Tag Archives: disability benefits

Disability Insurance: What Residents Need to Know – Part 4

 

Previous posts in this series discussed why residents should secure disability coverage sooner rather than later and examined some important terms and provisions to look for in choosing a policy.  In this final post, we’ll be discussing some provisions that allow you to increase your monthly benefits.

As a medical resident, you likely will not be able to obtain a high amount of disability coverage at first, due to your limited income.  Consequently, it is important to look for a policy that offers a way to increase your benefits in the future, as your earning capacity and expenses increase.  You can also, of course, just purchase an additional disability policy if you want to increase your monthly benefit amount, but there can be certain advantages to building benefit increases into your policy from the start.  For example, if your policy has a future increase option provision, you can typically increase the monthly benefits without undergoing any additional medical underwriting (which could otherwise result in exclusions being added to your policy if you have recently suffered from a new medical condition).

Here are a few of the most common methods of increasing the monthly disability benefit of an existing disability policy:

Automatic Benefit Increase

The automatic benefit increase rider adjusts your monthly benefit on an annual basis to account for anticipated increases in income after you purchase your policy.  The annual increases are typically for a term of five years, after which you will generally be required to provide evidence of your increased income in order to renew the rider.

Future Increase Option Rider

This policy rider guarantees you the right to purchase additional coverage at predetermined dates in the future without going back through the long and tedious process of reapplying for a policy. These riders can be attractive because often no additional medical underwriting is required.  Most insurers will not allow you to purchase this rider after age 45.

Cost-of-Living Adjustment (COLA)

A COLA rider automatically increases your benefit amount by a certain percentage every year to account for increased cost-of-living due to inflation.

Assuming that you will not face a short or long-term disability until you are older is not a risk you want to take. An individual disability insurance plan is a key component in making sure you are financially stable in the event you are no longer able to practice medicine in your chosen field.  However, not all plans are created equal.   Take the time to evaluate your financial goals and look carefully at the benefits provided by the basic terms, provisions, and riders of the policy you are considering.

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Disability Insurance: What Residents Need to Know – Part 3

In our previous posts in this series, we examined why residents should not wait to acquire disability coverage and discussed some key provisions to look for when selecting an individual disability policy.  In this post, we’ll be taking a look at a few more provisions you may want to look for when selecting a policy.  More specifically, we are going to look at some policy provisions that can help you meet your monthly expenses in the event of disability, along with some policy provisions that can help you plan for your retirement.

Student Loan Coverage Rider

If you are like most residents, you have accrued a significant amount of student loan debt.  The time it takes to pay off student loan debt varies widely based on income and other expenses.  Many doctors must practice for several years before they are able to pay off all of their student loans, and student loan obligations can be a significant monthly expense to meet if you are disabled and no longer able to practice.  Although not as common as other riders, a student loan coverage rider allows policy holders to insure their student loan for an additional amount each month, on top of their benefits.

Waiver of Premium

This provision allows you to forego paying your policy premiums while you are receiving disability benefits, freeing up a substantial portion of the monthly income you would otherwise be paying back to the insurance company.

Return of Premium

This provision, while not as common, entitles the policy holder to receive a refund of all premiums if he or she does not become disabled before the expiration of the policy term.  This can be appealing to residents, whose plans will be in effect for a long time.

Maximum Benefits

This important provision in a policy controls the period of time the insured is eligible to receive benefits.  Most plans pay benefits until age 65 or 67, some pay lifetime benefits, and others pay for only a limited amount of time, even if a claim is filed decades before the policy terminates.

Retirement Income

The majority of doctors under 40 list preparing for retirement as their top financial goal.[1]  There are several different disability policy riders directed towards this goal, including the following.

Graded Lifetime Benefit Rider:  This provision, based on its terms, extends some or all of your disability benefits past the normal end date of age 65 or 67.

Lump Sum Rider:  This rider provides for a one-time payment once the policy expiration age is reached.  Typically, policy holders must have received benefits for at least one year and the lump sum payment is typically a percentage of the aggregate sum of benefits received during the policy term.

