Why Relying On Your Employer-Sponsored Disability Plan Can Hurt You
Remember to keep group long-term disability insurance that is provided by an employer and/or association as your secondary plan, not primary.
It happens all of the time. Physicians get lost in the Disability Insurance Maze because of misunderstandings about what is written in the fine print of disability insurance contracts whether they are group or individual insurance plans. They are not experts in legal contracts, and often place too much faith in the employer to adequately select a disability plan that provides the coverage physicians need. The truth is, group disability plans are often selected by employers based on cost rather than the strength of the policy.
Why Do Physicians Place Too Much Confidence in Employer-Sponsored Plans?
Sometimes it is due to lack of time: working through residency or fellowship and the “I think I am covered sufficiently by the hospital/employer” mindset causes a sense of false security until the unforeseen happens.
Other common time constraints include finishing a training program, starting a new job and managing a new or seasoned practice. In many of these cases, physicians aren’t very interested in scouring a contract written by the attorneys employed by the insurance company because they do not have the legal background or level of experience in the insurance industry to adequately navigate the maze.
Why is it Important to Understand the Employer-Sponsored Disability Contract?
Physicians who look to the employer’s or association’s group disability insurance as their primary plan of insurance sometimes inadvertently find themselves in a precarious situation in their later years when suddenly they decide to make an employment change. A change that means starting with a new employer who doesn’t have disability insurance, establishing a new practice which requires the creation of a new insurance plan, or receiving a new compensation package causes their disability protection to be inadequate for their new level of income.
Keep in mind, according to the 2012 Physician Retention Survey by Cejka Search and the American Medical Group Association, most physicians who leave an employer do so within three years or less.
Those physicians who leave an employer are forced to drop the insurance benefits offered to them which means they no longer have any disability insurance. Then they recognize the importance of obtaining their own insurance and find in many cases, that the amount of insurance they are able to obtain is reduced because of a new employer’s group disability insurance plan.
This serves as another reminder of the temporary nature of an employer’s disability insurance plan and the importance of having individually owned insurance that is secure and portable.
What Often Happens to Physicians Who Wait to Get Their Own Disability Insurance?
Frequently their options become limited and cost prohibitive, exclusions get added that severely reduce the value of the plan or they can be denied coverage altogether. In each of the last few months alone, Physicians Thrive’ has had to share the bad news with residents and fellows who are still in their last year of training that they cannot get any insurance due to the development of a recent health condition.
In cases where health issues are a concern, an employer’s or association’s group disability insurance plan is very beneficial, because it provides protection for those who may not be able to obtain it on their own subject to the unique pre-existing conditions clauses. In the absence of health conditions, however, the group plan should remain what it truly is…the secondary plan.
The primary long-term disability insurance plan should be owned by the physician, should protect the desired amount of income (subject to the insurance limits), should be portable, should be specialty specific, benefits should not be taxable and should not be reduced by other income.
Why Should a Physician Own the Type of Disability Insurance Plan Just Mentioned?
The risk is too great without it. Being unprotected or under-protected in this area could mean risking a total loss of the return on their investment in medicine. This could be a gamble worth millions of dollars. Therefore, it is better for them to have insurance they don’t need than to need insurance they don’t have.
A physician’s return on their investment takes many forms. The lives they have impacted, the advances in medicine, the fulfillment of making a difference, and financially, the two to three decades of work which can generate more than $10 million of income. If that income comes to a halt due to an accident or illness, the “economic” return on investment vanishes.
With this in mind, physicians should stay informed of their options and what is happening in the disability insurance industry. There have been times when insurance companies have gone under, have been purchased by other companies, and in some cases, have caused the newest holder of the insurance companies to have financial trouble to then have to be purchased by another. In light of this, be on the lookout for changes coming in 2014 as we expect to see improvements rolling out from certain companies and rates with other companies going up. In some cases, 2013 may be the last time for physicians to get access to the most competitive rates that have been offered.
By staying informed and aware of what’s happening in the industry, physicians who have not established or updated their primary plan can take advantage of the best rates before they increase and keep tabs on the financial backing of their insurance plan to make sure they are protected into the future.
Physicians who would like a complementary analysis of their employer sponsored disability plan and personal quotes on an individual long term disability policy can do so by clicking on the link below:
After the request has been submitted, one of our advisors will speak with you about the options and navigating the Disability Insurance Maze at no cost or obligation. Remember, most physicians who leave an employer do so within three years or less and group insurance is not portable to new employers. It is recommended to have a secure insurance plan that can weather the storm through employment and partnership transitions.