By Kenneth Bloch
As a medical professional, you’re dedicated to helping other people maintain their health, overcome illnesses and injuries, and deal with disabilities. Though you probably pay close attention to your own wellness, there’s no way to predict what the future holds. If you fell victim to a disabling illness or were severely injured in an accident, how would a lack of income affect your life and those of your family?
Physicians and others in the medical field never know when an illness or unexpected injury might detract from their ability to treat patients or prevent them from practicing medicine altogether. If you’re not prepared for something like this, the impact could be devastating both emotionally and financially. Physician disability insurance can help lessen the blow to an extent.
Statistics indicate more than 25 percent of today’s young adults are likely to suffer from an injury or illness that takes them away from work for a year or more before they reach the age of retirement. This figure increases with age. On top of that, reports show less than half of Americans have enough money in savings to cover living expenses for three months or more if they become disabled regardless of age, occupation, or income.
To make matters worse, millions of people in the United States have no definitive disability coverage to help make ends meet and maintain their lifestyles in the event they’re impacted by a debilitating medical condition. While Social Security Disability Insurance is available to virtually all Americans, it falls sorely short of covering even basic expenses for most people.
In fact, the average monthly payout from SSDI is only about $2,000, and getting an initial decision for eligibility can take five months or longer. Even after this long waiting period, only 25 percent of applicants are approved for benefits. Of the 75 percent who appeal their initial denials, only a handful fare better the second time around.
Protecting Yourself for the Future
At InsureSTAT, we provide the full range of disability insurance options for residents, fellows, practicing physicians, medical assistants, nurses, and other healthcare professionals. We have more than 50 years of combined experience in our field. As independent agents, we work with all the major coverage providers as well, so we can bring clients a vast selection of options to choose from.
Our team is dedicated to helping medical professionals find the right coverage for their needs. With all the options now available, deciding which coverage best melds with your unique circumstances can be particularly difficult. Since understanding all the finer points of physician disability insurance is a major component of the process, we’re committed to providing all the information needed to make the right decisions.
Physician Disability Insurance – A Brief Overview
Numerous categories of disability insurance are available these days. Some are general in nature whereas others are more industry-specific. At the same time, various types of coverage are on the market. Each one has its own set of benefits and disadvantages, but most offer minimal coverage and aren’t geared toward the unique needs of those in the medical field.
Depending on the circumstances, you may be partially covered by worker’s compensation insurance. Though this type of coverage can help in some situations, it only applies to injuries sustained at the office or illnesses directly caused by exposure to harmful elements while at work. Most injuries and medical conditions don’t fall into this category.
Physician disability insurance is designed to cover the distinctive needs of doctors and other medical professionals and specialists in the event they become disabled. Even a temporary disability could cause significant financial hardships, but physician disability insurance helps thwart such difficulties. This type of coverage provides compensation if policyholders are unable to perform the basic duties of their occupations or continue in their fields of specialty.
Common Physician Disability Insurance Terms
Certain terms appear repeatedly when discussing insurance. You’ll need to know these terms as well as their meanings and significance to fully understand the intricacies of physician disability coverage. We’ll explain them in further detail before proceeding.
The elimination period is the waiting period between filing a disability claim and receiving benefits. It directly impacts the premiums. Shorter elimination periods mean higher premiums, and longer elimination periods bring about lower premiums. This happens because short-lived disabilities are more common than long-term ones and coverage providers are generally less likely to have to pay out benefits for those short-term conditions.
Elimination periods work in much the same way as the deductible on automobile insurance. With auto insurance, you have to pay in a certain amount before the coverage provider pays for any damages. During a disability insurance elimination period, you deal with expenses and lost income on your own. Then, after the elimination period ends, you begin receiving benefits.
Recovery benefits serve as a supplement to basic disability benefits. They usually kick in once a policyholder returns to work. They’re designed to help recoup losses outside the insured’s standard income. These might include patients lost while a physician is disabled who don’t come back to the practice once he or she returns to work.
In short, recovery benefits help with rebuilding a practice and covering ongoing losses. Some policies offer recovery benefits as standard protocol. In most cases, though, they’re only available through residual disability riders or other add-ons.
