Physician Disability Insurance Made Simple
The odds of an American worker becoming disabled and unable to work at some point in their career is roughly 25–30%.
When you’re a physician averaging $208,000 in earnings per year, an abrupt halt in income can create a dire financial situation.
The solution:
Physician disability insurance.
A physician disability insurance policy offers doctors a steady income when they cannot work due to a disability.
But is it worth investing 1–4% of your annual salary?
This guide will explain everything you need to know about disability insurance. From why you need this type of income insurance, to who is eligible to purchase it, to how to vet different policies.
Why Do Physicians Need Disability Insurance?
The statistics on the effects and prevalence of disability in America are sobering. At some point in their career, between 25–30% of American workers will suffer a disabling event that prevents them from earning an income.
If you become too disabled to work, the financial consequences could be catastrophic.
You may not be able to pay your medical school loans or provide a comfortable lifestyle for your family. But things can get far worse.
Without your regular income, you may lose your home. You may not be able to protect your assets. Your family could experience many hardships. You may even have to claim bankruptcy.
No one is immune to these risks. Don’t make the mistake of thinking, “It won’t happen to me.”
Even the most cautious of physicians can face tragedy.
The only real way to protect your finances is to buy disability insurance with an own-occupation or specialty-specific definition.
What Does Disability Insurance Cover + How Does It Work?
The type of disability insurance you carry will determine the scope of what it covers. Before you buy a plan, make sure you know what it covers and what it excludes.
Short-Term vs. Long-Term Disability Insurance Plan
First, it’s important to understand that not all disability insurance plans are equal. There are two main types: short-term disability insurance and long-term disability insurance.
What makes them distinct? The difference comes down to how long the plan will award disability insurance benefits to the policyholder.
Short-term disability insurance has a benefit period of about three to six months. It’s best for covering injuries and illnesses that only put you out of work for a short length of time.
The benefits of short-term disability insurance kick in much faster than long-term plans, in as little as two weeks.
A long-term disability plan could provide insurance coverage for as little as five years or as many as 20 years or more. The waiting period before seeing monthly benefits can range from a month to two years.
Individual vs. Group Disability Insurance
Individual disability insurance policies can be tailored to suit the individual. You may want to consider an individual policy if you’re self-employed or own your own practice.
An individual policy will only cover one person. The medical underwriting will be very specific to that individual. Also, these types of policies are often considered non-cancelable.
The individual policyholder will be responsible for the full cost of disability insurance premiums. On the upside, they also get full control over how much disability insurance they buy.
A group disability insurance policy is very different. Each physician who qualifies for group coverage will be subject to the same terms. This makes group coverage more rigid than individual policies.
Group policies are usually offered as part of an employee benefits package. They cost much less than an individual plan, but coverage is minimal.
The following sections focus on individual policies. Individual policies are the most comprehensive option for physicians seeking the best protection.
Definition of Disability
Depending on the insurance company, there are many different definitions of disability. It’s vital to understand how different disability insurance policies define “disability.”
Some policies will only provide disability coverage if the policyholder has a total disability, while others will still provide disability benefits if the policyholder becomes partially disabled.
Total disability occurs when you are unable to perform any and all duties of your occupation. It’s considered a partial disability if it limits your ability to work full-time or perform key functions of your occupation.
Physicians should look for an own-occupation policy, which provides the most protection.
Often, policies define disability based on whether a physician can continue working and, if so, in what occupation.
In the next section, we’ll delve deeper into what makes own-occupation policies the best choice in disability insurance.
Exclusions and Limitations
As with any type of insurance, such as auto or life insurance, the insurance agent will outline certain limits or exclusions of coverage.
Disability insurance exclusions and limitations are often identical. These include:
- Pre-existing medical conditions
- High-risk activities such as extreme sports
- Acts of war or violence
- Self-inflicted harm or attempted suicide
- On-the-job injuries
Why Own-Occupation Disability Insurance?
Why is it so important for a physician to settle for nothing less than an own-occupation disability insurance policy?
Some policies use generalized definitions of disability. According to the AMA, these policies make it very difficult for disabled physicians to collect benefits.
Own-occupation disability insurance can protect both a physician’s lifestyle and their financial plan.
Types of Own-Occ Disability Insurance Plans
Own-occupation plans use many different definitions of disability. We describe several of them below.
True Own-Occupation
A true own-occupation policy will still provide full benefits to a physician when they can no longer work in their profession. This applies even if they could perform the duties of a different job.
Transitional
When a physician cannot perform the duties of their job, a transitional own-occupation policy will pay them full disability benefits—even if they decide to transition to another occupation.
Transitional own-occupation is different from true own-occupation in that you only get benefits if your new income in your new occupation is less than what you were earning in your previous job.
Modified
Modified own-occupation policies will pay benefits to a physician if they are unable to perform their current duties. However, the physician cannot choose to earn an income from a different occupation.
Specialty
This is a very specific type of own-occupation policy. It provides full benefits to physicians who cannot perform the duties of their current medical specialty.
- When a disability policy penalizes you for earning an income while disabled, that goes against LeverageRx’s commitment to their clients. That’s why we only offer policies that allow you to work while disabled, with no reduction to your benefit.
See also: What is Non-Cancelable Disability Insurance?
Who Qualifies for Own-Occupation Disability Insurance?
There is an own-occupation disability insurance policy for almost every medical profession.
