Physician Disability Insurance: Insure Your Earning Potential
The Case for Adequate Disability CoveragePhysicians’ careers typically span two or three decades, during which time they can earn an inflation adjusted income of $10 – $40 million. This income is the expected return on investment for their medical education, years of training, and endless dedication to their patients. When a long-term disability prevents a doctor from working in their specialty, the doctor may lose a significant portion of that $10-40 million in career earnings. In cases of permanent disability, the doctor may forgo all of their future career earnings. It cannot be overstated enough the serious financial risk posed by inadequate disability insurance. To understand the potential impacts of disability coverage, we can compare it with other common types of insurance. Most physicians own several types of insurance, including:
|Malpractice||<$1-3 Million*||Malpractice claims|
|Home||<$1-3 Million*||Property damage|
|Auto||<$1-3 Million*||Property damage|
|Health||<$1 Million*||Medical expenses|
|Dental||<$1 Million*||Dental expenses|
The Key Distinctions Between PoliciesWhile adequate disability coverage is essential for all physicians, not all disability policies are created equal. Two major categories of insurance include employer-provided group plans and individual policies. A group plan is usually subsidized by an employer and is tied to a physician’s employment. An individual policy is purchased by a physician from an insurance carrier, and the coverage travels with the policyholder throughout his or her career. Consider the following common distinctions between employer-provided and individual-owned disability policies:
|Benefits can be reduced||Benefits cannot be reduced|
|Subject to enrollment terms||May or may not be subject to underwriting decision|
The Best Opportunity for Affordable, Scaleable CoverageWhen you go to purchase an individual disability insurance policy, the insurance carrier will conduct medical underwriting if needed. The purpose of underwriting is to explore your health and medical history to assess your risk of becoming disabled. The less likely an insurance carrier believes you are becoming disabled, the lower your premium costs will be. Alternatively, if the underwriting decision notes conditions or incidents that put you at a higher likelihood of becoming disabled, the carrier will charge higher premiums and/or exclude certain pre-existing conditions from your coverage. In the case of serious pre-existing conditions, such as cancer, you may be denied a policy altogether. As a result, the ideal time to purchase a disability insurance policy is as early as possible. Young, healthy doctors can be approved for policies with low monthly premiums, and lock-in these rates for the rest of their career. With special discounts available for residents and fellows, training physicians can maximize savings by purchasing a policy before graduation. By securing a career-long discount of 10-20%, medical residents have an opportunity to save tens of thousands of dollars on disability insurance in the long run. Of course, most 29-year-old physicians cannot afford the amount of coverage they will need to protect their income and lifestyle at the age of 40. As physicians earn more, start families, and buy property, their financial responsibilities and resources change dramatically over time. For this reason, physicians should include a Future Increase Option (FIO) rider in their policy. FIO riders allow policyholders to increase their benefit amount as their income increases. In summary, young physicians should invest in an individual insurance policy as early as possible, but only purchase the amount of coverage they can responsibly afford. With the inclusion of an FIO rider, doctors can then increase their benefits over the course of their career without risking losing coverage due to changes in their medical history.
Protect your financial future with own-occupation disability insurance. To learn more and get a free professional quote evaluation, talk with a Physicians Thrive advisor today.
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