+ Only Purchase True Own-Occupation

True own-occupation coverage means if you can’t perform all the duties of your medical specialty, you can still collect a benefit even if you are working in a different role. For example, someone who can no longer perform surgery but could teach would still be eligible to collect the full monthly benefit from their disability insurance policy and their salary as a professor. Because doctors are so specialized, a true own-occupation policy provides the maximum amount of protection. There are a few reputable companies who will actually define what your profession is into the policy. For example, Guardian clearly defines the osteopathic surgeon and includes verbiage that permits such a professional to collect benefits as long as he/she is no longer able to perform surgeries. True Own-Occupation provides a strict definition of disability to provide for maximum chance of collection benefits. Disability insurance from Professional medical and dental associations (AMA, ADA) pay benefits only if you can’t perform the “substantial and material” duties of your current occupation. This means that if you are disabled and can’t perform the duties of your specialty, but are capable of working in another occupation, you will not receive full benefits like you would with an individual disability insurance policy with a true own occupation definition of total disability. I am sure we can all agree that a surgeon should not be denied disability insurance because he/she is able to function as a family physician. Each medical and dental specialty has its specific residency requirements and training. Having an individual disability insurance policy that defines your specialty can be the difference between collecting benefits and being denied for them.

+ Avoid Any Occupation Disability Insurance

The opposite of True Own-occupation Disability insurance is “Any occupation” disability insurance. This is the weakest definition of disability doctors will find, usually in group disability insurance contracts. Under this definition, a physician is considered disabled if he or she is unable to engage in any gainful occupation that they are reasonably suited for based on education, training, work experience or other factors. In comparing the example above, a surgeon that can no longer perform surgeries but practice as a family doctor would generally not qualify as being disabled under an “Any- Occupation” policy. These should be avoided entirely by Physicians and Dentists.

+ Look for A Non-Cancellable Policy

A non-cancellable policy means that the insurance company can never cancel your policy or raise your premium for the duration of the coverage period as long as you make your premium payment on time . This means that if you purchase a policy while you are young you can lock in a great rate that will never increase!

+ Avoid Guaranteed-Renewable Policies

The flip side of a Non-Cancellable policy is a guaranteed- renewable policy. In this type of policy, the insurance company still cannot cancel the policy (unless you fail to pay the premiums), however, they may increase your rates as long as they increase the rates for everybody in your “class”. For example, your insurance carrier may decide that 52-year-old female orthodontists are a larger risk than anticipated. Therefore, they may increase the rate to whatever they desire as long as they increase is uniform across every 52-year-old female orthodontist. Needless to say, such a policy can eventually become too expensive to maintain – particularly in the later parts of your career when you need it most. Ironically, many of the professional member groups (think American Medical Association or The American Dental Association) offer these types of group policies to their members. The price of disability insurance from your professional group is often cheaper than getting your own individual guaranteed non-cancellable policy but those rates aren’t guaranteed! Remember, the devil is always in the details.

+ Make Sure to Add the Waiver of Premium Rider

Any reputable insurance company includes this benefit as a standard feature on their disability insurance product. Simply put, a waiver of premium is a benefit that doesn’t require you to make premium payments while you are receiving benefits.

+ Picking the Right Elimination Period

An elimination period is most similar to a deductible. This is the amount of time that you have to wait after your disability begins to start collecting benefits. Typical elimination periods available to choose from are 30, 60, 90, and 180 days. The shorter the elimination period the more expensive the premiums will be. We typically recommend most of our clients to maintain at least 3 months (90 days) worth of living expenses for emergencies and so we typically recommend choosing a 90-day elimination period. This is a sensible middle ground between price and benefits - 30 and 60-day eliminations are too expensive while a 180-day elimination period does not provide enough of a discount to justify the extra wait.

+ Benefit Period

This is the length of coverage you want to purchase. Consider this your “bank”. This is the total cumulative length of benefits you can receive over the life of the policy. The most common benefit periods available are 2 years, 5 years, 10 years, or to age 65/67/70. Since most people experience 2 disabilities during their working lives with each lasting about 2 years we recommend having at least a 5-year benefit period. However, most of our clients choose “to age 65” for the peace of mind.

+ Benefit Amount

The benefit amount is the monthly payout you receive after satisfying the elimination period. The payments you receive are income tax free and continue for as long as you are disabled up to the benefit period you select. Most insurance companies limit the benefit amount you can apply for to be 60% of your earned income. For example, as an Anesthesiologist earning a salary of $300,000, the maximum benefits he/she would be apply to purchase is $180,000/year or $15,000/month.

+ Make Sure to Add Some COLA

No, we aren’t talking about your favorite soda. We mean the Cost of Living Adjustment kind of COLA. This is a common rider (option) that most people overlook when shopping for a policy. We all know that prices tend to rise. This is especially true of disabled persons. As physicians and Dentists, you are acutely aware of the inflation in healthcare costs. The COLA rider allows your benefit payments to keep pace with inflation. Most insurance companies provide somewhere between a 3% to 5% annual increase to your benefit amount. For example, a policy with a $10,000 monthly benefit and a 3% COLA rider will provide a $10,300 monthly benefit amount in the next year.

+ Residual Disability/Enhanced Disability Rider

The standard disability insurance policy will only provide payments if you are “totally disabled”. However, oftentimes a disability is not an all or nothing situation. You may end hurt but not “totally disabled” and therefore still able to work part time. A residual disability policy provides benefits according to the amount of income you have lost because of your disability. These policies pay benefits even if you can work part-time and are not totally disabled. The benefit is based on the percentage of income you lost. For example, if you lose 25% of your income you would collect 25% of you benefit amount. Most companies require a loss of income of at least 15 percent compared to your pre-disability income in order to qualify for residual disability benefits. This rider is a practical addition to any disability insurance policy.