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.
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.
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.
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.
The majority of doctors under 40 list preparing for retirement as their top financial goal. 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.
 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.
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. 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, and just over 1 in 4 of today’s twenty-year-olds will become disabled before they retire.
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. 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, 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 , 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. 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.
 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
 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.
 You, disabled? What are your chances?, The Council for Disability Awareness, 2015, http://www.disabilitycanhappen.org/chances_disability/
 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
 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/
 2015 Report, Supra.
 Miller, Supra.
 2015 Report, Supra
Picture this scenario: you’ve just graduated dental school. You have well over $100,000 in student loan debt. You recently started working in a dental practice. But then, unexpectedly, you become disabled and are unable to work. All of a sudden you have no income and no way to make your student loan payments. What would you do?
This scenario may seem far fetched, but one in four people will become disabled at some point before retirement. Medical and dental students routinely graduate with hundreds of thousands of dollars in debt, and student loan debt in the United States has surpassed $1.3 trillion. If you are carrying a heavy student debt burden, a disabling condition can have a magnifying effect on your financial security. An inability to pay your student loans puts you at risk for default and a slew of financially-damaging penalties.
You might also be surprised to learn that student loan debt cannot be discharged in bankruptcy. In fact, the only individuals who are eligible to have their federal student loans discharged are those who meet the federal government’s stringent standard of “total and permanent disability.” Keep in mind that this discharge provision only applies to federal loans. Private lenders may or may not have similar provisions in their loan agreements.
In the event of a disabling condition – even if you have a disability insurance policy – your monthly benefits may not be enough to cover both their living expenses and your student loan payments. One potential solution is purchasing a disability insurance policy with a student loan protection rider. Disability insurers have started to offer student loan protection riders that typically allow individuals to secure monthly benefits in addition to their standard policy benefits for the purpose of covering their student loan payments. Usually, no loan documentation is required until a claim is filed. Additionally, students can receive discounted rates, including no cost while in school, on group disability insurance policies through either the American Dental Association or local dental associations. Whichever policy you choose, your insurance company must still determine that you are totally disabled before you are eligible to collect the benefits associated with this rider.
An alternative solution is to simply purchase additional coverage to ensure that both your monthly living expenses and student loan payments are accounted for in the event of a disability. One advantage to this approach is that you have greater flexibility to allocate your monthly benefits where you see fit. Before you purchase a student loan protection rider or additional coverage on your individual disability insurance policy, check with your insurance provider to see how much both options cost in comparison to the additional benefits you receive. Depending on your carrier, one option may be more financially beneficial than the other.