Retirement Protection Insurance Depending on the insurer, this may be offered as a rider or a stand-alone policy.  If you become disabled and your claim is approved, your insurer will establish a trust for your benefit, where benefits are deposited and invested (similar to an employer-sponsored 401(k)), with funds likely becoming accessible after the age of 65.

Our next post in this series will discuss the importance of choosing a plan where benefits increase over time.

[1] 2015 Report on U.S. Physicians’ Financial Preparedness, Young Physicians Segment, American Medical Association Insurance, https://www.amainsure.com/reports/2015-young-physician-report/index.html?page=5.

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Disability Insurance: What Residents Need to Know – Part 2

In our previous post, we looked at how important it is for residents to have a plan to protect themselves financially in the unfortunate event they become disabled.  In this post we will address some critical terms to look for when comparing potential policies.

Perhaps the most important provision in your policy is the definition of “Total Disability.”  For physicians, dentists, and other highly specialized professionals who have invested both years and hundreds of thousands of dollars in their careers, a policy that defines “Total Disability” in terms of your inability to perform the specific duties of your “own occupation” (as opposed to “any occupation”) is critical.  If your policy defines “Total Disability” as being unable to work in “any occupation,” it will be much more difficult to establish that you are entitled to benefits, in the event you suffer from a disabling condition.

In addition to knowing and understanding your policy’s definition of “total disability,” it is also crucial to know how working in another profession is treated by your policy.   For instance, if you happened to be an oral surgeon with an essential tremor, you may no longer be able to operate safely on patients, but you may still be able (and want) to teach. Alternatively, if you happened to be a physician who did not take steps to increase your disability coverage to match your increases in earnings, working in another capacity may be the only way to maintain your lifestyle in the event of disability.  Consequently, it is also important to know if your policy will allow you to work in another capacity and still collect benefits.  Along those lines, here are a few other provisions you will want to watch out for.

No Work Provisions

These provisions mandate that you cannot work in another field and still receive benefits.  This can be problematic if you do not have sufficient disability coverage to meet all of your financial needs.

Work Provisions

These types of provisions require you to work in another occupation.  This, of course, can make it impossible to collect on your benefits if your disability prevents you from working.

In our next post we will look at how you can select a plan that grows with you over time, as both your financial obligations and income change.

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Disability Insurance: What Residents Need to Know – Part 1

 

As a medical resident who is just starting out, you have likely heard about disability insurance, but you may not know a lot about what it is, and why it is important.  In this series of posts, we will be discussing a few things that every medical resident should know about disability insurance.

In this post we will look at the likelihood of disability, and discuss how you can begin to protect yourself now and in the future.  In subsequent posts we’ll address some of the key provisions to look for in a disability insurance policy, ways to make sure your policy meets current and future expenses, and ways to increase your disability benefits over time, as both your earning potential and financial obligations expand.

Likelihood of Disability

As a resident, you are beginning what will hopefully be a long and successful career as a physician.  The possibility of suffering either a short or long-term disability is probably the last thing on your mind, especially if you are still young and healthy.  However, the American Medical Association (AMA) reports that 60% of surveyed physicians have a colleague who has sustained a disability accident or injury.[1]  A Social Security Administration report shows that it is significantly more likely that a worker born in 1996 will become disabled during his or her career than die,[2]  and just over 1 in 4 of today’s twenty-year-olds will become disabled before they retire.[3]

Protection Against Disability

The majority of young doctors under 40 are married, have children, are homeowners, and 75% report that they are their family’s primary breadwinner.[4]  Young doctors also face substantial student loan debt, totaling around $166,750, on average.  With a resident’s salary averaging just $50,000 a year,[5] it can be tempting to put off adding the additional expense of an insurance premium.  However, with most young doctors having less than $50,000 in an emergency fund [6], it’s never too early to start planning to protect your family and provide for care in the unfortunate event you can no longer practice.

