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The income benefit you receive varies based on your specific insurance plan. The typical monthly benefit of a long-term policy covers between 40% and 60% of the policyholder’s salary.
The Definitive Guide to Physician Disability Insurance
- What is Disability Insurance?
- Basic Types of Disability Insurance
- Why You Need Disability Insurance
- How It Protects Your Financial Goals
- Components of Disability Insurance
- How Much Insurance Should I Buy?
- Disability Insurance Riders
- Why You Can’t Rely on Disability Insurance from Your Employer
- Disability Insurance and Taxes
- When to Get Disability Insurance
- How to File a Disability Claim
- Where to Get Disability Insurance
Disability insurance is one of the best ways to protect yourself and your financial interests, regardless of the type of work you do.
For physicians earning an average annual salary of over $200,000 per year, having the right disability insurance is essential.
But what does disability insurance cover? How much does it cost? Is it really worth it in the long run?
In this article, we will break down the different types of disability insurance and discuss why physicians need it. We’ll also address the benefits of private insurance over group or employer-sponsored plans.
From residents to practicing physicians, our complete guide to physicians’ disability insurance will tell you everything you need to know.
What is Disability Insurance?
Disability insurance provides financial protection if you become unable to work due to an injury or illness. If you’re unable to work, disability insurance will pay a portion of your income to insulate you from financial hardship.
Essentially, disability insurance is income insurance that provides a safety net in the instance you can no longer generate income.
Basic Types of Disability Insurance
Long-Term Disability Insurance
Long-term disability insurance covers disabilities that last longer than a few months.
The exact length is determined by the available options provided by the insurer, but it is often a minimum of three months.
Depending on the policy, benefits are paid out until you can work again, reach retirement age, or reach the expiration of a predetermined term.
Long-term disability insurance tends to have a longer elimination period. The elimination period is the waiting period between your injury or illness and the date that you can start receiving benefit payments. This period can range anywhere from one month all the way up to longer periods of two years.
The benefit you receive varies based on your specific insurance plan. The typical monthly benefit of a long-term policy covers between 40% and 60% of the policyholder’s gross salary.
According to the Social Security Administration, more than one in four Americans will face disability at some point in their career. If you’re the sole breadwinner for your family, as many physicians are, it is vital to protect your income with long-term disability insurance.
Short-Term Disability Insurance
Short-term disability coverage is for disabilities that last up to a few months.
The payout is typically higher than long-term disability and is usually around 60% to 70% of the policyholder’s salary.
The elimination period is relatively short with short-term policies. In some cases, it may be as little as two weeks.
A short-term disability will likely have less of a financial impact than a long-term disability. Yet many professionals find that the peace of mind that comes with short-term disability insurance is worth the investment.
Social Security Disability Insurance
Social Security Disability Insurance is funded by taxpayers and controlled by the Social Security Administration. SSDI is typically very difficult to qualify for because of their stringent definition of disability.
The benefit amount with SSDI is significantly lower than a physician’s typical salary. The average monthly benefit in January 2019 was just $1,234 per month, and the maximum was $2,861.
Could your family afford your current lifestyle on less than $3,000 per month? For most families, especially high-income households, the answer is no.
For these reasons and many others, we do not suggest relying on SSDI.
More on the various types of disability insurance here.
Why You Need Disability Insurance
As a physician, you need to be able to physically and mentally do your job.
Whether you’re a surgeon that relies upon your steady hands or a family practice physician, suffering a disability can prevent you from doing your job.
Anyone in any career can benefit from having disability insurance, but it’s especially crucial for physicians.
If you’re just starting your medical career, you may likely be struggling to pay back undergraduate student loans and medical school debt. If you’re advanced in your career, you probably have mortgage payments, car payments, and lifestyle expenses that you need to pay for.
Every one of us is at risk of suffering a disability that prevents us from working. With disability insurance, you can protect yourself and avoid sinking into financial debt or being derailed from your financial planning strategy.
Whether you’re out of work for a few weeks or a few years, having the right type of disability insurance can save you and your family from financial ruin. Your financial obligations will always exist, regardless of whether or not you are physically or mentally capable of doing your job.
By having disability insurance, you can protect yourself and your assets, even if you can’t earn a paycheck. It’s the best way to make sure that you can keep up with your car payments, pay your mortgage so you can remain in your home, and pay for other monthly expenses. You can even make sure your business cash flow is not interrupted by having a plan that covers your overhead expenses while you are not practicing and your revenue decreased for a period of time.
