Employment and Income Changes
When a doctor changes jobs or their income increases, their disability income protection plan may be change. It is during this time that physicians should review their disability insurance plans to see how it is impacted.
In light of these changes, let’s take a look at the rules that govern how physicians can set up their disability insurance plan. For example, the monthly benefit amount doctors qualify for depends on the stage of their career.
While disability insurance is known as being income-based, residents and fellows are eligible for $5,000 per month irrespective of income. Doctors who are about to finish their program or have recently started their first job after training can get $6,500 or $7,500 depending on specialty and this also is not dependent on income. It is when physicians want to have a higher benefit that it becomes income based.
To summarize, there are basically three categories: #1 (in training), #2 (new practice), and #3 (in practice…with a signed contract that specifies their income).
While the amount of #1 (in training) is the same across the board for the top insurance companies, the rules for #2 and #3 vary. Some companies allow for $6,500 while others allow $7,500. Another key distinction is how the insurance company treats disability insurance provided by the employer.
One of the fundamental rules of insurance is that you cannot have too much and this is especially true for #3 (in practice). There is one caveat to this, and that is if a doctor already has their disability insurance plan in place before joining a new employer. This is a key reason for doctors to review their disability insurance plan before considering a job change.
The “cannot have excess insurance” rule does not actually apply for #1 (in training). For #2 (new practice) it depends on when the private plan is started. For some companies, they ignore employer disability insurance for only a few months. Others go a full year and sometimes longer.
With all of this in mind, let’s go back to employment and income changes.
For doctors who have #1 ($5,000/mo), they should take a look at their plan and consider increasing it up to #2 ($6,500/$7,500) or #3 (in practice) and do so before their options are limited due to the employer disability insurance rules. For those with #2 (new practice), they should consider their option to increase into #3 (in practice)
How can doctors go from #1 to #2 or #3?
Physician disability insurance plans often allow doctors to increase their monthly benefit in the future without having to undergo new medical screening. How often this can be done depends on the insurance company.
Why should doctors consider increasing their benefit amount now vs. later?
Primarily two reasons.
Going from #1 to #2 may not be possible in the future due to the “employer disability insurance” rule. Secondly, the more benefit that is locked in at the current age rate the better for overall insurance cost management. The longer a physician waits to do an increase, the more the cost of insurance goes up.
For more information on this topic or to speak with an advisor about your disability insurance plan, contact our office.