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.
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.
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.
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.
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