All disability insurance policies have coverage exclusions, or conditions for which they won’t pay benefits. Preexisting conditions, or medical issues policyholders suffer from before obtaining coverage, are prime examples. Certain exclusions apply to all policyholders, such as disabilities incurred while driving under the influence of drugs or alcohol, self-inflicted injuries, and injuries acquired while breaking the law.
A policy may also contain coverage exclusions that are specific to you. These are usually based on your family medical history or lifestyle. If a hereditary disease runs in your family and you’re likely to develop it as well, disability insurance may not cover it. If you routinely participate in high-risk activities, such as skydiving or street racing, any disabilities caused by those activities probably won’t be covered.
Coverage limitations are comparable to exclusions, but they’re not quite as absolute. Policyholders may receive only partial benefits for disabilities included in the limitations of their policies, or the payouts may not last as long as they would for conditions without limitations. Limitations vary by policy and coverage provider, and they may stem from a person’s medical history, lifestyle, or field of specialty among other factors.
Mental and Nervous Limitations
Many physician disability insurance policies have coverage limitations on mental illnesses and substance abuse disorders. These are known as mental/nervous limitations. Your specialty may place you at a higher risk of developing a substance abuse issue, depression, anxiety, or other condition included in this category.
Though the policy will most likely cover those conditions, it may not pay full benefits for them. Limitations on the amount of time you’re allowed to collect benefits for mental or nervous conditions may also apply. Your coverage provider might require you to be under a physician’s care while receiving payouts. If you fail to receive the appropriate care, you’ll be denied benefits.
Multi-Life Discount Program
Multi-life discount programs offer reduced rates for coworkers who purchase individual policies. To qualify for these programs, three or more people who work for the same employer must purchase policies at the same time. They receive significant discounts on their policies without sacrificing the customization options of individual coverage.
Presumptive benefits are granted to policyholders when their physicians expect their disabilities to be permanent. These are usually sudden-onset conditions with extreme consequences, such as complete loss of sight, hearing, or speech. They may also include the loss of a limb or use of the hands or feet.
Coverage providers often forego the elimination period for policyholders with presumptive disabilities. Though they still require proof of disability, they generally don’t expect recipients to provide ongoing confirmation of their conditions under these circumstances.
Survivor benefits are benefits paid to a beneficiary if a policyholder passes away before his or her disability coverage ends. Though some policies offer survivor benefits as standard protocol, they’re usually only available through riders. You may choose who receives these benefits. Most people pass them along to their children or a spouse or parent.
Business Overhead Expense Coverage
Business overhead expense coverage helps meet the costs related to a business if its owner becomes disabled. Most policies and riders offering this coverage pay out benefits for a maximum of two years. Monthly benefits may range from $10,000 to $25,000 or be calculated based on the policyholder’s personal disability benefits. In the latter case, business overhead expense coverage might pay 10 times the amount of the policy’s personal benefit.
If you own a practice, we advise adding BOE coverage to your policy. It can help cover employee payroll, utilities, supplies, taxes, business insurance premiums, the rent or lease on your business property, and other expenses. Though recovery benefits may help with a portion of those costs, they won’t likely cover all of them. On top of that, you’ll receive BOE benefits while you’re out of work rather than after returning.
Insurance providers are required to allow policyholders a certain amount of time to cancel their coverage. This is called the free-look period. It varies by state and carrier but is usually 10 to 20 days.
These are terms you’ll hear quite often when discussing disability insurance, and some of them crop up with other types of coverage as well. Now that you have a reference for them, we’ll dig deeper into physician disability insurance and all the information you need to make an informed decision.
An Explanation of How Physician Disability Insurance Works
Physician disability insurance works in much the same way as other types of coverage, such as life, medical, and dental. You pay premiums to an insurance provider monthly, quarterly, or annually. In turn, the coverage provider will pay you the benefits specified in your policy if you become disabled. The policy may reimburse all or a portion of your typical income depending on the amount of coverage chosen.
It’s important to keep in mind, different versions of physician disability insurance are on the market. Some policies require policyholders to be completely disabled for payouts to apply. Others provide compensation if insured individuals are unable to perform the duties of their specific specialties. More general policies may not pay benefits if policyholders can still feasibly continue to work in the medical field even if they’re unable to keep providing all the same services as before disability became an issue.
