โโLong term disability insurance is a vital component of physician income protection that activates when medical conditions force physicians to take a lengthy absence from work. The medical recovery period associated with severe injury or illness can take many months and sometimes result in permanent impairment or loss of income.
Disability coverage serves as a bridge during this time to help ensure physicians are not left without an income stream or left with insufficient funds while unable to work. In contrast to short term disability insurance, long term coverage addresses the recovery period when physician income is most at risk.
Key Takeaways
- Long term disability insurance replaces income when a physician cannot work for an extended period due to illness or injury.
- Long term disability covers are triggered by a range of illnesses and injuries that prevent work. Covered conditions are defined in the policy.
- The process for making a long term disability claim requires ongoing medical documentation and administrative follow up.
Table of Contents
What Does Long Term Disability Cover
Long term disability insurance covers a medical condition that prevents physicians from doing the material and substantial duties of their occupation for a prolonged period. Insurance policies cover a wide variety of health conditions that limit physical and cognitive capacity including:
- Most illnesses
- Injuries that affect function
- Hospitalization
The specific medical conditions or causes of disability covered by long term disability will vary based on the carrier and policy language. However, these are some common examples of illnesses and injuries that may be covered when the disability persists for an extended period.
The long term disability insurer will make a determination regarding coverage after physicians file a claim and they have received medical records and any other required documentation. The medical condition or injury must substantially limit their ability to work for the defined period before the carrier will pay benefits.
How Long Term Disability Benefits are Triggered
Long term disability benefits generally kick in after an elimination period or waiting period following the initial onset of disability. This can typically be 90 to 180 days, although there are policies with shorter or longer periods. While it may be difficult to cover income needs during the elimination period, some insurance policies will pay benefits retroactively.
Once benefits start, physicians will generally receive monthly benefit payments until the claim is closed. The primary risk during the elimination period is that physicians will need some other source of income to bridge until long term disability benefits are paid. Some physicians have coverage through employers in the form of short term disability insurance that pays out earlier and can bridge the gap.
What Disability Definitions Mean for Coverage
Disability is generally defined as an inability to work or perform the material and substantial duties of your occupation. The definition of disability is a key factor in determining if long term disability benefits are payable for a given medical condition.
The three main types of disability definitions are: own-occupation, modified own-occupation, and any-occupation.
The type of definition is important because disability and ability to work are not always black and white. For example, a personโs ability to do their full occupation may be impaired, but it is not 100% disabled. And with a modified definition, a reduction in income may be allowable in some instances. A key for physicians is that the type of definition has unique implications for income protection since even partial functional loss may be enough to lose income if clinical work is not possible.
How Long Term Disability Benefits Work
Long term disability benefits are usually a percentage of pre-disability income, typically 50%-70%. Most policies also have a benefit cap that is the maximum monthly benefit payment allowed. Benefit caps may lower the effective rate of income replacement for higher earners.
Disability benefits are generally paid monthly. Whether benefits are taxable or not usually depends on who paid the premiums. Employer-paid premiums generally result in taxable income, while individually funded policies are typically tax free.
Rising Risk Factors for Long Term Disability Coverage
There are some evolving risk factors for long term disability, especially as underwriting evolves. Chronic stress and burnout are rising causes of disability risk, and some carriers are even broadening definitions to include conditions such as chronic pain, long COVID, and psychiatric fatigue.
It is important to be aware of changing underwriting standards that may change how risks are covered. These expanded conditions are still non-traumatic medical conditions but carriers are continuing to see increases in these types of claims.
Coverage for Self-Employed or Independent Physicians
Physician disability insurance for independent or self-employed physicians will usually require purchasing an individual policy. Some employment situations may have employer-sponsored coverage, although this is less common for non-traditional work arrangements.
Purchasing your own policy gives more flexibility and control over definitions, amounts, and riders. Employment changes may provide an opportunity to review coverage as transitions occur into private practice or other independent arrangements.
Cost and Coverage Adequacy Evaluation
Premiums are often a primary concern for those considering or shopping for disability insurance. However, long term disability insurance cost is worth it given the significant loss of future earning potential when out on disability. Premium considerations are also related to the adequacy of coverage.
Coverage adequacy is an important question when reviewing existing coverage and identifying potential gaps. Adequacy depends on things like income replacement after caps, elimination periods, and benefit duration.
Some physicians may benefit from getting a free disability insurance quote to better understand whatโs available.
Conclusion
Long term disability insurance covers income when illness or injury keeps you from working. It can cover a wide variety of conditions but only after elimination periods and extensive documentation. Long term disability insurance is important because your ability to generate income in the future is the single largest asset most people will ever have.
Physicians Thrive assists physicians nationwide to review their long term disability insurance coverage and employment contracts, as well as their other income protection requirements. Contact us today.