These professions include:
- Medical Doctors (MD)
- Doctors of Osteopathy (DO)
- Doctors of Dental Medicine (DMD)
- Doctors of Dental Surgery (DDS)
- Optometrists (OD)
- Podiatrists (DPM)
- Veterinarians (DPM)
- Chiropractors (DCH)
- Nurse Practitioners (NP)
- Certified Registered Nurse Anesthetists (CRNA)
- PharmDs
- Registered Pharmacists (RpH)
- Physician Assistants (PA)
- Doctors of Osteopathic Medicine (DO)
- Nurses (RN)
As long as your medical history clears the underwriting process, you should be eligible for an own-occupation disability income insurance plan.
What to Look for in a Disability Insurance Policy
Physicians should ensure that their disability insurance policy qualifies as an own-occupation policy.
Having said that, you’ll still need to make other choices about the terms of your disability insurance plan.
Riders
Riders are extra coverages that you can add to your policy. Keep in mind that riders will increase the cost of your premium.
Some riders may be worth the extra expense, especially for physicians. Consider each rider before you buy a plan. Once you settle the terms of your plan, you won’t have the option later to add more riders.
Partial Disability Rider
This add-on pays a portion of your wages in the event that you become partially disabled.
It is sometimes called a Residual Disability Rider.
This benefit can be disbursed even if the physician is still able to work part-time.
Student Loan Protection
It can take years for physicians to pay off their student loan debt. But what happens if they become disabled and are unable to fulfill this goal?
This rider will pay student loans without reducing the full monthly benefit amount.
COLA Rider
The cost of living adjustment (COLA Rider) is a rider that factors cost of living increases into your monthly benefit.
When inflation increases the cost of living over time, your monthly benefit will also increase to meet this extra cost.
Future Purchase Option Rider
For new physicians, this rider is especially important. Young physicians can often get much better rates on disability insurance. That’s because this rider factors the physician’s age into the plan’s cost.
However, it takes time for most new physicians to begin earning their full salary potential. This can limit their ability to purchase extra coverages. As physicians begin to earn more, they become eligible for more coverage.
The Future Purchase Option Rider allows physicians to increase their coverage every few years. It does not require a medical exam or proof of insurability.
Benefit Period
Many disability insurance plans offer several different benefit periods. The longer the benefit period, the higher the premiums.
Most plans offer a benefit period between five to 20 years. Or, until the physician reaches the age of retirement.
Waiting Period
Again, most disability insurance plans offer several options for the waiting period.
Otherwise known as the elimination period, this is the amount of time that a policyholder must wait from the time the claim is approved until the benefits go into effect.
The shorter the waiting period, the higher the premiums.
The waiting period can range anywhere from one month to two years.
Monthly Benefit
The benefit amount a physician is eligible for depends on their current income. Most disability insurance plans will offer a benefit amount that is about 60% of a physicians’ total salary.
Additional Options
Some insurance companies will provide even more options for your disability insurance policy.
Here are some that you may encounter:
Lump-Sum Benefit
Some insurance carriers will give you the option to receive a one-time lump sum rather than a monthly benefit.
This lump sum may be lower than the total amount you would receive through monthly payments.
Either way, you will need to decide if you need immediate funds more than you need consistent income.
Catastrophic Disability Benefit
This rider pays an increased monthly benefit if you meet the catastrophic definition of disability. Catastrophic disability means that you are unable to perform at least two or more activities of daily living. Examples of such activities include bathing, getting dressed, and feeding oneself.
Retirement Protection
This additional option will continue your contributions to your defined retirement savings plan. Retirement savings plans include IRAs and 401(k)s, but not social security benefits.
Related: How to Select an Elimination Period for Your Disability Insurance Policy
Premiums
Of course, as with any purchase, the cost is a factor to consider.
Several factors influence the cost of your disability insurance policy.
These include:
- Income: Cost is typically 1–4% of your current income
- Age: The earlier you purchase your plan, the cheaper your premium
- Gender: Premiums are more expensive for women
- Pre-existing conditions
- Occupation: Based on occupational hazard risk numbers
- Location
- Length of both the benefit period and the waiting period
- Optional riders
Who Offers Disability Insurance for Physicians?
There are many insurance companies, but only a handful of disability insurance companies offer plans that would benefit a physician.
The following companies offer true own-occupation disability insurance for physicians:
Ameritas
This insurance company has one of the cheapest premium rates in the group, but has a maximum policy benefit of $20,000 per month.
They offer a wide variety of riders, including two different COLA riders.
Guardian
This insurance provider is considered one of the nation’s best.
Guardian’s disability insurance policies offer many choices for your elimination and benefit periods. They include three options for COLA riders and two for partial disability.
MassMutual
Although this company offers true own-occupation disability insurance, it is not included in the base policy. It’s an optional coverage with a higher rate.
You can still choose your waiting and benefit periods, as well as riders.
Ohio National Financial Services
This company offers true own-occupation disability as an additional rider. They also offer several options for your benefit period and waiting period.
You can also choose from two options for both COLA riders and residual disability.
Principal
This company offers both true and modified own-occupation disability insurance.
They also provide flexible terms for your waiting and benefit periods, as well as for optional riders.
The Standard
This is one of the oldest and most trusted disability insurance providers. They offer many options to tailor your policy to your needs, including some no-cost riders.
If you are a physician not yet protected by disability insurance, we urge you to consider the benefits of such policies.
We’ve helped thousands of medical professionals across the country find the best disability insurance, and we would love to help you, too.