Group and Individual Disability Policies
Disability insurance for physicians and other medical professionals falls into several subcategories. It’s possible to be covered under group disability insurance, or you can purchase an individual disability policy. Though both options offer certain amounts of coverage in the event of a devastating loss of capacity, the two vary quite a bit.
As the name indicates, group disability insurance covers multiple people in a clinic or organization. Employers often have group disability policies in place as a safety net for employees. If you own a practice, you can obtain group coverage for yourself and your employees.
Group disability insurance is generally less expensive than individual coverage because the risks for providers are distributed among several people rather than only one. Premiums are also divided up among everyone included in the group. The employer may pay all or a portion of the premiums.
That being said, group disability usually only offers minimal benefits. Payouts probably won’t measure up to your lost wages if you become disabled. This is especially true if you’re in a specialized field and a higher income bracket.
Employers typically decide which features and coverage options are included in the policy. Everyone’s policies are identical rather than tailored to each person’s specific needs. When employees leave the group that’s covered by such a policy, their safety net falls apart, and they’re left without any hedge against lost wages and other hardships that might be caused by a disability.
Individual disability insurance, on the other hand, provides coverage for one person as opposed to a group. Policyholders decide on the provider and the amount and type of coverage rather than being limited to what their employer chooses. Individual physician insurance policies are typically more expensive than group alternatives, but they offer the freedom to add more coverage and features.
You can tailor individual disability coverage based on your requirements and make adjustments as your needs or income levels change. An individual policy follows you no matter where you go instead of only being in effect with a specific employer. This type of coverage will cost more, but it’s also more inclusive. If you’re already covered by group disability insurance, you can supplement with an individual policy for an added failsafe.
Comparing Short-Term and Long-Term Disability Insurance
Medical professionals can also choose between short- and long-term disability coverage. Both are designed for the same purpose, which is to replace at least a portion of a person’s income if he or she is no longer able to practice medicine because of an illness or injury. Still, a few key differences exist between the two options.
Short-term policies cover medical conditions, injuries, and other situations that cause temporary disabilities, such as a broken arm or knee surgery. Once the insured recovers and is able to return to work, payouts cease. Benefits generally take around two weeks to kick in and may last anywhere from six months to two years depending on the policy in question.
Long-term disability insurance covers conditions or injuries that cause lasting or permanent disabilities. Benefits may start in as little as a month, but it could take as long as two years to begin collecting payouts depending on certain factors. Though those benefits typically last five to ten years, they can extend through the age of 65 or until other coverage options take effect.
Exploring the Cost of Physician Disability Insurance and Its Influencing Factors
We can’t offer a straightforward, all-inclusive answer for how much physician disability insurance costs. How much you pay for a policy depends on a number of factors that we’ll discuss in further detail shortly. Generally speaking, though, we advise clients to spend between one and four percent of their income or at least two percent of their monthly benefit amounts. We also recommend purchasing a policy that covers at least 60 percent of your income after taxes are deducted.
Many variables factor into the individual cost of physician disability insurance. Your price probably won’t be the same as our hypothetical examples. They won’t match up with the premiums your colleagues pay for coverage, either. Each person’s cost differs from the next.
A Few Examples
The following are basic examples of specific policies and their costs. For the sake of consistency, we’ll say all our example policies include a standard three-percent cost-of-living adjustment to compensate for inflation and a future increase rider to adjust for rising income. They all pay benefits through retirement age and come with an elimination period of 60 days.
A 30-year-old male non-smoker who is in good health purchases a policy with monthly benefits of $10,000 for a full-blown disability. Coverage includes own-occupation benefits in the standard policy. His monthly premiums might be $150 for an annual total of $1,800.
A 40-year-old male who doesn’t smoke or suffer from any major health issues seeks out a policy with $5,000 monthly payouts. He has to purchase own-occupation coverage as a rider. Despite the lower monthly benefits, his premiums might run $450 per month or $5,400 per year because of his age and the addition of the own-occupation rider.