For many people, disability insurance keeps the dream of sending their kids to college alive. It keeps a roof over their heads. And it keeps the option of retirement on the table.
How Disability Insurance Protects Your Financial Goals
We’ve been in the financial services industry for more than ten years. Over this time, we’ve made a few observations. One is that while we each have our own unique goals and things that are important to us, generally speaking, we all tend to want the same things.
Whether it’s the desire to pay off debt or to travel regularly, we all want to be able to afford the things we need. And for most people, that means enjoying memorable experiences with family and friends.
At Physicians Thrive, we give presentations to physicians across the country to educate them in areas that they don’t get much time to focus on.
At the end of our presentations, the questions range from student loan repayment options to reducing taxes to investing. All of these questions are predicated on the assumption that the person asking will continue earning a steady income.
As a physician, your most significant financial asset is your earning potential. You’ve spent countless hours crafting your knowledge and skills and preparing to transition into practice. And you assume those years of hard work will lead to years of above-average income.
But what if your income stopped, or was reduced due to illness or injury?
How Would You Handle a Significant Loss of Income?
According to the CDC, one in four Americans is living with a disability. This sampling includes individuals from all age groups, but that number is still staggering.
Even more surprising is that just over one in four 20 year-olds today will become disabled before they retire. Your chances of missing a paycheck (or many paychecks) due to illness or injury are higher than you think.
For example, if you’re 35 years old, there’s a 50% chance of becoming disabled for three months or longer before you retire. That number is only reduced to a 33% chance if you’re 50.
There is a way to protect yourself and all of your hard work by taking a relatively easy step:
Investing in disability insurance.
When you purchase disability insurance, you transfer the risk of losing your ability to earn income to an insurance company. That way, if you ever become disabled, the insurance company will be responsible for covering part of your income.
Having disability insurance should be an obvious decision for any physician. It is the best way to continue to earn money regardless of your health.
Important Components of Disability Insurance for Physicians
True-Own Occupation Disability Insurance
Most employers offer disability insurance in the form of a group plan. But there are many deficiencies in group disability insurance that you should be aware of.
Most of the time, group disability coverage doesn’t really protect you because it doesn’t allow you to work in any occupation. The most important feature of disability insurance is to know how the insurer defines disability. You want what’s called “true-own occupation” disability insurance.
True-own occupation disability insurance protects you in the event you’re not able to do the duties of your own occupation. You can receive coverage even though you may be able to work in another area of medicine or a different career altogether.
In this case, if you’re not able to do the duties of your primary occupation, you will be eligible to receive a paycheck from the insurance company. You can receive benefits even if you’re earning an income from working in another specialty or profession.
Residual Disability Coverage
The second most important feature to have is what’s called residual disability coverage. This feature provides protection in the event you become partially disabled but are still able to work in your primary specialty.
Residual disability coverage eliminates the “all or nothing” assumption regarding disability insurance. It does so by providing a partial benefit to you in the event you have a 15 or 20% reduction of income due to illness or injury. In order to qualify, you’ll need to be under the care of a physician.
For instance, if you have a disability that only allows you to work limited hours, residual disability insurance will cover part of your losses.
Group Insurance vs. Individual Policies
You’ll need to determine if you want a group insurance policy or an individual plan.
Group policies offer lower insurance premiums because they cover a large group of physicians. The more physicians enrolled in the policy, the more buying power you’ll have against the insurance company, and the less you’ll need to pay in premiums.
However, those lower payments also mean you’ll have less flexibility in the parameters of the policy itself.
For more information about group policies, check out this post about AMA disability insurance. This is one of the most popular group policies for physicians.
With an individual policy, you’ll pay higher premiums, but you’ll have more flexibility in terms of what the policy covers. You change the terms of your policy when you need to. A group policy doesn’t offer that flexibility.
What You Need to Know Before Signing Up for a Disability Insurance Policy
Disability insurance policies include complex and sometimes confusing language. Before you decide which policy you want, there are a few things you’ll need to understand.
Disability Insurance Definitions
For starters, different policies have different definitions of what disability actually is:
Own Occupation/Speciality Specific
For a physician, the best definition of disability is the own occupation specialty-specific definition. Under this definition, the requirements for disability insurance benefits are broader than other definitions.