While many residents and doctors choose to take part in disability plans offered by their employers, these plans will often not provide adequate coverage, and any benefits you do receive will likely be taxable. In contrast, an individual plan provides coverage that is yours as you move from your residency and through (potentially) many different employers. Individual plans also typically allow you to adjust your coverage as your income potential grows.[7]  However, not all individual policies are created equal and it is important to carefully choose a policy.

In our next post, we’ll examine some key provisions to be aware of when shopping for an individual disability insurance policy.

 

 

 

 

[1] Robert Nagler Miller, Residents: Your disability insurance coverage may fall short, AMA Wire, April 4, 2017, https://wire.ama-assn.org/life-career/residents-your-disability-insurance-coverage-may-fall-short

[2] Johanna Maleh and Tiffany Bosley, Disability and Death Probability Tables for Insured Workers Born in 1996, Social Security Administration, Office of the Chief Actuary, Actuarial Note, No. 2016.6, October 2016.

[3] You, disabled?  What are your chances?, The Council for Disability Awareness, 2015, http://www.disabilitycanhappen.org/chances_disability/

[4] 2015 Report on U.S. Physicians’ Financial Preparedness, Young Physicians Segment, American Medical Association Insurance, https://www.amainsure.com/reports/2015-young-physician-report/index.html?page=5

[5] Kathy Kristof, $1 million mistake: Becoming a doctor, CBS Money Watch, Sept. 10, 2013, http://www.cbsnews.com/news/1-million-mistake-becoming-a-doctor/

[6] 2015 Report, Supra.

[7] Miller, Supra.

[8] 2015 Report, Supra

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Are Benefits Taxable?

 

The Answer Is: It Depends

Whether your disability benefit payments are taxable depends on what type of policy or plan you have and how your premiums are paid.  This post is not intended as tax advice—we’ve outlined some basic information below only.  You should always speak with a tax professional regarding your particular situation.

Individual Policies:  These are policies that you purchase yourself.  Generally speaking, if you pay the premiums with after-tax dollars, the benefits you receive are tax free.  However, if you pay with pre-tax dollars or deduct your premiums as a business expense, then your benefits will likely be subject to federal income taxation.

Group Policies: Group policies are those offered through associations such as the ADA or AMA.   These types of policies offer special terms, conditions, and rates to members and function much like individual policies, with similar tax consequences.  Generally speaking, if you pay the premiums (with after-tax dollars) then the benefits you receive are tax free.

Employer-Sponsored Policies: These types of policies can be less straightforward when it comes to taxes, as the payment of premiums can be structured several ways.  According to the IRS website:

  • If your employer pays the premium and does not include the cost of the premiums in your gross income, then benefits you receive will generally be fully taxable.
  • If the employer only offers a policy, but you pay the entire premium without taking a tax deduction, then the benefits you receive will generally be tax-free.
  • If both your employer and you pay the premiums then the tax liability will generally be split.

If you are unsure what type of policy or plan you have, and you think your employer might be paying the premiums, you can look at your application (there is typically a portion that states who is responsible for the premiums) or talk to your HR department.  For more information, talk to your accountant.  You can also go to to the IRS website on disability insurance proceeds to find additional information.

It may be tempting to save money by enrolling only in a plan solely paid for by your employer, paying premiums with pre-tax dollars, or deducting premiums as business expenses.  But keep in mind that, if you do become disabled, the amount of your benefits actually available to you will substantially decrease if you are required to pay income tax on them.

Selecting a policy is an important decision, and how benefits will be taxed is a significant factor to consider. With statistics showing that one in four dentists will be disabled long enough to collect benefits at some point in their careers, choosing to save now could hurt you financially down the road.

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Protecting Yourself in the IME Process

As we have discussed before, disability insurance claimants are often asked to submit to “independent” medical examinations (“IME”) with a doctor chosen by the insurance company.

IMEs are a source of anxiety for many insureds, especially because they are often a first step towards termination of a claim.  Fortunately, there are some steps you can take to help ensure that you are treated fairly.