A healthy, 50-year-old male non-smoker purchases a policy with $5,000 monthly payouts that includes own-occupation benefits at no extra charge. Premiums always increase along with age, so he might pay $300 each month or $3,600 annually. Though he has the same type of coverage as the physician in our first example and only half the monthly benefits, his premiums are twice those of the 30-year-old.
Again, these are very general examples. Additional features will drive the premiums higher unless they’re included in the basic policy. In most cases, though, those add-ons are well worth the extra cost because they provide more extensive protection.
Now we’ll discuss all the variables that factor into the equation when determining the cost for physician disability insurance. Coverage types and benefit amounts certainly affect the price, but they’re not the only deciding factors by far.
Premiums are typically higher for women than for men when it comes to individual policies. Coverage providers say female policyholders are more prone to filing claims due to depression, autoimmune disorders, and certain other medical conditions. These higher rates don’t apply with group policies.
Age has a major influence on the cost of coverage. Prices increase in proportion to age because the older a person is the greater the likelihood of submitting a claim as a general rule of thumb. Acquiring coverage as early as possible will go a long way toward securing more benefits with lower premiums.
Field of Specialty
Some specialties pose higher risks of filing claims than others. Carriers base this on the number of claims previously filed by others in a specific field, the particular dangers of the job, and the chances of a person returning to work following a disability among other considerations.
General physicians, pediatricians, gastroenterologists, oncologists, and neonatologists are among those who tend to pay less for coverage. On the other hand, neurosurgeons, emergency room physicians, otolaryngologists, and anesthesiologists usually pay higher premiums.
Coverage providers rate risk factors on a scale of one to six. Higher numbers indicate lower risks and vice versa. Not all insurance providers classify risk categories the same, though. Someone might be rated a four with one provider and a six with another.
As is the case for medical and life insurance policies, physician disability coverage costs more if you’re not in perfect health. Before obtaining coverage, you’ll need to undergo a physical exam and provide blood and urine samples.
During the physical, a medical examiner from the insurance company will look at your blood pressure and sugar levels, heart rate, weight, height, and a number of other aspects to determine your premiums. The exam also includes numerous questions regarding family medical history, preexisting conditions, and any medications you currently take. Whether you smoke or drink will impact the premiums as well.
Location plays a significant role in determining your premiums. If you live in an area where incomes and the cost of living are higher than the national average, physician disability insurance will cost more because the payouts will add up to greater expenses for the coverage providers.
Insurers also base premiums on previous claims in the state where a policyholder lives and practices. Premiums cost more in areas with higher numbers of claims. Rates in areas with minimal claims histories are lower. Certain environmental factors, such as vehicle accidents, population, and even crime rates, can increase or decrease the likelihood of becoming disabled. In turn, this affects the risks for coverage providers.
Benefit Length and Elimination Period
When choosing a disability insurance policy, there’s an option to determine the length of time you want to receive benefits. As you might imagine, the longer the payouts, the more expensive the policy will be. If you plan ahead for a short-term disability, such as one lasting six months, the premiums will be lower. Policies designed for the long term, like ten years or until retirement age, will be more costly.
As we touched upon earlier, physician disability insurance comes with a waiting, or elimination, period between the time a policyholder becomes disabled and the time he or she begins receiving benefits. If you choose a policy that pays benefits within a month, it’ll be more expensive than one that doesn’t kick in until a year or two following the onset of a disability.
The Underwriting Process
Underwriters are the institutions that assess the risks and potential costs involved in providing coverage and payouts. They determine policy prices based on those elements. Income, net worth, and other financial considerations also come into play here.
Those applying for coverage have to provide proof of income, such as tax returns from previous years. All earned income, including standard salary, overtime pay, bonuses, and any other factors that would be reduced by a disability, fall into this category. If you own a practice, its overall earnings will enter the mix as well.
Underwriters don’t count all aspects of applicants’ financial circumstances. Housing and vehicle allowances, investment income, and business income that wouldn’t be affected by disability aren’t considered earned income. Contributions an applicant or employer makes to retirement plans may or may not be factored in depending on the coverage provider.
