If you’re here, then you must be wondering about disabilities. Maybe you’ve experienced an injury or illness that could keep you from earning an income. Maybe it’s a loved one that is facing uncertainty. Regardless, we can help you understand disabilities, if you qualify for benefits and the top signs to look for to determine if you will be approved.
Table of Contents
What is a Disability?
First, let’s go over what disability is, and how it can affect you.
Simply put, a disability is anything that is debilitating. In terms of insurance coverage, a disability is anything that prevents you from fully working, or working at an extremely diminished capacity. In this case, your income becomes near (or at) zero, meaning that families can no longer sustain themselves with the same quality of life, as the physician in the family is commonly the primary breadwinner, due to the extremely technical and professional nature of the standard.
What is Disability Insurance?
Although it is talked about often, there is a lack of inaction, especially for those who are younger, around understanding disability insurance. The belief that there is nothing to protect if you are not in a relationship, or that debts are surmounting can often be offputting for physicians to consider. Disability insurance provides the insured, and often their loved ones, with the necessary protection once someone is incapable of working due to a disability. The insurance will pay out the necessary financial support to the insured to minimize, or even completely insulate, the ensuing financial hardship.
How Does Disability Insurance Work? How Can It Help?
Disability insurance is a great first step towards providing peace of mind that you will be covered in the future, in case of the unfortunate event that you become unable to work. While some consider this a rare happenstance, 5% of Americans (per year) experience a short-term or long-term disability that is due to injury or illness caused outside a non-occupational hazard. This 5% may seem like a low number, but 5% per year will more than likely affect you or your partner in some way, shape, or form eventually.
Firstly, you must compare and contrast the different plans available. Be certain to understand what is in your disability policy. Many different factors go into insurance that are separate from the payout, including a full evaluation of your circumstances, and the desired output. A short-term disability contract, for example, is much different than a long-term disability contract. Short-term disability is considered to be 6 months or less.
Once a plan is selected, you are covered under the legal terms of the contract. When it comes time to collect your insurance, you must first meet the standards defined within the stipulations, which we will go over later in the article.
Once you are sure you have met the conditions, it is time to file a claim. This can be a lengthy process. There are certain things that you must avoid doing during this time – sometimes this includes working. If you are successful, you will start collecting monthly payouts.
Is Disability Insurance Taxed?
Disability Insurance is both taxable and non-taxable for certain conditions and benefits. It is best to consult a professional before considering tax implications, as every situation is extremely unique and cannot be considered generalized in any way, shape, or form.
Generally speaking, taxation revolves around the person who is paying for the plan, and the amount of income generated. Disability insurance for long-term policies is usually tax-free as long as the policy and the payments are purchased with money that has already been taxed (preventing “double-dipping”). Disability is meant to be income replacement or income assistance. And as such, it is rarely classified as taxable for reporting purposes to the IRS.
Short-term disability follows the same notion. However, it is often part of a larger policy that could be matched through an employer. If someone else is covering parts of your payment, you will most likely need to pay for these benefits. This is not true if you are obtaining an individual policy vs a group policy.
Related: Does Disability Insurance Cover Cancer?
Types of Disability Insurance
When considering what will give you the best payout, it is best to consider your situation and the amount of income you are generating to sustain a reasonable quality of life. Generally, individual policies offer a more tailored solution and could become your best option. Below, we will first define the different basic types of insurance and their associated policies.
Long-Term
Long-Term Disability is the most common sought-after policy by an individual, as it is not often offered by the state or through employers. For those that have plans, they are generally extremely basic as they need to cover the needs of many other people within that organization. This means that if egregious issues were ever to happen. This type of insurance has a higher elimination period, which is the waiting period between the injury or illness that has occurred and the time that you will receive your first monthly payout and confirmation of your benefits package.
Typically, physicians can expect between 40 to 60% of their gross salary and should be insured as such. Long-term disability is often defined as disabilities that are sustained beyond 6 months which will impede your ability to work. One in four Americans will face a disability claim at some point in their life, and over 50 million are not covered. Longer-term disability also has a wider breadth of terms for signs that you will be approved for disability.
Short-Term
Short-term disability insurance often pays out much more, as you can expect 60-70% of the salary in the time that you have claimed. While Short-term disability does not always have a true definition as to the period of time, it is generally less than 6 months. The elimination period is also relatively short, as it can payout in as little as two weeks.
Short-term disability is sometimes offered by employers, but individual plans are also necessary. This is especially true for high-income owners like most practitioners within the physician space. It is best practice to hold both a short-term and long-term disability policy as they can provide the absolute best payout, and ensures proper tax advantages that aren’t offered by employers or the state. If, for example, you sustain a long-term injury, you can receive much more by first receiving a short-term payout, and then subsequently switching to your long-term contract if necessary.
Social Security
Social security is funded by the taxpayer and provided between $1200-2900 a month in assistance. It also does not guarantee many things, as it is general coverage of the public. Even if the maximum is achieved, it can be extremely difficult to sustain a family on under $3,000 a month. This is even more true if they have already become accustomed to the quality of life that is paired with a physician’s compensation and education.
