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The Disability Insurance Options No One Tells You About

couple browsing for disability insurance on the laptop

Physicians invest a significant amount of time, effort, and money into their careers. But all it takes is one unexpected illness or injury to derail your plans and jeopardize your financial stability.

That’s where disability insurance comes in. Disability insurance for physicians is designed to provide you with financial protection in case you become disabled and are unable to work. How does disability insurance work when you’re a physician? Let’s find out.

This article will include: 

  • Understanding disability insurance
  • Considering definitions, costs, rider, and tax implications
  • The basics of disability to make an informed decision

Read more:

Understanding Disability Insurance for Physicians

As a physician, it is essential to understand disability insurance and how it can protect you financially in case of a disability that prevents you from practicing medicine.

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Disability insurance is designed to provide you with income replacement when you are unable to work due to a disability. As a physician, your ability to work is your most significant asset, and disability insurance can help protect that asset.

Without disability insurance, you may be unable to pay your bills, cover your living expenses, or support your family if you become disabled.

Key Features of Disability Insurance Policies

It’s necessary to be aware of the ‘must-haves’ when you’re shopping for disability insurance as a physician.

Many online brokers will show you charts and spreadsheets comparing your options. While that’s easy to help visualize some features, the inherent problem is that charts only show information the broker wants you to see.

Private, own-occupation disability insurance is often the best option to secure your income and protect your financial goals. Getting this right early in your career saves thousands of dollars with training discounts and good health being locked into a policy forever.

A lot has been said about important features, but what are some of the options that seem lucrative but aren’t? How can you know if these benefit you?

Young physicians should make sure they have the following.

Own Occupation Disability

Imagine you become disabled, but your condition allows you to work in a different field, maybe something less physically demanding. Regular disability insurance might not pay you benefits because, technically, you could still work.

Own occupation disability steps in and says, “Hey, you can’t work as a doctor anymore,” and pays you benefits as long as that’s true – even if you could be a teacher.

Future Purchase Rider

Think of this as a “buy now, pay later” option for your disability insurance.

You lock in the discounted rates you get as a resident or fellow, but you can increase the amount of money your policy pays out in the future without having to do another medical exam.

This is useful because as your attending salary grows, you might want your disability benefits to grow along with it.

Residual/Partial Disability Rider

Life rarely throws clear-cut punches.  Sometimes an illness or injury might not completely sideline you, but it might force you to cut back on hours or take on lighter duties.

This rider recognizes that partial disability can still have a big financial impact.  It pays you a portion of your benefit amount if you’re still working but making less because of a disability.

Some companies even offer different levels of coverage within this rider (Basic and Enhanced), so you can pick the option that best fits your needs.

Non-cancelable and Guaranteed Renewable

Think of this as a two-part shield protecting your disability insurance policy.  Non-cancelable means the insurance company can’t just cancel your policy outright, even if they decide your profession is high-risk.

Guaranteed Renewable means they have to keep offering you the same coverage as long as you keep paying your premiums.

They can’t raise your rates just because you get older or have a claim.

COLA Rider (Cost of Living Adjustment)

Imagine becoming disabled and living on a fixed income for decades. Inflation slowly eats away at your buying power. A COLA rider helps fight back.

It gives your monthly benefit a little raise each year to keep up with the rising cost of living. This is especially important for younger physicians – particularly those under 40 – who might be on disability for a long time.

Other Options to Consider

Here’s a breakdown of those additional disability insurance options in simpler terms:

Catastrophic Disability Rider

This rider is for serious situations.

If your disability is so severe that you need help with basic daily activities like dressing, bathing, or eating, or if it causes major cognitive problems, this rider kicks in and pays you extra money on top of your regular disability benefit.

Automatic Benefit Enhancement

This is a bit of a “set it and forget it” option for increasing your coverage.  You choose to have your disability benefit amount automatically go up a small percentage (usually 4%) every year for a set number of years (usually 5 or 6).

The best part? No medical exam or financial check is needed – it’s pretty much automatic. Some people might decide to skip this feature, but for many it’s a convenient way to get some guaranteed extra coverage without any hassle.

Retirement Rider

This rider is like a built-in savings plan for retirement within your disability insurance. While you’re on disability, money can be automatically deducted from your benefit payment and put towards your retirement savings.

This option isn’t very common – most people would likely prefer to just get a higher monthly benefit amount to cover their expenses directly.

Student Loan Repayment Rider

This rider can be a lifesaver if you become disabled early in your career and are still saddled with student loans. It helps you out by paying off your student loans while you’re on disability.

However, it’s an expensive add-on and not very popular – getting a larger monthly benefit might be a better way to free up cash for your loans.

6% COLA Rider (Cost of Living Adjustment)

This is a supercharged version of the standard COLA rider.

While the regular COLA rider gives your monthly benefit a small raise each year to keep up with inflation, this one gives you a much bigger bump (usually 6% instead of 3%).

This can be a good option if you’re worried about inflation eating away at your disability income over a long period, but it will also cost you more in premiums.

What other options could I add to my coverage?

There are even more options beyond the ones mentioned previously, but they tend to be less common and may not apply to everyone.  Here’s a quick rundown:

  • Dividends: Some disability insurance policies offer dividends, which are basically cash payments from the insurance company based on the policy’s performance. Think of it as a potential bonus on top of your regular benefits.
  • Family Care Benefit: This rider provides additional benefits if you need help caring for a child or other dependent due to your disability.
  • Good Health Benefit: This rider might reward you with a small benefit payment if you stay healthy for a certain period.
  • Supplemental Health Benefit: This rider might offer additional benefits to help cover out-of-pocket medical expenses while you’re disabled.
  • Unemployment Waiver of Premium: This rider can help cover your disability insurance premiums if you become unemployed.

Remember, these features are extras. They’re like the cupholders in a car – nice to have, but not essential.

Focus on getting the core coverage right (own-occupation disability, future purchase rider, etc.) Then you can consider these add-ons based on your specific needs and budget.

Don’t be afraid to ask questions. Physicians are intelligent and can critically evaluate these policies. The key is to work with a broker who provides all the information you need to make an informed decision about what’s right for you.

Get started by requesting your free quotes today.

Frequently Asked Questions

What factors should physicians consider when choosing a disability insurance policy?

When choosing a disability insurance policy, physicians should consider factors such as the monthly benefit amount, waiting period, benefit period, and optional riders.

It is important to choose a policy that provides adequate coverage and fits your specific needs. Additionally, physicians should consider the financial stability and reputation of the insurance company.

How does the cost of disability insurance vary for physicians at different stages of their career?

The cost of disability insurance varies based on factors such as age, gender, specialty, and health status. Generally, younger physicians will pay lower premiums than older physicians.

This cost tends to increase as physicians progress in their careers and earn higher salaries.

Why is ‘own occupation’ disability insurance considered beneficial for physicians?

‘Own occupation’ disability insurance is considered beneficial for physicians because it provides coverage if you are unable to perform the duties of your specific medical specialty.

This type of coverage ensures that you will receive benefits if you are unable to work in your chosen field, even if you are able to work in a different capacity.

What are the tax implications of physician disability insurance?

The tax implications of physician disability insurance depend on whether the policy is paid for with pre-tax or post-tax dollars.

If the policy is paid for with pre-tax dollars, the benefits will be taxable when received. If the policy is paid for with post-tax dollars, the benefits will be tax-free.

How does physician disability insurance differ from regular medical insurance?

Physician disability insurance is designed to provide income replacement in the event that you are unable to work due to a disability.

Regular medical insurance, on the other hand, is designed to cover the cost of medical treatment and procedures.

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