Different Definitions of Disability Based on Policies and Providers
We mentioned previously that different policies have varying definitions of disabilities. Some consider people disabled if they can no longer carry on in their field of specialty whereas others won’t provide benefits as long as policyholders can work in any capacity. Many fall somewhere in the middle of the spectrum. It’s essential to understand which type of policy provides each level of coverage.
Any Occupation Versus Own Occupation
Any-occupation policies come with the lowest premiums because they offer the least coverage. They only provide benefits if policyholders become severely disabled and can’t work in any field for which they’re qualified. As long as they can perform in a job that’s reasonably suited to their skills and education level, they’re not considered disabled and won’t receive benefits.
Say, for instance, a cosmetic surgeon loses an arm in an accident. She can’t perform surgery with only one hand but can still carry out many medical tasks, such as routine checkups. Her policy might dictate that she’s not eligible to receive benefits because she can technically still offer consultations for cosmetic surgery patients, work in a general clinic, or provide instruction for medical students entering the cosmetic surgery field.
Any-occupation policies don’t provide benefits to those who aren’t completely disabled and can still work in some capacity. Of course, certain restrictions are in place to offer some protection for the insured. Carriers still provide benefits to policyholders who are only partially disabled if there aren’t any jobs available within a reasonable distance from their homes. Said policyholders must be capable of performing all the tasks involved in a prospective job, and the salary can’t fall too far below their education and skill levels.
Any available job that is reasonably suited to a policyholder’s expertise must also be flexible enough to allow for doctor’s appointments and receiving other necessary treatments. This job must also pay at least a minimum percentage of the individual’s original income. In many cases, the threshold is 60 percent.
After filing a claim, your physician and insurance company will work together to determine if you can still work in some way and whether any local jobs meet the prerequisites. A vocational expert will most likely be called upon for assistance as well. This person works for the insurance provider and will evaluate your ability to work in a field other than your chosen specialty.
Overall, any-occupation coverage generally leaves policyholders working despite their illnesses and injuries except in the most extreme cases. This often results in significantly lower incomes and, by extension, severely hampered lifestyles.
Own-occupation policies offer far more coverage than their any-occupation counterparts. This type of policy provides benefits in any situation that prevents medical professionals from performing all the tasks of their specialties and specific practices.
Consider our previous example. If a cosmetic surgeon loses an arm in an accident, an own-occupation policy will provide benefits simply because he or she can’t continue to perform surgical procedures. Losing the ability to perform surgery means the insured is unable to continue in his or her field of specialty at full capacity. It also means the surgeon’s income will be negatively affected. As such, he or she is qualified to receive payouts from an own-occupation policy.
Policyholders might still be able to provide consultations, accept teaching positions, or perform other jobs in their chosen specialties. If they wish, they can continue working in those capacities after developing a disability. Doing so won’t affect own-occupation benefits under some policies.
It’s important to read the fine print, though, because not all own-occupation coverage follows those lines of reasoning. Some policies limit the types of specialties that are eligible for own-occupation policies as well. In certain cases, own-occupation coverage may not be available with a basic policy because of a chosen specialty, but the policyholder may be able to purchase additional coverage for extra protection.
Transitional Own Occupation
Transitional own-occupation coverage is a middle ground of sorts. With this type of policy, medical professionals receive benefits if a disability renders them unable to work in their field of specialization. In the event they find a job in another field or continue working at a limited capacity, though, their benefits will be affected.
Say you purchase a transitional own-occupation policy that provides payouts of $15,000 per month for a disability preventing you from performing the “material and substantial” duties of your specialty as the insurance industry calls them. You’ll receive the full $15,000 monthly payouts as long as you don’t continue working.
If you decide to continue working in the medical field in a limited capacity, though, only partial payouts will apply. For example, if you go back to work and earn $7,500 each month, the transitional own-occupation benefits will amount to $7,500 per month as opposed to the full $15,000. Should you earn as much after the disability as beforehand, you won’t receive any benefits at all.
Choosing Physician Disability Insurance Riders
You may have heard of riders with other insurance policies. These are extra provisions or benefits policyholders can purchase to enhance or fine-tune their coverage. Many riders are available, and most of them add to the overall cost of physician disability insurance.
