Discount Disability Insurance for Residents and Fellows
Your countless hours of training during residency and fellowship (as well as your student debt) are investments in your future and your earning potential for years to come.
While disability insurance is essential for physicians to help protect and sustain that investment, it can often seem costly.
Is it worth obtaining disability insurance now while still a resident or fellow and only making enough to pay for the bare necessities?
As a resident, you will never be in a better position to purchase disability insurance.
Even if it seems like a hefty expense, obtaining disability coverage now will save you thousands in the long run and protect your income for decades.
What is disability insurance?
Disability insurance policies are designed to help replace a portion of a worker’s income if they can no longer work due to an illness or injury.
For example, if a construction worker suffers from an arm or leg injury, it’s likely that they will be unable to use the tools necessary to do their job. This is where disability insurance kicks in – the insurance policy will provide the worker with an income they can use to live on while recovering from their injury or seeking new employment.
How much does disability insurance pay?
The amount of income provided by disability insurance will depend on a few different factors, including the length of time that the worker is unable to work, the profession they are involved in, the worker’s medical history, and how strict the rules surrounding disability are within a particular policy.
However, most policies replace up to 60% of your monthly income in the event that you become disabled.
Some policies, known as short-term policies, will pay this benefit for up to a year. Long-term disability insurance allows for terms longer than a year, up to and including total disability until the age of retirement.
What is considered a disability?
The Americans With Disabilities Act (ADA) defines a disability as a physical or mental impairment that substantially limits a major life activity. However, for the purposes of disability insurance coverage, it will depend upon your job and your individual policy to determine what is and is not considered a disability.
Some disability insurance policies will only cover a disability that is severe enough that it prevents you from working any job at all. Others will cover your lost income if the disability prevents you from working in your current occupation. There may also be limitations on the length of time that your policy will cover you.
Do physicians really need disability insurance?
Physicians and other healthcare workers are just as likely to become disabled as those in other career fields. Thousands of hospital and healthcare workers each year suffer from work-related injuries and illnesses. According to a recent press release from the US Department of Labor, the frequency of injury and illness rates increased by over 200% during the COVID-19 pandemic.
According to this press release there were more healthcare workers who missed work due to an injury or illness than in the construction and manufacturing industries.
It is also important to remember that you can become disabled due to an injury or illness outside of the workplace too. The Council of Disability Awareness reports that out of the 5% of working Americans that experience a short-term disability (six months or less) each year, nearly all of them are non-occupational in origin.
This means that no one, physicians included, is immune from the risk of becoming disabled, no matter their occupation or current health state.
Will my employer provide disability insurance?
Physicians who are employed full-time by hospitals often have access to group insurance policies as a part of their employment. However, these policies cease to be in effect when a physician quits or changes jobs.
Group policies also often lack the ability to be changed or customized to fit the needs of individual physicians. Your disability insurance needs will change as you grow older or as your career progresses.
Individual disability insurance plans allow for much more flexibility when it comes to changing your benefits. Physicians can also take individual plans with them when they experience a change in employment.
Why should residents and fellows get disability insurance?
As a resident or fellow, long-term disability insurance will never cost less than it does now. This is thanks to the young age and generally good health that residents and fellows tend to possess.
The older that you get, the higher your insurance premiums will be due to the increasing likelihood of becoming disabled that comes with age. By the time you are 65, your chances of becoming disabled will have nearly doubled.
Because residents and fellows have not yet reached their full earning potential, many are tempted to wait until they have become physicians to carry disability insurance. However, there are discounted premiums and benefits that are only available to you while you are still a resident. These discounts will remain in effect for the duration of your policy.
Waiting until you have begun your career as a physician may save you money now, but it will end up costing you much more in the long run. Purchasing a long-term policy with a level premium while you are still a resident can potentially save you thousands of dollars over the length of your career as a physician.
What discounts are available for residents?
There are a number of disability insurance discounts and benefits that are available to residents. One of which is that residents are often allowed to forgo medical exams that most insurance policies require. This can often result in lower premiums, particularly for residents with pre-existing conditions.
The price of disability insurance often changes depending on specialty. Two residents may plan on pursuing vastly different specialties, such as one becoming a surgeon and another becoming an allergist. Normally, these two people would pay very different premiums.
However, if they both purchased disability insurance before they chose their specialties, they would likely pay much lower and much more similar premiums. Residents and fellows generally pay less, regardless of what specialty they go on to pursue.
Residents and fellows qualify for certain riders that make insurance more affordable. An increase rider (often called a future increase option) rider is a provision that allows physicians to pay for more disability coverage later in their careers without requiring the purchase of a new policy.
