Before we start to talk about what we get wrong with disability insurance, I should tell you that I personally do not carry disability insurance. It’s true. If I were no longer able to perform my duties as an anesthesiologist, I would no longer earn a paycheck.
And yet, reviewing the list below, I don’t believe I’ve made a single mistake regarding disability insurance.
You see, I did once buy a true own-occ disability insurance policy from a reputable company via an independent agent. I locked in a low rate in residency and increased my benefit after graduating. It was only after I achieved financial independence that I was in a position where the policy became optional.
I carried the policy for about 10 years, most of them with a $10,000 a month benefit. That was enough to fund the life we lead. Now, our investments can support that, making both disability and term life insurance redundant policies. I no longer carry them, but they were an integral part of my financial plan.
Today’s guest post was written by Matthew Wiggins, a close childhood friend of Coach Chad Carson and partner at Pattern (check rates here), a frequent sponsor of Physician on FIRE, supporting our charitable mission.
Matthew was kind enough to write the following blog post and create a video based on the content. Enjoy!
Top 5 Mistakes Doctors Make With Disability Insurance
Busy doctors can get so stressed by how time-consuming and complicated researching disability insurance can be that they end up going with the wrong policy or forgoing disability insurance altogether.
This leaves many doctors at risk of losing their homes, cars, and general standard of living should they get disabled and not have their income appropriately protected. But it doesn’t have to be that way!
To keep you from putting yourself in this dangerous place, I’m going to share with you the top five mistakes we’ve seen doctors make over the last decade.
#1 Thinking they don’t need disability insurance
Many doctors, especially young doctors, think that they’ll never become disabled. Studies show, however, that doctors have a 20-30% chance of being disabled over the course of their careers, a much higher chance than those in other white-collar professions.
In addition, the financial impact of not having your income protected can be life-altering. A recent study showed that 42% of people diagnosed with cancer end up depleting all of their life savings, even when they had health insurance.
A huge reason they had to exhaust their savings was due to being out of work for long periods of time and not having an income source.
The best way to protect your assets from the financial effects of a chronic illness or injury is long-term disability insurance. Since your career income is far and away your largest financial asset, protecting it is a no-brainer.
If you’d insure a $30,000 car or a $400,000 house, you should insure your $5 million (or $50 million) career income.
#2 Believing all disability insurance is the same
One of the reasons why researching disability can feel overwhelming is that it’s difficult to understand the policies and their specific language.
Is this true own-occupation disability insurance? How do you know if this rider is the same as that one? And what is a rider, anyway?
Despite its confusing jargon, it’s so important that you fully examine the policies if you choose to do the research yourself. The coverage you purchase and how it protects you is only as good as its contract language.
If the contract language states that the policy will keep paying you the full benefit if you are unable to perform your duties, even if you can work in a different job after the disability, it’s a true own-occupation policy.
If it says that it protects your own medical occupation, but it will diminish or quit paying your benefits if you can simply do ANY job after a disability, then it’s not a true own-occupation policy and is not protecting you thoroughly.
True own-occupation disability insurance is currently only provided by a limited number of companies: Ameritas, Guardian, Mass Mutual, Ohio National, Principal, and Standard.
#3 Thinking employer coverage is enough
Disability insurance through your employer is just not enough on its own! Most doctors don’t realize this but their employer’s coverage is not true own-occupation coverage and the benefit is most often taxed before you ever receive it.
This means that if you get disabled and think your employer will cover 60% of your income, it may end up only paying you between 25%-40% of your attending income after taxes and other deductions are made.
On top of this, coverage from your employer is not portable in most cases. This means you could end up in a position of not being able to protect your income in the future if you change jobs to an employer that doesn’t provide a disability benefit or if your health has changed to where you can’t get the coverage on your own.
#4 Not using an independent insurance broker
When I was in the 8th grade, I had both of my parents for teachers. They tried so hard to avoid the perception of favoritism, but of course they were partial to me—they were my parents, after all!
I always think about that when I hear about doctors trusting an insurance agent who is employed by a single company to be unbiased.
Even if they have the best intentions to be impartial, if their office is paid for by one company and their bonuses are linked to selling policies from that company, they can only be dispassionate to a certain degree.
Your best bet is to find an independent insurance broker who is not employed by any of the companies that they help you research.
One trick is to ask them how much of their business is placed each year with each company and why? You’ll learn a lot if they are honest with you!
#5 Waiting to buy disability insurance
There are two constants in the world of disability insurance: prices go up as you age and as your health deteriorates.
In most cases, you will never be younger and healthier than you are today so your disability insurance rates will never be better.
Plus, if you’re still in training there are some incredible discounts available to you, some up to 40 percent off of the price you’d pay as an attending.
If you wait too long and you have a health issue arise that would make you uninsurable, your ability to protect your income would vanish, right as you needed it the most.
To get the best price and not risk your opportunity to get coverage, the sooner you start looking into disability insurance, the better.
The Bottom line
In order to protect your income, you really need disability insurance. The problem is disability insurance is complicated and takes too much time to research, which can make you feel overwhelmed and afraid to make a big mistake.
We believe doctors have more important things to do than spend their time researching disability insurance policies and we understand what it feels like to get ripped off or make a bad financial decision.
We hope that you avoid these 5 mistakes and end up with the right protection for your income.
Your mortgage, children’s education, retirement, and standard of living for the rest of your life is at stake!
If you’d like for us to help, click here and request your quotes. We’ll make sure you get disability insurance right the first time and simplify the process for you so you can stop wasting time and feeling overwhelmed. You can save money and spend time on the things you love instead, while being confident your income is protected.
See our additional posts on the topic before consulting with one of our vetted, independent insurance agents who regularly work with physicians.
What mistakes have you seen people make with disability insurance? Have you made any of these yourself?