Residual Disability Rider
We previously mentioned the limitations of certain types of coverage, like any-occupation policies. With those policies, policyholders are only considered disabled if they’re unable to work in any type of job for which they’re qualified. They won’t receive benefits even if taking a job outside their specialty results in a reduced income.
Residual disability riders help protect against lost income in such situations. They kick in if the insured is able to perform some, but not all, of the duties of his or her profession or is only able to work part-time. If the person is working but not earning as much as before the disability, a residual disability rider will help make up the difference in income.
Payouts from this type of insurance rider are calculated as a percentage of lost earnings and the benefits the policyholder would receive if he or she couldn’t work at all. Some residual riders pay benefits if policyholders lose 15 percent of their income. Others don’t kick in unless they lose at least 75 percent of their pre-disability earnings. As is the case with basic coverage, residual riders last for specified terms, such as six months or a year.
Keep in mind, residual disability riders come in different forms. Some only provide benefits to those who remain within their chosen specialty while others allow policyholders to work in any occupation. Certain riders in this category only offer minimal residual benefit payments and guarantee periods. More expensive versions provide longer payout periods and more substantial benefits.
Future Increase Rider
Chances are your income and circumstances at the time of purchasing a physician disability policy won’t be the same a few years down the road. Any number of things can change. You might receive a pay increase, get married, or have children to name a few possibilities. That means the coverage initially purchased will no longer suit your needs.
Ordinarily, policy owners can’t simply choose to increase the amount of coverage their basic disability policy provides to meet their growing and changing needs. They have to purchase a new policy and go through the underwriting process each time they want to upgrade their coverage. In doing so, they run the risk of having to pay higher premiums or settle for less coverage because of age and other factors.
This is where future increase riders are helpful. With a future increase rider, policyholders essentially purchase the option to raise their coverage amounts in the future without having to revisit the underwriting process.
When and to what extent a person is allowed to use a future increase rider depends on the insurance provider and policy. It may be possible to raise the coverage amount once each year for the first few years after purchasing a policy. The policy may allow a policyholder to augment his or her coverage by a specified percentage based on income increases over a certain amount of time.
If a person is using individual coverage as a supplement for a group disability policy and loses group coverage, he or she might be able to exercise the future increase rider. Milestone events, like getting married and having children, may allow for coverage increases as well. In most cases, policyholders are only allowed to increase their coverage by a certain amount. In order to further augment the policy, they need to purchase additional future increase riders if the insurance provider permits.
Future increase riders are essential for fellows and residents because providers place a cap on physician disability insurance coverage based on the policyholder’s income at the time of purchase. Without this extra layer of protection, benefits may fall well short of a policyholder’s income by the time he or she needs to file a claim.
We’re all well aware of how inflation impacts our lives. Each year, the cost of living soars ever higher. Though disability benefits may cover expenses when you begin receiving them, that might not be the case a year or two down the road. You can’t purchase additional coverage after becoming disabled, but it’s possible to protect yourself from inflation in advance.
With a cost-of-living adjustment, benefits will increase along with the rate of inflation. COLAs may be based on a fixed percentage of around three percent per year, or they might follow suit with the Consumer Price Index at one or two percent annually. Some insurance providers allow policyholders to choose between the two whereas others make the decision themselves.
If possible, try to choose a COLA that’s based on compound interest rather than simple interest. This will generate a larger annual increase. Regardless of the COLA you choose, though, you’ll be safeguarded against the unnecessary hardships of disability benefits failing to cover your expenses if you need to file a claim a few years after purchasing the policy.
Catastrophic Disability Rider
As you know, there are varying degrees of disability. Those that are catastrophic in nature have particularly devastating impacts on people’s lives. They also require a great deal more medical care than less severe cases. Catastrophic disability riders provide extra coverage to help pay for that care.
This level of disability isn’t as common as milder instances, so it presents less of a risk for insurance providers. Because of this, catastrophic disability riders are less expensive than some other coverage add-ons. They also come with quite a few restrictions.
This type of rider is usually only available to people under the age of 50 because the risk of a catastrophic disability greatly increases beyond that point. Most insurance companies place limits on the amounts of benefits policyholders can collect as well. Some won’t allow catastrophic coverage benefits of more than three times the base disability payout.
