It’s not a stretch to say that disability insurance for physicians is becoming a lifeline for many in the profession.
According to statistics, over 25% of 20-year-olds in the United States will likely become disabled well before retirement age.
If we shift our attention to physicians, the statistics become even more worrying, with 30% of physicians becoming disabled under the age of 45.
These numbers show that disability insurance, although not legally mandatory, is a strong backup plan for such a demanding profession.
In this guide, we’ll highlight some of the available types of disability insurance to give you an idea of how suitable different policies are for your situation.
Key Takeaways
- Physician disability insurance protects income if illness or injury prevents working.
- Own-occupation policies offer the best coverage but come with higher premiums.
- Short-term disability covers temporary conditions, while long-term covers chronic ones.
- Choosing the right policy depends on specialty, budget, and financial goals.
Table of Contents
The Different Insurances Available for Physicians
As a physician, you have several types of disability insurance that make up for a good part (potentially all) of your lost income if you’re no longer able to work.
Here are the different types of disability insurance:
1. Own-occupation Disability Insurance
The own-occupation policy pays benefits to physicians when they can’t perform the specific duties required by their medical specialty.
The physician still gets benefits even if they can work in another field or occupation.
This particular policy is favored among physicians because it provides the highest level of coverage for high-earning professionals, such as physicians.
This policy is highly useful for high-earning professions.
After all, it wouldn’t make sense for a surgeon who spent years practicing their craft to settle for a considerably lesser job because they got a disability out of their control.
Let’s consider another example: a cardiologist who develops a heart condition and can no longer perform invasive procedures can still take up a teaching role and receive full disability benefits under an “own-occupation” policy.
Costs
Premiums of own-occupation policy are often higher than other types of disability insurance, ranging between 2% to 6% of total annual income paid monthly.
The actual premium depends on age, health, and specialty.
The own-occupation policy is the gold standard for physicians and should always be prioritized, especially if they’re in a high-earning field like surgery, orthopedics, or anesthesiology.
Benefits
The payments can vary, but they start as high as 80% and can even reach 100% of lost income in case of a permanent disability.
Also, the fact that it’s specialty-specific makes it tailored to the unique demands of your medical field.
Something to Consider
In theory, own-occupation disability insurance offers the best protection for physicians. However, in practice, several factors prevent it from being the universally best choice.
The primary barrier is the cost; when premiums go up to 6% of annual income, early-career physicians with student loan debt may think twice before taking that policy.
Additionally, these policies often have hidden limitations and benefit caps and may lack coverage for short-term disabilities.
Accordingly, some physicians opt for less expensive employer-sponsored plans or association policies, especially when budget considerations are significant.
2. Any-occupation Disability Insurance
Any-occupation insurance is applicable only when the individual is no longer to work in any occupation for which they are reasonably qualified by education, training, or expertise.
In other words, there’s a considerable restriction here. If a physician can work in any capacity, even in non-medical roles, they may be denied benefits.
Costs
Because of that restriction, the premiums are considerably lower, often around 1% to 3% of annual income.
The difference in percentage may not seem like much, but it does save a considerable chunk of the annual income of a high-paying profession.
For example, according to our Neurologist compensation data, a specialist in the field can earn up to $394,000 per year.
The own-occupation policy premium average (4%) will be reflected as $15,760 per year or $1,313 per month.
On the other hand, the any-occupation policy premium average ($2) will shrink that number to $7,880 per year, which is 50% less compared to own-occupation.
Benefits
Any-occupation benefits can vary according to the circumstances, but you can expect around 60% and 80% of your after-tax income.
While that’s not as extensive as the previous policy, it still presents a safety net.
3. Residual Disability Rider
Residual disability benefits are a specialized component of disability insurance designed to provide financial support for physicians who can still work in their specialty.
The difference is that they’re no longer able to work at full capacity because of an injury or a disability and, as a result, experience a significant income loss.
Keep in mind that residual disability isn’t a standalone type of insurance but rather an add-on or a “rider” to an already existing insurance policy that pays partial benefits to its policyholders.
The residual disability rider is exceptionally useful for physicians who can still see and diagnose their patients but are no longer able to perform complex procedures, even if temporarily.
For example, if a surgeon is recovering from a hand injury and expecting to be fully recovered within two months, a residual disability rider allows for gradual reintegration into work without a heavy loss in income.
Costs
The monthly premium for a disability insurance policy that includes residual disability benefits varies depending on several factors, including the physician’s specialty, health, the specific policy provisions, and the desired benefit amount.
A policy with a $10,000 monthly benefit, including residual disability coverage, might typically cost between $200 and $500 per month.
It’s important to understand that this premium covers the entire policy, not just the residual disability component.
Benefits
The benefits are typically calculated based on the percentage of income lost due to the disability.
For example, if a physician had a monthly income of $5,000 before becoming partially disabled and is now earning $3,000, then they have a 40% lost income.
If their total disability benefit would have been $1,500, the residual benefit would be calculated as follows:
Lost income ($2,000) divided by pre-disability income ($5,000) multiplied by total disability benefit ($1,500) = $600 per month.
Classification According to Duration
Disability insurance can also be classified into two types, based on its duration:
1. Short-term Disability (STD) Insurance
This insurance covers temporary disabilities, providing income replacement for a few weeks to several months due to illness or injury.
For example, a physician recovering from knee surgery may not be able to work for a few weeks.
Short-term disability insurance has the short elimination period advantage, which means it doesn’t take long before filling for the insurance and actually receiving the benefits.
The average waiting period ranges between 7–14 days.
Costs
On average, short-term disability insurance premiums cost between 1% and 3% of your annual income, similar to Any-occupation insurance.
Benefits
STD is ideal for recovering from short-term conditions without financial strain. It also typically replaces 60% to 80% of income throughout the recovery period.
2. Long-Term Disability (LTD) Insurance
Long-term disability insurance is designed for severe or chronic conditions that prevent you from working for an extended period (often until the age of retirement).
This kind of protection can last years and potentially decades, making it suitable for cases causing permanent physical damage, like amputations, cancers, and paralysis.
The average waiting period in LTD can go up to months.
Costs
Because of the extended duration of the protection, LTD premiums are higher than STD.
Health, occupation, benefit amount, and length of the benefit period are all factors that can affect the premiums.
Accordingly, giving a precise number or even range here isn’t possible.
Benefits
Much like STD, LTD typically replaces around 60%–80% of your pre-disability income, though the exact percentage will depend on the policy.
Note:
Short-term disability (STD) and long-term disability (LTD) insurance are distinct types of disability insurance policies.
While the specific names of policies may vary slightly between insurance providers, the terms STD and LTD are commonly used to categorize these different products based on their benefit periods and coverage.
Learn From the Best
Disability insurance can make up for a large part of lost income and genuinely be a life-saver to physicians, but only when you decide on the policy that fits you the most.
There is no universal choice, and your individual situation, paired with the ins and outs of every policy, can make it difficult to choose the most suitable option.
That’s why you need a professional to help you choose: preferably in your medical field, as they already have experience in all aspects related to disability insurance.
If that sounds like something you’re looking for, then you are already in the right place.
Contact us at Physicians Thrive, Let us know the details of your own situation, and we’ll help you select the most suitable disability insurance policy.
