The life of a medical resident isn’t easy. You’ve spent eight years or more in undergraduate studies and medical school. Student loans are piling up. You’re working 12 - 16 hours a day and making $50-$60k a year. There's no time to think about the future, let alone what you would do if something catastrophic happened. Besides, there's no room in your budget for anything beyond basic living expenses. Given these circumstances, buying physician disability insurance may be something you want to delay. But that would be a mistake. This article is your guide to resident disability insurance. Let's go.
Remember, no one plans on becoming disabled, especially when they are young. However, 25% of 20-somethings today will be disabled by the time they retire. You might think you are covered through your group policy, but group disability for physicians won’t give you the protection you need. This is because group policies are not underwritten. Instead, group policies cover everyone within X group (hospital, association, etc.) which leaves little room for personalization. Plus, group policies can be canceled or modified at any time, sometimes without your knowledge! For that reason, individual disability insurance is the way to go. You can customize it to meet your unique needs and plan for your financial future. Here is why you should buy disability insurance as a resident:
Protect Current Income
If you become disabled during your residency, you may find yourself unable to participate in the program. If you can't participate in the program, then you would lose your income. If you have a family, physician mortgage, student loans or other obligations, losing your income would be catastrophic. Even if you declare bankruptcy following a disability, student loans are difficult to discharge. Therefore, disability insurance benefits can help you replace the income you would lose due to injury or illness.
More Affordable Than Ever
Buying a policy while you are in residency will lock in your premium for decades. One of the major underwriting factors that determine the cost of disability insurance is age. The younger you are, the less you will spend on coverage. Waiting until you can “afford” physician disability insurance will end up costing you more. For example, if you buy resident disability insurance at age 30 instead of age 35, you will save $75 per month, $920 per year, and $4,500 over the course of your career!
Student Loan Rider
Physician disability insurance doesn’t just help replace your income in the case of an illness or injury, it can also help you pay off your debts. By adding a student loan rider to your disability insurance policy, some insurers will actually help you pay back your student loans (up to an agreed upon amount) without tapping into your lost income benefit. That is a win-win.
You Can Enhance Later
Disability insurance coverage is based on your current income. Resident and fellow benefits are typically capped around $5,000 and $6,500 a month, regardless of your specialty or income. If you have an employment agreement signed while in residency, then you may be able to increase that cap. But if not, no worries! The great thing about physician disability insurance is that it is flexible. For example, there is something called a Future Increase Option Rider which allows you to add more coverage without having to go through medical underwriting again. In other words, you can lock in your premium during residency (low) but buy more coverage once you are an attending physician! We'll review more riders below.
There are a lot of reasons to buy disability insurance as a resident. However, don't feel pressured to do so. These are two legitimate reasons not to buy resident disability insurance:
You Can't Afford It
Although disability insurance is great for protecting your future expenses, it doesn't necessarily help your current expenses if you are already on a tight budget. Medical residents are famous for working long hours and making very little in salary. If you are worried about the cost of premiums, review your budget carefully and shop around for rates before making your final decision on a policy. If you can't swing it this year, then you can't swing it and that's okay.
You Are Covered Already
As mentioned, group disability insurance policies are usually not comprehensive enough for the individual. That said, every employer and association is different and it could be that your group policy is indeed sufficient. Talk to your program director, talk to your coworkers and call the insurance company yourself. Ask lots of questions and make sure you understand the benefits you'd be entitled to should something happen. If after doing all that, you are still happy with your group policy, then congratulations! You are all set.
Each resident’s personal financial situation is different, so what you are looking for in a policy should be as well. Here are some of the most important things to look for during your search:
Non-Cancelable or Guaranteed Renewable
Non-cancelable insurance policies allow you to lock in your premium and terms when your policy begins. They are called non-cancelable because as long as you pay your premiums, the insurer can’t cancel your policy. If you are young and in residency, enrolling in a non-cancelable policy will ensure that your disability insurance premium stays low well into your 60s, when non-cancelable plans are usually evaluated.
Guaranteed renewable plans are similar to non-cancelable plans, in the sense that they lock in your policy terms. The difference here is that guaranteed renewable policies allow the insurer to increase your premium over time, as long as others in your rating class are also charged the same increase. If given the choice, non-cancelable is preferable to guaranteed renewable.
Own-occupation disability ensures that you will be paid benefits if you can no longer work within your medical speciality. Own-occupation is special because the policy does not require the disabled person (policyholder) to be idle at home due to his or her disability. With own-occupation disability insurance, you are free to work in any other occupation or industry you like and receive a full-time salary. However, because you cannot work in your specific area of medicine, then you will still receive disability benefits, whether you are employed elsewhere or not.
A COLA rider is helpful in offsetting inflation, which can have a huge impact on your disability benefit should you ever need to collect on it. Including a COLA rider in your policy will ensure that your payout amount is adjusted to help keep pace with inflation.