Certain policies prevent policyholders from collecting more in benefits than they earned before becoming disabled. If a medical professional made $15,000 per month beforehand and his or her basic policy pays out $10,000 each month, he or she would only be allowed $5,000 in monthly catastrophic disability benefits.
To qualify for catastrophic disability benefits, you have to meet fairly stringent prerequisites. A disability must leave you with severe cognitive or physical impairment with the former being measured using specific medical tests. The latter is categorized as losing sight, hearing, speech, use of both hands or feet, or use of one hand and one foot. Policyholders are also considered eligible for catastrophic benefits if their disabilities severely limit their mobility or ability to eat, bathe, dress, or use the restroom on their own.
Student Loan Rider
It’s virtually impossible to go through medical school without accumulating at least a fair amount of student loan debt. Lenders don’t simply forget about those loans if you become disabled and are unable to repay them. You may be able to purchase a student loan rider to cover any remaining balance owed if a disability renders you unable to work.
Benefits from this type of rider last for ten or fifteen years at the most, and this period begins when the policy is purchased rather than when the insured starts receiving benefits. Policy owners only receive benefits from student loan riders if they’re completely disabled. If they’re able to work in any capacity, they won’t qualify for benefits. Minimum monthly payouts for these riders range from $100 to $500 and maximum benefits from $2,000 to $2,500.
These are the most common physician disability insurance riders. In most cases, they have to be tacked onto basic coverage when a policy is purchased and can’t be added later on. However, policyholders can choose to let go of their riders over time.
Also remember, some riders may not be necessary for your circumstances. Some of the coverage they provide may even be included in certain base policies. Be sure you understand the coverage you need and what is offered in your original policy before adding riders to the mix.
Top Disability Insurance Companies for Medical Professionals
Numerous insurance providers are available, but not all of them are created equally. When looking for a carrier, it’s crucial to choose one with a strong financial history and a long-running track record of client satisfaction. Placing your faith and financial future in a company simply because its rates are cheaper than the competition is never a good idea. You need to choose a coverage provider with a good score from the top credit rating agencies.
Evaluating Coverage Providers Based on Financial Ratings
A few credit and financial rating companies analyze insurance carriers and assign them ratings based on certain factors. These include the providers’ histories, financial health, and projected ability to meet their future obligations to policyholders. Some of the top rating agencies and their highest ratings are:
- S&P: As the largest of the Big Three credit rating agencies, S&P’s opinion holds a great deal of weight in the world of financial research. Its top ratings are AAA, AA+, AA, AA−, A+, A, and A−.
- Fitch: Also among the most trusted rating agencies, Fitch began providing financial research and analysis back in the early 1900s. Its highest ratings are AA+, AA, AA−, A+, A, and A−.
- Moody’s: Moody’s, like Fitch and S&P, is one of the Big Three. This provider of financial services, research, and analysis rates companies using a scale of Aaa, Aa1, Aa2, Aa3, A1, A2, A3, and so forth.
- A.M. Best: A.M. Best is a credit rating agency that focuses specifically on members of the insurance sector. Its highest rankings are A++, A+, A, and A−.
Choosing insurance providers with one of these agencies’ high ratings offers a great deal of peace of mind for your financial future. Those scores indicate a company has built a solid reputation for following through on policyholders’ claims and has the financial stability to continue doing so. If an insurance carrier holds a lesser rating, there’s a chance it might not be there when you need to file a physician disability claim regardless of the amount of money you invested in this level of financial security.
With all that being said, certain physician disability insurance providers stand out from the rest. Each of these began offering disability coverage for medical professionals more than a century ago and has proven itself over time. All also receive high marks from the previously mentioned credit rating agencies.
- Guardian: Guardian was founded in 1860 and provides a long list of insurance products and services. Its A.M. Best rating is A-, meaning it has excellent financial stability and security. Moody’s gives the company an Aa2 rating for financial strength and creditworthiness. Guardian doesn’t have the same short-lived mental and nervous disorder limitations as other coverage providers for most specialties. You’ll also have your choice between COLA riders that are based on compound interest or the Consumer Price Index among other highly sought-after features.