Over the next few days, we will outline some general tips on dealing with IMEs.  Keep in mind that these tips are no substitute for the advice of a disability insurance lawyer who knows the specifics of your situation.  Hence, today’s tip:

Get your attorney involved.  If you don’t have a lawyer to help you with your claim, now is a good time to seek some advice.  Oftentimes, insurance companies use IMEs to try to show that you aren’t entitled to disability benefits anymore.  A lawyer can help protect your rights during the IME process by, among other things, finding out what the policy requires (and doesn’t require) and discussing those requirements with your insurer.  If you aren’t sure how to find the right lawyer, consider our Questions to Ask When Choosing a Disability Insurance Attorney.

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Out of Contract Demands: When You Can Tell Your Disability Insurer “No”

Every disability insurance policy is a contract. With this contract come certain rights and obligations on the part of the disability insurance company and on the part of the policyholder. The insurer promises to pay you disability benefits and you promise to fulfill certain conditions. One of the most important things to remember about this contractual relationship is that if it’s not in your policy, you don’t have to do it.

Often, disability insurers will ask a person filing for benefits to do certain things or provide certain information in order to qualify for benefits. What every policyholder needs to realize is that the disability insurer cannot force you to do something that is not outlined in your policy. There are many examples of disability insurance companies’ demands that may not be required under the terms of the policy, such as:

• That you see a certain type of doctor

• That you undergo surgery for your disabling condition

• That you get a particular treatment or therapy

• That you provide your Social Security or workers’ compensation claim file

• That you attend a certain type of examination

• That you complete detailed descriptions of your daily activities

• That you allow a private investigator into your home

The bottom line is that a policyholder filing for disability insurance benefits should know what their policy requires and what it doesn’t. The best way to be sure an insurer doesn’t get away with making extra-contractual demands is to have a disability insurance attorney review your policy and advocate with the company for your rights.

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Working with Disability Claim Managers – Know Your Rights and Be Vigilant

Even though disability insurance companies have a duty under Arizona law to give your interests equal consideration to their own, insurers rarely act for the policyholder’s benefit.   Claims benefit managers are frequently taught how to approach disability claimants to get a desired result, usually a denial or termination of benefits.  From our years of experience with the disability insurance industry, we have learned some of the tactics claims personnel use.  The following is a list of strategies to beware of.  Though not every disability claim manager engages in these practices, it is always a good idea for claimants to be vigilant in order to protect their rights under their policy.

  • Treating claims like a unit of production.  Disability insurance companies often don’t care to know how being disabled and filing for benefits affects you personally.  Don’t expect that they will understand or be sympathetic to the personal toll the entire process takes on a claimant, especially a doctor or dentist who has spent years in study and practice to achieve professional success.  To disability insurers, each claim is a unit of production being channeled towards an end goal.
  • Misinterpreting policy provisions.  Disability insurance claims managers are not lawyers, and just like most people, often have trouble properly interpreting complicated insurance policies.  For example, claims personnel might inform an insured that her claim is an “any occupation” policy when in fact it is an “own occupation” policy.
  • Claiming rights that don’t exist under the policy.  Claims managers will also frequently indicate that the disability insurance company can make claimants do certain things or provide certain information that is not actually required under the individual policy.  For instance, an insurer might tell a claimant he needs to complete a detailed daily activity report, when there is actually no such requirement to do so in his policy.  Make sure you know what your policy does and does not actually allow.
  • Acting like your friend.  Employees of disability insurance companies often try to act like your friend or partner in the process, when they are actually channeling your claim towards denial or termination of benefits.  Often, claims managers will call an insured for a friendly chat, all the while peppering the insured with seemingly innocuous questions meant to provide evidence for claim denial.  Policyholders should understand the questions being asked, and not get distracted by the congeniality of the caller.
  • Sending “field investigators” to talk about your claim. Another common practice in the disability insurance industry is to schedule an in-person interview in the claimant’s home with a “field investigator.”  These interviewers will spend hours asking about your symptoms and activities in excruciating detail, taking copious notes and even asking to photograph you.  What they may not make clear is that the field investigator has no authority over the disposition of your claim.  Rather, he or she is a private investigator hired by your insurance company to gather evidence against your claim and provide a starting point for surveillance.