What is a GSI disability policy?
If you are a resident or fellow working for a large medical institution, you may be lucky enough to have access to Guaranteed Standard Issue Disability Insurance (GSI). These are high-quality plans that are only available to employees of specific institutions.
Some of the perks of GSI policies include:
- No medical underwriting is involved. This means you will have access to the best policy regardless of your medical history or current medical conditions.
- The premiums are unisex. Because males and females tend to experience different health issues, they tend to have different premiums for the same policy. The premiums for a GSI policy are the same regardless of sex.
- The policies tend to be much less expensive than other individual or group plans.
While many insurance companies offer GSI policies to physicians who have finished their residency or fellowship, it becomes much harder to access these plans. Many insurance companies only offer these plans to current or graduating residents.
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How much does disability insurance cost?
There are a number of factors that determine the cost of disability insurance. Cost tends to vary depending on the policy benefits, riders, income, benefit and elimination period of the policy.
A practitioner’s sex, geographical location, pre-existing conditions, habits and current health status can all affect the cost of disability insurance. Younger people with a clean bill of health will have lower premiums than someone who is older, has experienced a severe illness or injury in the past, or engages in unhealthy habits such as smoking.
As a general rule, however, most physicians can expect a policy to cost 1-3% of their annual salary. There are certain medical specialties that might result in a higher premium. For example, surgeons tend to have a higher premium than primary care physicians.
How do I choose the right disability insurance policy?
There are two main kinds of disability insurance that are available to physicians: own-occupation disability insurance and any-occupation disability insurance.
Own-occupation versus any-occupation policies: what’s the difference?
Own-occupation disability insurance will cover a portion of your income if an illness or injury prevents you from working in your current occupation. For instance, if a surgeon injures their hands and can no longer perform surgery, their income would be covered by an own-occupation policy.
Any-occupation disability insurance will only cover a portion of your income if your injury or illness prevents you from working in any job environment.
The same surgeon with a hand injury would not be eligible for benefits under an any-occupation policy if they were still capable of working as a physician, even if they could no longer perform surgery.
See also: Occupation Classes in a Disability Insurance Policy
Which type of insurance is better for residents?
For residents and fellows looking to purchase disability insurance, own-occupation policies are a safe bet. While this kind of policy tends to be more expensive, the invested time and cost of training for a specialty are not worth risking for a lower insurance premium.
Transitional own-occupation policies are a third option that is also a good choice for residents. These policies will make up for differences in your income if you are forced to move to a new occupation due to an injury or illness.
In our scenario with the surgeon, they would continue to receive the benefit of their surgeon’s salary under this policy even if they took up a job as a general practitioner or another specialty after their hand injury.
What else should residents and fellows look for in a disability insurance policy?
When choosing a disability insurance policy, it is vital for residents to look at any riders that are included within the policy. Riders are amendments to an existing contract that changes the terms of the policy.
Many riders are in a resident’s favor, such as the ability to add further coverage to an existing policy, as with the FIO rider mentioned earlier.
Residents should also be on the lookout for the cost of living adjustment (COLA) rider. The COLA rider gradually increases benefits to keep up with the rising cost of living. A few kinds of COLA riders are available, including fixed riders that increase benefits by a certain percentage each year, and indexed riders, which increase benefits according to the Consumer Price Index.
Other riders may not be necessary for some residents and can increase premiums, such as student loan forgiveness riders. This is a great rider for those who carry a lot of student debt from medical school, but not necessary for those who do not.
Should I work with an agent to choose a disability insurance policy?
Searching for and comparing many different disability insurance policies can quickly become overwhelming. That is why working with an independent agent is highly recommended for residents and fellows looking to purchase disability insurance.
While large insurance companies are often eager to let their captive agents help you decide”, this can often cause a conflict of interest and lead you to purchase insurance you don’t need.
It’s important to seek an independent agent with experience with clients within the healthcare community. They will have a strong understanding of the needs of residents, fellows, and physicians and will be able to sift through policies from multiple carriers to find the right one for your situation.
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Working with an agent who is knowledgeable and experienced in working with physicians is the best first step toward securing your investment for the future. They can help you sort through your options and help to choose the right plan for you.
You have already invested years of your life and accumulated debt into your career in the medical field – don’t let an accident or illness put your investment at risk.
Disability insurance is a crucial aspect of financial planning for physicians in residency, and the right coverage can provide peace of mind in the event of an unexpected illness or injury.
As a trusted provider of disability insurance, LeverageRx is here to help you navigate the options and find a policy that meets your unique needs. Don’t wait until it’s too late — contact us today to learn more about how we can help you protect your financial future.