Disability Insurance Basics – How to Choose a Policy
By: Karla B. Thompson, Esq.
At some point in his or her career, almost every osteopath will consider purchasing a disability insurance policy to protect his or her income in case of injury or sickness. Perhaps you’re just finishing school and want to insure your investment in your education, or maybe you’re an established practice owner looking for additional protection. Either way, selecting the disability insurance policy that is right for you can be a daunting task. Disability insurance policies are not one-size-fits-all, nor are all policies created equal. The terms of your policy can have drastic consequences, and it’s important to understand a policy’s provisions before you purchase it. As a law firm focusing on helping doctors with disability insurance claims, we’re often asked which policies are best. Though we can’t endorse any particular insurance company, we’re happy to provide a few basic guidelines to help osteopaths choose the most appropriate coverage.
1. Protect Your Own Occupation
The definition of “Totally Disabled” (or “Disabled” in some policies) is the most important definition in a policy. Whether or not you qualify for benefits will depend on whether you are Totally Disabled according to the policy’s definition. Doctors should always consider policies that define Total Disability in terms of the doctor’s own occupation. Here is an example, taken from an actual policy, of the definition of “Totally Disabled” that you want in your policy:
Total Disability or Totally Disabled
Total Disability or Totally Disabled means that, solely due to Injury or Sickness, You are not able to perform the material and substantial duties of Your Occupation.
You will be Totally Disabled even if You are Gainfully Employed in another occupation so long as, solely due to Injury or Sickness, You are not able to work in Your Occupation.
This definition is beneficial to you for two significant reasons. First, it does not require that you be unable to perform any occupation, it only requires that you be unable to perform your occupation. For example, if you are a surgeon and you develop a hand tremor that prevents you from safely operating on patients, you would still be considered Totally Disabled, even if you were able to treat patients in a non-surgical role. Under this policy definition, you would be able to collect your benefits and work in a different occupation at the same time.
Second, it does not require you to be unable to perform all the duties of your occupation in order to receive disability benefits; you’ll be considered Totally Disabled if you’re unable to perform the material and substantial duties of your occupation. In the example above, you would still be Totally Disabled even if you could perform some incidental duties of your surgical position, such as supervising office staff or signing off on patient charts.
Just as not all disability insurance policies are equal, not all “own occupation” coverage is the same. Even if your agent assures you that you’re buying an “own occupation” policy, you should still review the policy in its entirety. Although many definitions of “Totally Disabled” will look similar to the above example, insurance companies sometimes introduce subtle variations which benefit the insurer at your expense. For instance, beware of policies that define Totally Disabled as “unable to perform all duties of Your Occupation.” This language appears to be an “own occupation” definition because it includes the words “Your Occupation,” but it requires that you not be able to perform any duties of your occupation before you may collect benefits.
As another example, some policies define Totally Disabled as “unable to perform all duties of Your Occupation and not working in another occupation.” Again, this language appears to be the beneficial “own occupation” definition, but it will not provide you benefits if you work in any other job–even if that job has nothing to do with your prior occupation.
2. Avoid Specific Definitions of “Physician’s Care”
Another thing to watch out for in the definition of “Total Disability” is the “Physician’s Care” or “Appropriate Care” requirement. Although our example policy above did not include such a requirement, definitions of “totally disabled” often require that you be under the care of a physician for the condition causing your disability. For example, one policy provides:
“Total Disability” means that because of Injury or Sickness:
a. You are unable to perform the important duties of Your Occupation; and
b. You are receiving Physician’s Care.
How the policy defines “Physician’s Care” could greatly impact whether you meet the policy’s definition of “Totally Disabled.” For instance, if the policy states that “Physician’s Care” requires you to see an M.D. or D.O., you may not be entitled to benefits if you are only treating with a chiropractor or with a Ph.D.-level psychologist.
Some more restrictive policies also require you to receive the care of a physician “which, under prevailing medical standards, is appropriate for the condition causing the disability.” This provides the insurance company with an opportunity to decide what care is “appropriate” for you. For instance, some insurance companies will deny a policyholder’s claim because he or she has declined to undergo surgery, even though he or she is receiving other, non-surgical treatment. The insurer will argue that surgery is the most “appropriate” care, and so anything else does not meet the policy’s requirements. The best policy for you is a policy that does not separately define “Physician’s Care” or “Appropriate Care.” This allows you to determine the care you receive, without being concerned about the policy’s requirements.
3. Watch Out for Mental Disorder Limitations
You should also avoid policies that place special requirements or limitations on mental health disorders. These may be in the form of strenuous “Appropriate Care” requirements such as this one:
If the condition causing the Disability is a Mental Disorder, the appropriate care must be approved by Us. We may require a written plan of care from Your Physician.
These may also be in the form of limitations on the maximum duration of benefits. For example, your policy might limit benefits for mental disorders to two years of payments. In contrast, benefits for physical disabilities typically pay until age 65, or for life.
If the policy specifically addresses mental disorders, be sure that it includes them as covered illnesses. Avoid policies that deny, limit, or otherwise place extra burdens on benefits for disabilities caused by mental disorders.
4. Purchase a Cost of Living Adjustment Rider
To get the best long-term protection for your income, consider purchasing a Cost of Living Adjustment, or COLA, rider. Riders are additional policy provisions and/or coverages that may be added to a policy at an additional cost. The COLA rider provides for your disability benefit to increase by a certain percentage each year to accommodate your increased cost of living due to inflation.
This rider is very important in long-term disability policies. For example, imagine that you became permanently disabled at age 40. A typical long-term disability policy will provide benefits at least until you turn 65. Over that period of 25 years, your cost of living will increase significantly. Without a COLA rider, your benefit amount will remain constant over those years, making it very likely that your benefits will no longer sufficiently cover your expenses in your later years. A COLA rider will protect you from this.
5. Consider a Waiver of Premium Rider
Another beneficial rider is the “waiver of premium” rider. This allows you to forgo paying the policy premium while you are disabled, easing the financial burden disability creates. Unfortunately, the waiver typically does not apply until after you have been disabled for a prescribed amount of time, such as ninety days. Nevertheless, even with a ninety-day waiting period, this rider provides a valuable benefit, as the policy premium will be one less expense you must cover.
These basic suggestions are just the starting point for making smart decisions about your disability insurance coverage. Even if you already have a policy, make sure that you take the time to read it, paying special attention to the definitions. If the policies you are considering or already own do not provide the benefits laid out here, ask your insurance agent if you can add them in a rider. Your ability to collect the benefits you need starts with the provisions of the policy you select.
The information in this article has been prepared for informational purposes only and does not constitute legal advice. Anyone reading this article should not act on any information contained therein without seeking professional counsel from an attorney. The author and publisher shall not be responsible for any damages resulting from any error, inaccuracy or omission contained in this publication.