One of the ways physicians can obtain disability insurance is to buy a policy through a professional association.
The American Medical Association (AMA) offers physicians its DisabilityPro Insurance policy through AMA Insurance. This plan is underwritten by The United States Life Insurance Company, based in New York City.
The AMA Disability Insurance Plan is an association policy and has significant fundamental differences from an individual disability insurance plan. To help physicians best evaluate their insurance options, we’ve provided an AMA Disability Insurance Review and outlined the major differences between the AMA plan and other physician disability insurance policies.
Definition of total disability
The definition of total disability in a disability insurance contract is arguably the most important part of the policy. This language explains when the insurance company will consider the insured totally disabled and will pay benefits.
AMA Disability Insurance. Under the AMA disability insurance policy, Total Disability means you are unable to perform the substantial and material duties of your current occupation, and you are not engaged in any other occupation. This means that if you are disabled and can’t perform the duties of your specialty, but are capable of working in another occupation, you will not receive full benefits like you would with an individual disability insurance policy with a true own occupation definition of total disability.
Individual Disability Insurance. The “big six” disability insurance companies that offer individual disability insurance for physicians are all own occupation disability insurance policies, most of which contain specialty-specific language. This means that if you are disabled and can’t perform the duties of your specialty, but are capable of working in another specialty, you will receive full benefits.
Non-cancellable and guaranteed renewable
Non-cancellable and guaranteed renewable insurance policies cannot be modified, changed or cancelled by the insurance company. If a policy is not non-cancellable and guaranteed renewable, the company has the ability to modify features and increase premiums.
AMA Disability Insurance. The AMA disability insurance plan is not non-cancellable, meaning that the policy can be changed, premiums can be increased at any time, and the company can even cancel the policy at their discretion on any policy anniversary.
Individual Disability Insurance. The “big six” disability insurance companies that offer individual disability insurance for physicians are all non-cancellable, meaning that the features of the policy when you purchase it are locked in for the life of the policy. The insurance company cannot modify any features or increase premiums as long as you make your scheduled premium payments.
Mental and nervous disability claim limitations
Disabilities arising from mental, nervous and substance abuse issues account for a significant amount of disabilities. Some policies will limit the benefits paid for these types of disabilities to a certain amount of time, and will not pay benefits for the life of the policy.
AMA Disability Insurance. The AMA disability insurance plan limits the benefits paid for mental/nervous and substance abuse disabilities to 24 months, meaning that if you suffer a disability related to a mental or nervous condition, the company will only pay you monthly benefits for 24 months regardless of how long your disability actually lasts.
Individual Disability Insurance. While some individual disability insurance plans limit mental/nervous and substance abuse disabilities to 24 months, there are policies that don’t have these limitations and will pay benefits through the life of the benefit period.
Future purchase and future increase disability insurance options
Future increase options allow the insured to increase their coverage in the future as their income grows. This is especially important for residents and fellows that will be experiencing significant increases in income in the near future and will need additional coverage.
AMA Disability Insurance. The AMA disability insurance plan allows policyholders contains a future purchase option, but coverage can be increased once within the first 3 years of the policy or before your 40th birthday, whichever comes first. This is a major limitation for physicians in residency or early in practice that may experience significant increases in their income later in their career.
Individual Disability Insurance. Most individual disability insurance plans give you the option to increase your coverage each year up to age 55. This provides policyholders flexibility to increase coverage as their income grows throughout their career, while locking in the cost of additional benefits when the policy is purchased. Some individual policies will only allow you to increase coverage every 3 years.
Cost of living adjustment
Cost of Living Adjustment riders help benefits paid for a disability to keep pace with inflation through annual increases in benefits paid. Commonly referred to as COLA riders for short, these annual increases are typically a fixed percentage or are tied to an inflation index.
AMA Disability Insurance. The AMA disability insurance plan does not provide a cost of living adjustment rider. This means that if you are paid benefits, they will not keep pace with inflation and will erode the value of any benefits paid over time.
Individual Disability Insurance. All individual plans allow you to obtain a cost of living adjustment rider with your individual disability insurance policy. These are typically a 3% or 6% annual increase in benefits paid which are capped and sometimes tied to an inflation index.
Residual or Partial Disability Benefits
Residual or partial benefits allow the insured to collect benefits if they suffer a disability that results in a loss of income, but are not considered totally disabled. Residual benefits typically require at least a 15-20% loss of income in order for the insured to receive benefits. As most disabilities start as partial disabilities, this is a critical feature of any disability insurance plan.
AMA Disability Insurance. The AMA disability insurance policy requires a loss of income of at least 20% before any benefits are paid AND must follow total disability. This means that policyholders will not be able to collect benefits from a partial disability that results in a loss of income before they have met the criteria of being totally disabled. As most disabilities start as partial disabilities, this is a major flaw of the AMA’s disability insurance plan.
Individual Disability Insurance. Individual disability insurance plans will allow you to receive partial benefits following a 15-20% loss of income and don’t require total disability to occur before partial benefits will be paid. This is a very important feature as the majority of disabilities start as partial disabilities before the insured is considered totally disabled.
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