The new year is often a time for making resolutions and planning for the future. This should include reviewing your financial situation, including assessing whether you will be adequately prepared in the event that you become disabled and have to stop practicing. We recommend that you make a periodic review of your disability policies and evaluate:
- What type of policy(ies) do I have?
- Do I understand the terms and provisions of my policy(ies)?
- How much coverage do I have?
- Do I have enough coverage?
- Do I qualify for any increase options?
- Should I buy an additional policy(ies)?
Many physicians and dentists purchase their policies as residents or when they are first establishing their practice, and then file their policies away and don’t think about them again until the unexpected happens and they need to file a claim. This is problematic, because financial needs and obligations change over time, and the income and standard of living for a resident is vastly different than that of a physician with a family 20 years down the road.
While insurance companies’ underwriting standards are typically structured in a way that prevents you from collecting the exact same amount of monthly income you were making pre-disability, your goal should be to get as close as possible. In other words, if you are a dentist earning $20,000 a month and need to file a claim, you don’t want to have to end up relying on a disability policy with a monthly benefit of $5,000 as your primary source of income.
Often policies have future increase options that allow you to purchase additional coverage without changes to the terms of the existing policy. Typically, these options will only be available during certain discrete time periods set forth in the policy, so it’s important to read your policy carefully to make sure you don’t miss out on the opportunity to take advantage of an increase option.
If your policy does not have increase options and you’ve outgrown the monthly benefit amount, you can also purchase another policy to increase the total coverage you would receive if you filed a claim. However, if you’re going to be purchasing a new policy, you need to keep in mind that you must purchase a policy that compliments you’re existing coverage, and does not cancel out your other policy or policies.
For example, some policies contain provisions stating that a claimant cannot collect total disability benefits if he or she is working in another profession (a “no-work” provision). Other policies require the policyholder to work in some other capacity, in order to collect total disability benefits (a “work” provision). Thus, if you were to purchase a new policy with a “work” provision, and your old policy had a “no work” provision, one of the policies would be rendered useless (because it would be impossible to collect total disability benefits under both policies).
When purchasing a new policy, it’s also important to keep in mind that disability policies have become increasingly more complex, restrictive and less favorable to policyholders over time. There is no longer a “standard” policy that every company sells—each policy will have it’s pros and cons, and it is therefore important to take your time to familiarize yourself with the policy at the point of sale, so that you know what you’re purchasing. And if you didn’t pay close attention when you purchased the policy, or you can’t remember exactly what your policy says, you should review your policy to assess whether it still meets your needs and make sure that you have an accurate understanding of the scope of your coverage.