Individual long-term disability insurance policies are your best protection against a loss of income that results from an illness, injury, or disability.
But many physicians find it confusing to customize their own policy, partly because there are so many optional riders to choose from.
If you’re getting ready to invest in a disability insurance policy, here’s our complete guide to 13 physician disability riders and how they can make your policy much more robust.
What Are Disability Riders?
Disability income insurance pays benefits when a medical condition prohibits you from working and earning your accustomed income. You decide the coverage amount you need, and the insurance company will pay you that monthly to make up for your lost income.
Add riders to your policy, and you can bring in even more.
Riders are added, optional benefits that you can tack onto a policy. Some of these add-ons increase your coverage amount per month. Others exist to enhance policy terms. There are many to choose from (some more important than others), and each one you add will increase the cost of your monthly premium.
1. True Own-Occupation Definition of Disability
When you file a disability claim, the first thing the insurance company will look at is whether or not it meets the definition of a disability. Some policies make it easy to get a claim approved, while others make it almost impossible to ever collect benefits. Some definitions are more clear than others, making the claims process simpler.
For physicians, if you only add one rider, it should be the True Own-Occupation Definition of Disability rider.
With this definition of disability, you can collect benefits if you suffer any injury or illness that prevents you from doing some or all of your current occupation. Because physicians have such specialized experience and education, this is incredibly important.
The default definition in most insurance policies is that of “any occupation,” which means you have to be unable to work in any job to collect benefits. For a physician accustomed to earning $10k or $20k or more per month, an any occupation policy wouldn’t pay you a penny if your injury permitted you to work a different job that would be reasonable for your level of education.
With a True Own-Occupation policy, you can collect benefits even if there are thousands of other jobs that you could do.
Collect Benefits and Still Work (in a Different Occupation)
Another advantage to having the True Own-Occupation definition is that you can collect monthly disability payouts even if you choose to work and earn income in a different line of work.
As long as your injury or illness prevents you from working in your specialty doing the job you did pre-disability, you can collect benefits.
Only Offered By the Big Six
There are only six insurance companies that offer the True Own-Occupation Definition of Disability, and that has earned them the moniker “Big Six.”
Physicians looking for the greatest amount of disability income protection through a True Own-Occupation policy should purchase their insurance from one of these six reputable companies:
- Mass Mutual
- Ameritas
- Principal
- Guardian
- Ohio National
- The Standard
2. COLA Rider
Inflation rises year-over-year. In fact, the last time it dropped was 1954. That means that every dollar you earn today will be worth a little less in the future. The good news is that you can protect yourself against that by adding the COLA rider.
The COLA rider, also called the Cost of Living Adjustment or the Cost of Living rider, increases your coverage yearly based on the Consumer Price Index. As inflation rises, so will your benefits.
For example, if your monthly benefit today is $10,000 and inflation increases 2% this year, next year it will be $10,200 — if you have the COLA rider.
This is a rider that every physician should add to their policy, but it’s crucial for younger physicians with more years to work. Older physicians nearing retirement age are the only policyholders that might not need it, as all policy benefits end when you reach retirement age.
3. Future Purchase Options
There are a few different future purchase options, including:
- Future Increase Option
- Future Insurability Rider
- Future Purchase Option
- Future Benefits Rider
No matter which option you choose or what the insurer calls it, it’s one of the most essential riders you can add to a policy, especially for younger physicians and residents just starting their careers.
When you get disability insurance, the max coverage amount allowed is a percentage of your current income. However, you’ll likely earn more as you advance in your career. The more you make, the more coverage you’ll need.
A future purchase option allows you to increase coverage when your salary increases in future years. You won’t have to undergo the process of underwriting a new policy.
This is what makes this type of rider so key.
Insurers require you to have a medical evaluation before they underwrite your policy. When you do so, the younger and healthier you are, the lower your premiums will be. A future purchase option gives you the option to add coverage at a future date without having a new health screening that could detect a new, pre-existing condition and increase your premiums.
A future purchase option is a must-have for residents and younger physicians who will likely see salary increases. It is not necessary if you are nearing retirement or aren’t likely to see any more salary increases throughout your career.
4. Automatic Increase Rider
Unlike the future purchase option, in which policyholders can elect to increase coverage, the Automatic Increase rider automatically increases your benefit — and your premiums along with it.
Also called the Automatic Increase Benefit or the Benefit Update rider, this additional coverage automatically increases your benefit amount throughout and up to the first six years you hold the policy.