Read this: Who Needs Disability Insurance? You and NFL Players
Individual vs Group Policies
Group
Group policies can often have better premiums as they cover a wider range of insured persons. These policies are generally plans that are offered by employers or plans that are offered in medium-sized clinics. As an employer, it may see beneficial to insure your employees through a group benefits policy. However you will have reduced flexibility with your own claims. Remember that insurance isn’t a one-size-fits-all approach, rather it is a way to protect yourself with a customizable solution. While upfront you may be paying lower premiums due to an increased purchasing power, you can suffer from:
- Long elimination periods
- Being covered for the wrong disability
- Having your claim denied due to the general nature of the group coverage
- Offering lower protection
- Having taxable benefits that are considered as part of your income when filing taxes to the IRS
Overall, employers often choose group benefits simply because they are affordable and offer an easy solution for many employees. For those who are high earners, the individual policy is extremely beneficial.
Individual
Individual policies are the most effective ways to insure yourself and provide a good income replacement. They are extremely customizable and include many optional riders. These riders can supply better benefits, improved tax efficiency, increased coverage, and the ultimate peace of mind necessary to perform your stressful job. They are also lifetime contracts usually, meaning you will never have to renegotiate to keep up with the demand. Individual benefits increase the number of signs that you will be approved for disability.
While individual policies may be extremely beneficial, they can be more costly. The key is to obtain one as young as possible, as insurance is much more costly at older ages. Physicians Thrive provides the best quote based on your situation, and can search for coverage on your behalf.
Read/Watch this: Valerie King, M.D. – Her Story of Disability
How Do I Know That I Will Be Approved?
If you are only insured through social security, it is extremely difficult to become approved. This is especially true if you are still earning partial income. Some of the requirements include:
- Being of a certain age
- Having a low-income threshold
- Being up to date on taxes
- Having an SSA Blue Book evaluator
This is why the top 6 list of signs that you will be approved for disability include the following:
1. You’ve Purchased an Individual Plan
If you’ve purchased an individualized plan, you will most likely already be ahead of the curve. Those who purchase individualized plans are often much more knowledgeable about the coverage they purchased. On the other hand, those who are either uninsured, insured by the state, or insured through a group/plan are often in the dark. While it can be an extremely challenging time, you will have available information handy to start your disability claim process. Having an individual plan is one of the top signs that you will be approved for disability.
2. You Provided All Diagnostics and Records According to the Policy
Once you have met the non-medical conditions, you can breathe a sigh of relief if all the diagnostics and records have been provided. This is usually supplied by the insurance company and the evaluator by your medical professional. If you are unsure as to what is necessary, it is best to talk to the evaluator or to see what else needs to be submitted before the claim process has been started.
3. Your Illness and Injury Have Displaced You For Weeks/Months
Insurance fraud is a very real thing. It is the primary motive why companies triple-check your information before paying out the terms of the policy. If you have sustained a debilitating injury, or have contracted an illness that limits your mobility and professionalism and is expected to last for up to, or longer than, 12 months – it is generally a good sign that you will be considered disabled by the language of your contract.
4. Your Consultative Doctor Strongly Believes You Meet The Criteria
Medical consultants and examiners are professional, in the fact that their job relies on them being extremely detail-oriented when performing their assessments. If, after a full analysis, they have deemed you are extremely likely to meet the criteria, this is a strong sign that your claim may be approved.
5. Your Evaluator/Adjustor Has Seen a Similar Case
When working to file, you will be assigned an evaluator or adjustor for your case. That person often works with your employer and your doctor to collect all necessary information to ascertain your disability status, and the validity of your claim.
6. You Worked With a Professional
If you have worked with a professional agency, you can rest assured that all the clauses and terms of the contract will be legally binding and extremely meticulous in their definition. This will give people peace of mind rather than doing it themselves or relying on the state/employer. This is the final sign that you will be approved for a disability insurance claim.
Conclusion
Now that you are well informed about coverage, physicians often find that they cannot rely on state insurance to support their families. With some sort of disability being a statistical reality, the premiums paid are infinitesimal to the peace of mind you can achieve with a fully-defined benefits plan through an individual policy.
Physicians Thrive is the leading financial planning service for physicians. We can help you increase the likelihood that you will see signs needed to be approved for a disability claim. The quotes that we offer are:
- Unbiased, as we work with all the experts.
- Quick, as we will find the lowest rate immediately after submission
- Simple, as we work with top disability insurance companies and will do all the work on your behalf.
As a client, we want to protect everything that you have made able through the sleepless nights, the examinations, your work history, and everything you have sacrificed for your career. Protect you and your loved ones today, and fill out a simple quote form to get started. And if the time come to file a claim, you can rely on us to help you though that process. Physicians Thrive will be your partner through all stages of life, including a disability.
Subscribe to our email newsletter for expert tips about finances, insurance, employment contracts, and more!
