Disability Insurance for Self-Employed Physicians

The American Bar Association reports that over 25% of today’s 20-year-olds will become disabled before retiring.

Although nobody plans for life-altering incidents, the chances it can happen to you exist.

Running your medical practice gives you flexibility and independence.

But it also means you don’t have the same safety nets as traditional employees. If an injury or illness prevents you from working, you risk losing your income entirely.

Employers often offer disability income insurance that protects their employees.

To protect yourself, you must also learn about disability insurance for self-employed people to ensure financial stability if you cannot work due to a disability.

This guide breaks down how disability insurance works, how to choose the right plan for your needs, and the best options available for self-employed workers.

How Disability Insurance Works for Self-Employed People

Disability insurance provides financial protection by replacing a portion of your income if you become disabled and unable to perform your substantial and material duties. As stated earlier, employer plans often cover you if you work for an employer.

But for small business owners, sole proprietors, and independent medical professionals like yourself, you must purchase individual disability insurance plans to cover expenses in the face of disabilities.

So, here’s how it works:

1. You purchase a disability insurance policy and pay monthly premiums. ( Premium is the amount you pay periodically to your insurance company.)

2. When you experience a qualifying disability: If an injury or illness prevents you from performing your work duties, you file a claim with your insurance company.

3. The insurance company reviews your claim : The company reviews your claim, medical records, and income verification to determine your eligibility.

4. You go through the waiting period: Also known as the elimination period, the waiting period is between when you file your claim and receive the disability benefits, if eligible. This waiting period helps prevent claims for minor, short-term illnesses or injuries.

5. You receive benefits for the specified benefit period: If they approve your claim, you receive benefit payments, often a portion of your previous earnings. The payments are usually tax-free to prevent reducing your income even further. Plus, your insurer may offer other forms of health support to aid your recovery. This continues until you reach the end of your benefit period or recover.

Disability Insurance Options for Self-Employed Individuals

Self-employed individuals have a few options for disability insurance, including:

Personal Disability Income Insurance

Personal disability insurance covers your income if you experience a qualifying disability but not your business expenses.

A key requirement for this disability insurance option is income verification. You’ll need to prove your practice generates income. If you’re running a new business or can’t provide sufficient proof of income, it may be challenging to secure coverage. But don’t fret, it’s not impossible.

One thing you can do before launching your business is purchase a personal insurance policy while still employed. Many employees do this for extra coverage in addition to their employer plans.

Disability Overhead Insurance

Now, there’s no need for your business to suffer because you have a disability. There’s another insurance policy to keep your business afloat.

Also known as Business Overhead Expense Insurance, it is designed to cover expenses, like rent, utilities, and employee salaries, to keep the business running if the owner becomes disabled. The premiums are tax-deductible, but you must have no more than 10 professionals to qualify.

Short- and Long-Term Disability Insurance

The major difference between both is the benefit period—the period you’ll receive disability benefits.

• Short-Term Disability Insurance: Short-term disability insurance provides benefits for a limited period, usually for a few weeks to six months. It’s ideal for temporary health issues that prevent you from working but don’t result in permanent disability. Sometimes, short-term disability insurance offers benefits until the long-term coverage starts. They typically have shorter waiting periods, between 7 and 30 days.

• Long-Term Disability Insurance: If the illness continues or results in permanent disability, the long-term disability benefits kick in after the short-term coverage. It has a longer elimination period (typically 90 days or more), hence the need for short-term disability benefits. Long-term disability insurance can cover you for years or until retirement age.

Group Disability Insurance

As an employer, the group disability insurance protects your employees if they get an illness or injury that prevents them from working. As an employer, you’re responsible for providing this coverage to ensure your employees have financial protection if they become disabled.

Social Security Disability Insurance (SSDI)

If you consistently pay social security taxes for years, you may qualify for SSDI. Self-employed physicians can earn Social Security credits just like employees do, qualifying you for benefits if you meet the eligibility requirements.

If you haven’t earned enough credits before your disability, you can apply for Supplemental Security Income (SSI). SSI is a financial assistance aid for the disabled and elderly with low income and little to no resources.

Cost of Disability Insurance for Self-Employed People

The cost of disability insurance for self-employed people varies based on factors, including physical health, your desired benefit amount, the benefit period, age, profession, and the type of coverage you want.

Disability insurance policies with a longer benefit period and larger benefit amount typically cost more. An existing health condition and older age may increase the disability insurance cost.

What Does Disability Insurance Cover?

Disability insurance coverage varies by policy. Generally, most plans provide benefits for chronic conditions and injuries that impact your ability to work.

Common claims often involve:

• Cancer
• Musculoskeletal injuries
• Mental health conditions, including anxiety and depression
• Nervous system disorder

Other conditions that may be covered include:

• Respiratory conditions (asthma, severe lung diseases, etc.)
• Autoimmune disorders (rheumatoid arthritis, lupus, etc.)
• Neurological disorders (Parkinson’s disease, epilepsy, etc.)
• Diabetes
• Cardiovascular disorders
• Vision and hearing impairments

The specific coverage depends on the insurance policy.

Choosing the Right Disability Insurance Plan

To select the best policy, start by evaluating your needs. Key aspects to consider are:

1. Your practice expenses: Consider expenses like staff salaries, utilities, and rent. This will help you understand your overhead expenses and determine the right policy to meet your needs.

2. Your monthly income and personal expenses: How much do you currently earn? How much do you spend on everyday expenses? How much do you need to live fairly comfortably if you get a disability? These are important considerations when choosing a disability insurance plan.

3. Your health: If you have existing medical conditions, you may need a disability insurance plan with wide coverage.

Next, research different insurance policies and compare your options. Ensure you get customer reviews, their quotes, coverage details (benefit amount, waiting period, benefit period, and other add-ons), and the policy’s terms and conditions. Always read the fine print. Ask questions like,

• Does the insurer cover my profession?
• How much coverage do they offer?
• Do they have reliable customer service or trained professionals that can offer comprehensive support?

When you have this information, compare the terms with your needs and choose the best option.

4 Best Disability Insurance Providers for Self-Employed People

To save you the stress of doing extensive research, see the 4 top disability insurance providers for self-employed individuals:

MassMutual

MassMutual can cover you past retirement age, provide up to 80% of your income, and has customizable policies to suit the unique needs of self-employed people.

Ameritas

Although Ameritas only covers 66% of your income, it offers more flexible plans and add-ons (riders), making it a reliable choice for people who need more customization.

Thrivent

Thrivent is the most affordable disability insurance provider on this list. It covers up to 70% of your income. On the flip side, membership is only open to Christians or their families.

State Farm

Another affordable option is State Farm. If you don’t qualify for Thrivent, State Farm offers another budget-friendly option worth considering. Plus, like MassMutual, it covers up to 80% of your income. The only drawback is the maximum monthly benefit of $20,000, which may be a limitation for high-income physicians.

Final Thoughts

As a self-employed physician, your ability to work is your greatest financial asset. When you can’t work due to a disability, you need systems in place to ensure you live well and your business runs smoothly without you. This is why securing disability insurance is essential for self-employed physicians.

It’s best practice to consult a financial advisor to help choose the right policy based on your needs and financial circumstances. Fortunately, you don’t have to look far because we specialize in providing personalized financial advice to physicians. Contact us now to get started.