It’s a good idea to add the AIB to your disability coverage if your income will increase in the next four to five years. If there’s no guarantee of a salary, you can turn AIB off.
5. Student Loan Repayment Rider
Physicians still saddled with student and medical school loan debt may consider adding the Student Loan Repayment rider. However, because your budget already includes student loan payments, it is not necessary to add this rider if you protect your income fully.
If you do choose to add this rider, drop it from your policy once your student loans have been repaid.
6. Catastrophic Disability Rider
The Catastrophic Disability rider provides additional monetary benefits if you have severe cognitive impairment or suffer a disability that prevents you from doing some of the basic activities of daily living::
- Eating
- Bathing
- Dressing yourself
- Toileting
- Continence
- Transferring in and out of a bed or chair
This can be an invaluable insurance benefit, but it’s not a necessity. Many policyholders choose to pay for a larger coverage amount to cover the expenses of the additional care rather than add this option.
7. Premium Waiver Benefit
Also called the Waiver of Premium rider, the Premium Waiver Benefit is both a policy enhancement and an added financial value. With it, you won’t have to pay monthly premiums on your policy while collecting benefits, but you will have to resume premium payments if and when you return to work.
The more your monthly premium payments are, the more money this rider will save you.
Policyholders with a long benefit period who suffer an injury that lasts permanently or throughout the entire benefit period could save tens of thousands of dollars by opting for this rider. Without it, you’ll have to continue paying your monthly premiums.
8. Residual Disability Rider
Sometimes referred to as the Partial Disability rider, the Residual Disability rider pays a portion of your total benefit amount if your injury or diagnosis prevents you from working full-time but allows you to scale back to a part-time schedule.
Everyone should add this option, as it’s a way to keep earning your full income even if you can only work a small percentage of the time.
Here’s how it works:
If you have a $10,000 monthly benefit and your part-time income earns you $6,000 per month, your insurer will pay you a reduced benefit amount that’s proportionate to the income you’ve lost. The most you would be able to receive would be $4,000.
Read more: Residual Disability Rider in a Disability Policy
9. Retirement Protection Rider
The Retirement Protection rider is an optional one. Most physicians prefer to pay for more coverage and a larger monthly benefit rather than the added cost of this option. However, this rider is a good way to increase coverage if you can’t get as much coverage as you want.
With this added to your disability policy, you can earn extra money each month that can be used to continue to fund an IRA or 401k and save for retirement. It’s usually better to select a higher coverage amount and continue to support your retirement accounts with a percentage of that.
10. Guaranteed Renewability Rider
The Guaranteed Renewability rider is one that many insurance companies allow you to add for free, and it’s one that everyone should select.
This rider is a policy enhancement that ensures the insurance company can never cancel your policy as long as you continue to pay your monthly premiums. To further protect yourself from rising premium costs, you can also add the Non-Cancelable rider.
11. Non-Cancelable Rider
To ensure that your insurance carrier won’t cancel your policy or increase your premiums, add the Non-Cancelable rider. Like the guaranteed renewability rider, it ensures you’ll have the same amount of coverage for the same cost as long as you pay your premiums.
Everyone should have a non-cancelable policy, and the best part is that many providers offer it as a free, built-in benefit that won’t add a penny to your monthly premium as long as you keep your same coverage amount.
12. Survivor Benefit
The Survivor Benefit, also called the Death Benefit, will give a portion of your disability income to your heirs and beneficiaries when you’re gone. Should you die while still collecting disability benefits, your insurance company will pay a few months of your disability income directly to your beneficiaries on your behalf.
If you already have a robust life insurance policy, this rider is not a necessity, though some insurers include it as a free, built-in benefit.
13. Lump Sum Disability Benefit
Regardless of your benefit period, your monthly payouts will end when you reach retirement age. The Lump Sum Disability Benefit allows you to collect one final lump sum payment at the end of your benefit period to help you pay for future expenses in retirement.
For ailments such as stroke, loss of vision, or heart attack, some carriers also offer lump sum payments in lieu of sending monthly payments throughout your benefit period.
Recap
With so many riders to choose from, it can be tricky deciding which ones to select and which ones to pass up.
Before buying disability insurance coverage, be sure to compare and weigh policy terms with the costs and benefits of various add-ons. Almost every rider you add will increase your monthly premium payments, but the extra value they provide makes (most of them) well worth it.
Many agents quote rates with pre-selected riders already added in. These are usually sufficient, but it is important to be aware of what other riders may be available to you.
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