Physician Disability Insurance: Insure Your Earning Potential

The specialized nature of a physician’s occupation requires a specialized plan for protecting their most important asset – their “intellectual capital and ability to work.” Therefore, selecting the right disability insurance is a strategic choice in a physician’s overall risk management plan.

The Case for Adequate Coverage

In most cases, a physician’s career spans 20-30 years depending on when they finish their training. Over those years, a physician can earn $10 – $20 million, which is the return on their investment in their medical education and commitment to their patients through the years.

What would happen if the physician was not able to work due to an accident or an illness? In some cases, the physician would have to forego $10 million or at least a large portion of it.

Physicians own several types of insurance. Including, but not limited to:

TYPE EXPOSURE PROTECTION FOR
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

 

None of the above mentioned policies cover anywhere close to $10 million. Most agree that it is unwise to cut corners with the insurance planning surrounding these items. How much more would it be unwise to cut corners with $10 million of earnings?

If a physician’s most important asset is their “intellectual capital and ability to work” and it is worth this much over their career, how do they protect it?

These reasons make it imperative for physicians to pay at least as much attention to the type of disability income insurance plan they have as other forms of financial protection. This requires the proper management of employer provided and individually owned physician disability income insurance policies. Disability contracts have many details that must be understood in order to have the peace of mind that it will provide benefits when a disability occurs. Remember, “the devil is in the details.”

Important Considerations When Selecting a Disability Insurance Policy

Here are a few fundamentals to consider when evaluating how secure a physician disability insurance contract:

  • Is it non-cancellable and guaranteed renewable?
  • Is it specialty specific? Is the definition of disability true/pure own occupation, modified own occupation, or regular occupation?
  • Can the benefit amount be reduced?
  • What exclusions or restrictions does it have?
  • Does it include partial benefits? What are the terms?
  • Does it have recovery benefits?
  • What is the financial strength of the company writing the contract?
  • What is the the cost/benefit value?

Why Employer Benefit Disability Plans Are Only Sufficient as Supplemental Coverage

Consider the typical characteristics of policies offered through benefits compared to personal ownership.

EMPLOYER-PROVIDED* INDIVIDUAL-OWNED*
Cancelable Non-cancelable
Taxable Non-taxable
Non-portable Portable
Benefits can be reduced Benefits cannot be reduced
Not specialty-specific Specialty-specific
Subject to enrollment terms Subject to underwriting decision

 

In general, your personal policy will offer more comprehensive protection. The key here is to think of the individually owned coverage as “core” coverage and the employer provided as “supplemental.” Core is what physicians should have so that they can take it with them throughout their entire career, have control, lock in the rates (and discounts if possible), receive full benefits, and protect their specialty.

The Right Time to Research and Buy Personal Physician Disability Insurance

Since most individually owned coverage is subject to an underwriting decision, a physician may not be able to get the coverage they want unless they are young, in good health, and have little to no accident or sickness history. Therefore, the sooner an individually owned physician disability insurance policy can be started, the better since there are no guarantees the doctor is going to be able to get the coverage they want or need at a later date.

Additionally, the amount of individual coverage you may qualify for could be limited by the amount of insurance your employer provides. Therefore, it is wise to investigate your personal coverage options before starting practice.

A Note to Residents and Fellows About Discounts

In many cases, physicians completing a residency or fellowship program have access to discounts that can be applied to the cost of their insurance. It is highly recommended to take advantage of the discount, but be careful. Just because a discount is available does not mean the contract is worthy of ownership. A prudent approach to evaluating a contract that has a discount is to compare it against a number of other contracts to objectively assess whether or not it provides the quality needed to protect your most important asset, your “intellectual capital and ability to work.”

The savings from a discount can easily be tens of thousands of dollars over a physician’s career, which is why it is worth serious consideration. Some insurance companies provide lower cost physician disability insurance through a discount or endorsement program. In most cases, all companies allow for one when 3 or more physicians obtain coverage at the same time. There are many variations of discount programs and for the sake of brevity, we will not expand on them further in this issue.

Check Your Discount Eligibility

Our advisory group has access to the most and largest discounts available with most providers. To see if you are eligible for a discount, click here. To learn more about disability insurance options for physicians, feel free to contact our advisory group. Our team can prepare a multi-carrier comparison quote for you and help you find coverage that fits your needs and budget.

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