With own occupation/specialty-specific disability insurance, you may be physically able to be employed in another occupation.
You can collect your benefits as long as you can’t perform the duties of your pre-disability specialty. With this definition, you can receive benefits while you work in a new occupation. As long as you can’t perform the duties as required by your current occupation or specialty, you can collect benefits.
This definition has much more stringent terms. To qualify for benefits under this definition, you must be disabled in a way that prevents you from doing any job at all.
It’s important to know whether the costs and monthly premiums are fixed at a specific rate or if they are variable. Variable costs may cost less per month to start but can increase over time.
Fixed costs make it easier to stick to your financial goals and budgets, as well as ensure that you won’t face exorbitant premiums in the future.
The waiting period is the time between the day you become disabled, and the day that you are eligible to start collecting benefits.
The longer the waiting period, the lower your premiums will be, but the longer it will take to start collecting monthly benefits.
How Much Insurance Should I Buy?
How much insurance you should buy depends on how much money you need to pay for your day-to-day living expenses and monthly bills. The lower your cost of living, the less coverage you’ll need to buy and the less you’ll need to spend each month in premiums.
Young, healthy physicians in their 30s can expect to pay about 2-6% of the monthly benefit. In other words, if you want a $10,000 per month payout, you’ll need to spend between $200 and $600 month.
In general, most physicians spend 1% to 4% of their annual income on disability insurance.
More about how much disability insurance you need here.
Disability Insurance Riders
Most insurance companies offer the option to add riders to your disability insurance policy.
For every rider you add, you can expect to pay a little bit more in premiums each month, but many physicians find it worth the extra dollars. It all depends on what you need.
Some of the most common riders you can add include:
With this rider, you can earn benefits even if you’re not fully disabled. More on disability insurance riders here.
From the loss of speech, hearing or sight to the loss of the use of your hands and feet, this rider protects you in case of the worst circumstances. It also protects you if you can’t do day-to-day activities, such as bathing, eating, dressing, and using the restroom. This will provide an additional benefit on top of your regular monthly benefit.
With a retirement rider, your insurance company will put a percentage of your premium into a monthly retirement account.
Cost of living adjustment
The COLA rider ensures that your benefit amount will increase in accordance with the rate of inflation.
If you become disabled or suffer a serious illness while you’re still paying off student loans, this rider can help you repay your debts.
If, for example, you buy a 15-year student loan rider and become disabled ten years in, you’ll receive enough to cover student loan repayments for the remaining five years.
Future increase option
This rider affords you the option to increase benefits without having to undergo any health evaluations. Therefore you are guaranteed to be insurable at the time of increase so you don’t need to worry about being approved. You’ll only have to show your income has grown and is eligible for the increase. Though there is usually a maximum amount attached, this allows you to increase benefits to keep pace with your income and for life events such as when you get married, have a child, etc.
Why You Can’t Rely on Disability Insurance from Your Employer
Many employers provide disability insurance, but it usually isn’t enough to get you through tough financial times.
And here’s why:
If you quit or get fired from your job, you will lose your employer’s disability insurance coverage. It’s the same as health insurance – regardless of how good your coverage may be, when you leave the job, the coverage ends.
So even if your employer provides disability insurance as a part of your benefits package, it’s best to have your own additional coverage that you can take with you from job to job.
With your own disability insurance, you can have maximum control of your monthly premiums and monthly benefits. You can also take advantage of riders that your employer’s policy may not cover.
Disability Insurance and Taxes
Another thing to be aware of is how your disability benefit or paycheck from the insurance company is taxed.
If your employer pays for the disability insurance, which is usually the case, any benefit you receive is 100% taxable as ordinary income. This means that if you have a $10,000/month benefit, after you pay taxes, you may only actually be getting a benefit worth $6,500/month.
For this reason and many others, individual disability policies are usually the way to go when it comes to getting the coverage you need.
Disability benefits received from an individual insurance policy are tax-free. This provides dollar for dollar protection on any coverage you have through an individual policy.
Protecting your lifetime earnings potential is essential when it comes to financial planning.
We’ve highlighted a few of the things you need to be aware of regarding disability insurance for physicians, but there are many more.
If you have any questions or would like to go over the other things to know, connect with us and we can provide more information.
When to Get Disability Insurance
Now is the best time to buy disability insurance.
Laying the groundwork toward financial health starts with disability insurance. At Physicians Thrive, we’re here to help find the plan that best fits your needs.
