians are partially disabled each year than totally disabled.
This means that they are prevented from earning their previous full income, but they are still practicing in their specialty.
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.
It’s important to make sure that this language is in the disability insurance policy; otherwise, the insurance company has the right to change your premium rates.
3. What You Can & Can’t Control
Don’t forget about choosing the right company!
Don’t waste your time working with companies that are not financially stable or that have bad reputations of overly difficult claims departments.
When it comes to disability insurance for physicians, there are many companies that will offer coverage.
However, physicians need to be sure to get *true own-occupation coverage* which is only provided by 6 insurance companies at this point.
The “Big 6” insurance companies include:
● Mass Mutual
● Ohio National
Some policies are often confused for having *true own-occupation coverage*, but DO NOT.
Some of these include:
● Northwestern Mutual
● State Farm
● Most employer-provided group plans
As you finish up training, your education and future income are you most valuable assets
Especially in the case of injury or illness, you do not want to spend the time putting up with the hassles of a failing company nor an obstinate claims department if you need to file a claim.
As you finish up training, your education and future income are your most valuable assets.
But even if you want a disability insurance policy, sorting through the different sorts of policies and riders can be extremely time-consuming!
4. The Best Time to Purchase a Policy
Take advantage of training program discounts.
If you’re a resident or a fellow you can take advantage of training program discounts that give you the confidence that you’re covered as soon as you enter your first attending position—not to mention that you can take it with you whenever you change employers.
Residents and fellows have the opportunity to use available training program discounts to get 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 still a resident or fellow, your policy will stack on top of whatever group coverage you receive from your eventual employer.
This feature not only makes physician disability insurance unique, but it makes residency or fellowship the best time to buy it.
Residents and fellows typically earn the lowest level of income that they ever will in the course of their professional careers and are saddled with the highest level of debt.
This is why it is an ideal time to get disability insurance to ensure that you are protected from financial loss in case of injury.
These discounts can provide career-long savings of up to 45 percent of the normal rate.
To obtain the discounted rates, you need to submit your application prior to your graduation date, or within the insurance company’s grace period.
Since this period differs among the companies, making sure that you get a quote request in before graduation ensures that you have access to the full range of options.
Even if you’re past the training program discount, you’ll never be younger (and thus have lower premiums) than you are today.
With insurance, it’s always better to get it sooner than to wait until you need it.
Don’t wait until you are in your forties or fifties to get disability insurance since premiums will be much higher than in your twenties or thirties.
5. The Insurance Marketplace is Volatile
What disability insurance claims pay is based on what’s in the insurance contract that exists between you and the insurance company.
There currently exist favorable contracts specifically available to residents that protect your occupation and medical specialty.
But remember that the insurance marketplace is volatile—getting disability insurance now will make sure that the provisions you have will not change, no matter the changes in the market.
As we’ve seen recently, however, the insurance market may suddenly end the availability of certain plans, which further limits the options for medical professionals.
By getting a contract today, you get peace of mind that your provisions will not change, no matter the changes in the market.
Insurance is confusing, and disability insurance is a particularly confusing product.
For this reason, it’s better to work with a good independent agency, instead of directly with an insurance carrier.
An independent agency will be able collect quotes for you and walk you through the intricacies of various plans to make sure that you’re cutting through the confusion to get the best plan for you.
Pattern compares all your true own occupation disability insurance quotes quickly and easily with one simple form.
With three easy steps you can compare your options and buy risk free, giving you confidence that you have the best policy at the best price!
If you are ready to lock in your disability insurance rates, fill out a quick quote request here.
If you are in search of financial help, please consider enlisting the service of any of the sponsors of this blog who I feel are part of the “good guys and gals of finance.”
Even a steadfast DIY’er can sometimes gain benefit from the occasional professional input.
NOTE: The website XRAYVSN contains affiliate links and thus receives compensation whenever a purchase through these links is made (at no further cost to you). As an Amazon Associate I earn from qualifying purchases. Although these proceeds help keep this site going they do not have any bearing on the reviews of any products I endorse which are from my own honest experiences. Thank you- XRAYVSN