Residual Disability Rider
Short term and partial disabilities can still have a huge impact on your ability to perform your job, especially with the long hours required of medical residents. To ensure that you don’t lose income when you can’t operate at peak capacity, a residual disability rider can be added to your policy by your insurance agent.
Short-term disability can be beneficial for just that, the short-term. However, if you become disabled as a resident and lose your ability to practice medicine, you will miss out on the salary potential of your occupation. Long-term disability is meant to replace this income for a much longer period of time.
Future Increase Option
A future increase option gives you, the policyholder, the option to increase the amount of disability insurance coverage you have as your income rises. Since residents have a larger salary to look forward to once they become an attending physician, this option ensures that your policy can grow with your career.
Student Loan Repayment Rider
A student loan repayment rider is especially helpful to those who have a lot of student debt. Since you will need to retain as much of your disability payout as possible to cover your lost income, a loan repayment benefit can help you pay off your student loans. Each insurance company will offer different loan repayment terms and you will need to decide on a payoff amount with your individual insurer.
Disability insurance cost is going to to depend on a number of factors, including:
- Your specialty
- The amount of income that you want covered
- Your age
- Your sex
- The terms, benefits, riders, and policy add-ons that you have selected
- The insurance company you selected
Remember, no matter how much a disability insurance policy may cost you now in residency, it is the cheapest it will ever be. If you can lock in a low rate now, especially with a non-cancelable policy, your future self will thank you and save lots of money.
Disability insurance could be free, depending on your residency program
Disability insurance for residents could be completely free, depending on where you complete your residency. You will want to refer to your benefits package in order to find out if you are already protected by disability insurance. Oftentimes, hospitals will enroll residents in a group policy that is shared amongst other residents and employees. However, even if you have disability insurance through your residency, you may not have enough. If the benefit payout isn’t enough to cover lost income, you may want to enroll in an additional policy through a company like Amica or The Standard.
Who Offers Disability Insurance
Increase OptionResidual BenefitStates available in
Ameritas Life is as reputable as any name in the insurance industry. However, it's actually a newcomer to the disability insurance space in comparison to its competitors. DInamic Foundation is its best disability insurance product for doctors. Policies are underwritten and issued by Union Central Life, its wholly-owned subsidiary.
Ameritas features a true own-occupation definition of disability. This provision benefits you if an accident or illness prevents you from practicing your specialty.
DInamic Foundation requires you to choose between non-cancelable coverage and guaranteed renewal. The maximum benefit period available is to age 70. Ameritas offers basic and enhanced residual disability riders. It also offers two different COLA riders.
- True own-occupation provision.
- Lowest premium amount.
- Two COLA rider and residual disability options.
- Various add-ons such a good health benefit, presumptive total disability benefit, COBRA premium benefit, partial disability benefit, and non-disabling injury benefit.
- Slower customer service.
- Lowest maximum policy benefit: $20,000 per month.
- Must choose between non-cancelable coverage and guaranteed renewal.
- For certain occupation classes, the own-occupation provision is only available for five years.
As one of the largest, most trusted mutual insurance companies in America, Guardian Life is the Cadillac of its industry. Its disability insurance product, ProVider Choice, is a great fit for doctors. Policies are underwritten and issued by Berkshire Life, a wholly-owned stock subsidiary.
According to Guardian, total disability occurs when injury or illness prevents you from performing your occupation. For doctors, more than half of your income must come from hands-on patient care or surgical procedures to qualify.
Guardian’s true own-occupation definition of disability guarantees full benefits. It still applies if you’re able to maintain gainful employment in another occupation. In fact, you may be able to benefit if you can still practice your specialty with major limitations.
Coverage is non-cancelable and guaranteed renewable to age 70. You may elect 10-year, five-year and two-year benefit periods. Guardian offers 30-day, 60-day, 90-day, 180-day, 360-day and 720-day elimination periods.
Unlike other providers, Guardian features three cost-of-living adjustment (COLA) rider options. As for residual disability, Guardian offers both basic and enhanced partial riders.
- True own-occupation provision.
- Highest COMDEX score: 99.
- Highest maximum policy benefit: $20,000 per month.
- Simplified underwriting for up to $7,500.
- Various options for benefit and elimination periods.
- Various options for COLA and residual disability riders.
- Various add-ons such as an automatic benefit enhancement, benefit purchase option, catastrophic disability rider, hospice care benefit, serious illness supplemental benefit and student loan protection.
- Highest premium amount.
- No presumptive total disability benefit.
MassMutual has been a mainstay in the insurance game since 1851. MassMutual offers two disability insurance products, Radius and Radius Choice. Both feature provisions and add-ons that allow you to customize your coverage to meet specific needs. MassMutual helps you protect your income and retirement without relinquishing payment control.
MassMutual features a true own-occupation definition of disability. However, the provision is not part of your base policy. You must purchase it as an additional rider. With this provision in place, ‘total disability’ occurs when you cannot perform the main duties of your occupation. This requires you to be under a physician's care.