Fill out the form below and a member of our team will get in touch with you shortly.
Now that you understand the importance of disability insurance as a physician, you’re probably wondering where to get it.
We always suggest shopping around with different providers to ensure you are getting the best deal possible.
If you have a trusted insurance agent or broker, contact them to see if they offer an assortment of disability insurance plans.
Alternatively, you can request a quote below, and we’ll provide multiple quotes from all of the top-tier companies.
Why You Need Disability Insurance Sooner Rather Than Later
You can’t wait until you need disability insurance to get it. By that time, it may be too late.
To secure your financial assets, and protect yourself and your family, enroll in a disability insurance plan now.
The younger and healthier you are when you enroll, the less you’ll pay. Young, healthy physicians always pay less than older physicians or those who already have a medical condition.
But those aren’t the only factors that determine how much you’ll pay in monthly premiums. Your medical specialty also plays an important role. Doctors in certain specialties, specifically those with more hazardous or strenuous jobs, should expect to pay more.
Protect yourself early on to get the best rates and deals. With many insurance companies, you can even sign up for disability insurance as soon as you become an M4. This can work to your advantage because you can get the more preferable rates of an internal medicine specialty than what a critical care or invasive cardiologist would receive since their duties are more strenuous.
How to File a Disability Insurance Claim
One important thing to know about your disability insurance policy is how long you have to file a claim. Many insurance companies have a 20-30 day time frame to file that starts on the date you suffered the disability.
No matter what policy you have, make sure you are well aware of the timeframe for filing.
In order to file, you’ll need to make sure you meet the definition of disability as outlined in your policy.
If you suffer an emergency or disability and are unclear about the terms of your policy, contact your insurer immediately.
Where to Get Disability Insurance
The best approach is to get insurance through an independent agent, and better yet, a broker.
But how do you go about finding one?
Start by asking colleagues and professional groups for recommendations. Narrow your choices down to two or three and research those agents or brokers to find the one that’s best for you.
Regardless of the agent or broker you choose, you’ll need to apply for the insurance policy and undergo a medical examination. If you’re approved for disability insurance, the company will underwrite a policy and give you an offer. If you accept the offer, your policy will go into effect, and you’ll begin making payments so coverage can begin.
How Can Physicians Thrive Help?
Physicians Thrive only works with the top own-occupation disability insurance providers.
It’s important to note that we don’t work for these companies. We recommend the best value option that meets our clients’ needs. It really depends on our client’s goal. Sometimes price is more important, but for others having the best contract is the priority.
Information From A Trusted Source
Physicians Thrive works with physicians nationwide. Our advisors work independently as fiduciaries. They do not work with any one insurance company, so you’ll always get unbiased personal guidance.
For no extra cost to you, our advisors advocate for you for the life of your insurance policy. In case you need to increase your coverage, file a claim, or have questions about your policy at any time, we are here for you.
Only Quotes From The Best Insurance Companies
We are not tied to one insurance company. Instead, we have evaluated the leading companies and plans for their ability to adequately protect the unique needs of doctors.
We offer only those disability insurance plans we have deemed worthy of our endorsement. Since we can show you quotes across all companies, we are able to save you time and help you find options that fit your needs.
For over 30 years, our team of experts have served thousands of physicians at over 400 medical centers, hospitals, and medical schools. This includes doctors at over 1,000 residency and fellowship programs, encompassing all specialties. To date we have prepared more than 52,000 quotes for physicians nationwide.
Why Choose Physicians Thrive?
Our experts present all the options — not just the ones we want you to choose — so the freedom to choose the best policy is always at your discretion.
Plus, your insurance will follow you wherever the job market takes you.
When Physicians Thrive finds the lowest rate, you’ll know immediately so you can jump on exceptional insurance discounts.
Our experts work with top disability insurance companies to get as many quotes as possible.
As a client, you’ll never have to shop around—you can simply choose the option that works for you.
While injuries and disabilities are unpredictable, bills and financial obligations are not.
As a physician, it’s essential that you take the appropriate steps in protecting yourself from financial hardship. Don’t wait until it’s too late to take out a disability insurance policy. No matter how early you are in your career, the time to do so is now.
Research different insurance policies. Compare benefits and premiums. Consider optional riders, know the definition of disability, and understand the elimination periods.
Ready to protect yourself with disability insurance?
Get free disability insurance quotes now.