The best way to make sure that these claims management practices aren’t used to take advantage of you when making a claim for disability benefits is to enlist an attorney who knows the tactics used and how to guard against them.  Nevertheless, every insured should understand their insurance company’s approach to claims management and be cautious in their interactions with claims management personnel.

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May is Disability Insurance Awareness Month — A Good Time To Ask Yourself If You Can Collect on Your Disability Insurance Policy

May 2011 is Disability Insurance Awareness Month.  While the insurance industry likes to increase awareness of purchasing disability insurance, medical professionals who long ago purchased disability insurance and have been paying premiums on disability policies for many years may opt to instead raise their awareness of the obstacles they are likely to encounter should they ever need to make a claim on their disability insurance policy.  The article below by disability insurance attorney Edward O. Comitz provides some food for thought.

DISABILITY INSURANCE: CAN YOU COLLECT UNDER YOUR POLICY?

By: Edward O. Comitz, Esq.

You have practiced medicine for your entire career. Your spouse and children rely on you, and you have numerous financial obligations. The stress and trauma of a disability can cause you significant problems. To protect yourself in case of total or partial disability, you have purchased disability insurance.

Unfortunately, you suffer an injury or become so ill that you cannot continue your practice, and you then file a claim with your insurance agent. Of course, you expect it to be honored. Instead, shortly thereafter, you are contacted by an insurance adjuster, not your agent. Unlike your agent, the insurance adjuster is hostile; the questions he asks imply that you are malingering. You try to be cooperative, providing the insurance adjuster with the additional information he requests, but again your claim is denied. Adding insult to injury, you learn from the adjuster that the insurance company has secretly videotaped your activities and, based on the tapes, believes that you are not disabled at all. Dumbfounded by the insurance company’s response, you ask yourself if there is anything that you can do to make the insurance company pay the benefits it promised. The answer is yes.

Typically, the type of policy that medical and dental professionals purchase is what is known as an “own occupation policy.” Such policies provide compensation following a disability that prevents the insured (the person who purchased the policy) from performing the particular duties of his or her profession. Thus, the insured may be entitled to benefits even if he or she could in fact perform work of a different nature. For example, if a surgeon purchases an “own occupation policy” and severely injures his hand, but could nevertheless perform some or all of the duties of a general practitioner, the surgeon is considered disabled under an “own occupation policy” and entitled to benefits.

Disability provisions greatly vary in the language used, and coverage is often circumscribed and restricted by qualifying words and phrases. Accordingly, each policy of insurance must be individually reviewed to determine whether a particular claim is covered. What may appear to be an “own occupation policy” could in fact be an “occupational policy” if “total disability” is defined to include the insured’s inability to perform “all” duties or “every” duty pertaining to the insured’s occupation. In such a case, the insured may not be entitled to benefits if he or she can perform comparable employment for which the person is suited by education, experience and physical condition. Continue reading May is Disability Insurance Awareness Month — A Good Time To Ask Yourself If You Can Collect on Your Disability Insurance Policy

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Disability Group Monthly Conference Calls Hosted by White House, White House Disability Blog, and E-Mail Distribution List Regarding Disability Issues

The White House Disability Group has begun hosting monthly calls to update interested parties on issues such as key political appointments, employment, civil rights, health care and transportation.  The calls are intended to keep Americans with disabilities informed about the Obama Administration’s disability-related efforts and to introduce staff who work on disability issues in the federal government.

Further information about the Disability Group Monthly Conference calls is available at the White House’s Disability Blog, at http://blog.govdelivery.com/usodep/2011/03/white-house-disability-group-monthly-conference-call-march-31.html.

The White House also has an informative blog about disability issues.  That blog can be read by clicking here:  http://blog.govdelivery.com/usodep/ and disabled persons, or anyone interested in disability issues, can subscribe to the White House Disability Group e-mail distribution list by sending an e-mail sfeuerstein@who.eop.gov and providing their name, e-mail address, city, state and organization (if applicable).

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