Both Radius and Radius Choice are non-cancelable and guaranteed renewable to age 65. Radius is conditionally renewable for life, while Radius Choice is only until age 74. Both policies have benefit periods available to ages 65 and 67, as well as two years, five years and 10 years. Radius Choice also offers a maximum benefit period to age 70. Both policies offer elimination periods of 60 days, 90 days, 180 days, one year and two years.
MassMutual offers one cost-of-living adjustment (COLA) rider. After your first year of disability, your monthly benefit increases by a set percentage each year. MassMutual offers one option with basic criteria that increases your chance of qualifying.
- True own-occupation provision.
- Various add-ons such as an automatic benefit enhancement, catastrophic disability rider, future increase option, presumptive total disability benefit and student loan protection.
- Own-occupation provision sold separately.
- Only one COLA rider and residual disability rider option.
- No benefit purchase option, hospice care benefit or serious illness supplemental benefit.
Ohio National’s disability insurance product is relatively new to the market. Still, it's among the best money can buy. ContinuON Income Solutions II allows you to customize your coverage without losing control of premium expenses.
Ohio National offers its true own-occupation provision as a rider. Regardless of occupation class, it does not come with your base policy. With Ohio National, total disability occurs when you're unable to perform the material and substantial duties of your specialty. To qualify, you must be under the care of a physician.
ContinuON Income Solutions II is guaranteed renewable on an annual basis. Coverage is non-cancelable as long as you consistently pay on time. Benefits periods include age 65, 67 and 70. Two-year, five-year and 10-year benefit periods are also available. Ohio National offers 60-day, 90-day, 180-day and one-year elimination periods.
Ohio National offers both a 3% and a 6% COLA rider. Policyholders may elect the basic or enhanced residual disability rider.
- True own-occupation provision.
- Excellent customer service.
- Various add-ons such as a hospice benefit, survivor benefit and recurrent disability benefit.
- Lowest physical and labs limit means simplified underwriting is only allowed for up to $3,000 per month.
Principal Life is among the most competitive providers in the disability insurance market. HH750 is an excellent option for doctors seeking a top-shelf disability insurance product. It features a wide variety of options that afford you maximum flexibility.
Principal offers both a true own-occupation and a modified own-occupation provision. A true own-occupation provision is the best bet for highly-skilled individuals like doctors. You benefit if you become unable to perform the material and substantial duties of your specialty. It still applies if you can maintain gainful employment in a different occupation.
Modified own-occupation is a watered-down version of the former. Frankly, it's only feasible if you’re cost is a concern. The definition of disability is the same, but you will not benefit if you can fulfill another occupation. Either way, both provisions are available as part of your base policy. You do not have to purchase an additional rider.
HH750 is non-cancelable and guaranteed renewable to age 65. Benefit periods are available to ages 65, 67 and 70, and for two years and five years. Principal features 30-day, 60-day, 90-day, 180-day and one year elimination periods.
Principal offers one cost-of-living adjustment (COLA) rider. After selecting a maximum benefit between 3-6%, it increases on a compound basis. Principal also offers one partial residual disability rider.
- True and modified own-occupation provisions.
- Advisor’s Choice Award for advisor support.
- Available to those who only work 20 hours a week.
- Simplified underwriting for up to $6,000 per month.
- Various add-ons such as a benefit update rider, catastrophic disability rider, future benefit increase rider, presumptive total disability benefit, and serious illness benefit.
- The modified own-occupation provision can be misleading. It can save you money now, but you will not receive as strong of benefits as true own-occupation.
The Standard is among the largest, most trusted providers in the disability insurance space. The company has several options, but Platinum Advantage is the most beneficial for doctors. It features built-in provisions and additional riders that maximize income protection.
The Standard's true own-occupation definition of disability is available as an additional rider. With this provision in place, ‘total disability’ occurs when you are unable to perform the substantial and material duties of your specialty. You must also be under the care of a physician to qualify.
Platinum Advantage is guaranteed renewable to age 67. To make your policy non-cancelable, you must purchase an additional rider. Benefit periods are available to ages 65 and 67, as well as two years, five years and 10 years. Elimination periods of 60 days, 90 days, 180 days and one year are available.
The Standard offers one cost-of-living adjustment (COLA) rider. After selecting a maximum benefit between 3-6%, it increases annually on a compound basis according to the Consumer Price Index. The Standard offers a basic residual disability rider.
- True own-occupation provision.
- Wide variety of options and strong coverage guarantee.
- No-cost riders and benefits, such as the family care benefit.
- Various add-ons such as an automatic increase benefit rider, benefit increase rider, catastrophic disability rider, family care benefit, premium waiver benefit, presumptive total disability benefit, student loan rider and survivor benefit.
- Own-occupation and non-cancelable riders sold separately.
- Only one COLA rider and residual disability rider option.
- Lowest COMDEX score: 79.
Micah believes financial literacy is the key to building lasting wealth, security, and the ability to make life-changing financial decisions with confidence. For his own website and others, Micah writes thoughtful personal finance content that makes a positive impact in readers' lives. You can find his past work on Micah Murray Freelance and Money Under 30.