- Ameritas: Ameritas was founded in 1887 as Old Line Bankers Life Insurance Company of Nebraska. With a rating of A+ from S&P and A from A.M. Best, this provider has certainly withstood the test of time and branched out to offer a wide range of coverage options. Its physician disability policies offer many of the features we’ve discussed here, including a maximum benefit period up to the age of 70 and a residual disability rider that pays out benefits if a policyholder loses 15 percent or more of his or her monthly income.
- The Standard: As far as ratings are concerned, The Standard currently holds an A+ from S&P, A1 from Moody’s, and A from A.M. Best. The company was established in 1906 and, as mentioned in a recent write-up, has continually fulfilled its commitments to policyholders despite historically volatile circumstances. Policies from The Standard offer annual future increase options up to the age of 55, and numerous riders are available, some at no extra cost.
- MassMutual: Fitch and S&P both give MassMutual an AA+ rating while A.M. Best has assigned the company an A++, and Moody’s assessment is Aa3. Since its founding in 1851, the company has grown to become one of the largest financial service firms in the nation. Its physician disability insurance offers benefit periods up to ages 65, 67, or 70 depending on the policy. Several helpful riders are available. Though the company offers own-occupation coverage, it must be purchased as a rider rather than part of a basic policy.
- Principal: Principal receives an A+ rating from A.M. Best and S&P, an A1 from Moody’s, and an AA- from Fitch. Its COLA rider is calculated based on compound interest with three and six percent options available. You can choose a future increase rider at no extra cost that’s renewable every six years. Basic disability payments are available through the age of 70, and the company offers policyholders a serious illness benefit rider for no additional premium.
- Ohio National: Ohio National holds A-, A3, and A ratings from S&P, Moody’s, and A.M. Best respectively. Although the company has been offering insurance products and services since 1909, its physician disability coverage is a relative newcomer to the market. Still, it receives high praise from analysts. As is the case with some other providers, the company’s own-occupation coverage is only available as a rider. Several other options are also offered, like recurrent disability, hospice care, and survivor benefits.
These are the most well-known physician disability insurance providers. Others are out there, many of which offer numerous coverage options and have good customer satisfaction ratings. Most aren’t quite as established as these major companies, though.
Those we’ve listed here have won the trust of clients, rating agencies, financial analysts, and other key players over the years. They’ve withstood the tests of time and economic turmoil, so they’re clearly not fly-by-night companies. Chances are your investment in the future will be safe with them, and they’ll be here if you need to file a claim.
Obtaining Physician Disability Coverage
You can purchase individual physician disability insurance through the companies we’ve listed above. Your employer may also offer group coverage. In such a case, simply speak with the right representative about obtaining coverage. Some employers require employees to be with their companies for a certain amount of time before they’re eligible for coverage, though.
Of course, having the benefit of a knowledgeable, experienced guide can certainly be helpful when searching for the right policy. As brokers, we can help with obtaining coverage through these popular, highly rated providers. Our agents can also help you determine which policies and riders would benefit you most.
Finding an Agent
Sorting through all the available providers and their various policies, riders, and other alternatives can certainly be complicated and time-consuming. In the end, you may still be unsure of which coverage options best suit your needs. This is where a reputable insurance agent is immensely helpful.
Agents are well-versed in the products they have to offer, so they can make recommendations based on clients’ unique requirements. Two types of agents exist: captive and independent. Captive agents work for a single insurance company, so they’re limited to the options available from that provider. Independent agents can offer coverage from numerous providers, so they give clients much more freedom of choice.
We’re independent agents, meaning we can offer you a much broader selection than captive agents. Our team members are on hand to answer your questions and aid in your search for physician disability coverage. Don’t hesitate to contact us for assistance.
After finding an agent to work with, you’ll go through certain steps to obtain coverage. Before moving forward, tell the agent about your coverage needs and expectations. Then, he or she will help you proceed through the following steps.
Step 1: Getting Recommendations
Based on your circumstances and the coverage options available, the agent will make recommendations for the providers and policies that best suit your needs. He or she can also obtain various quotes to give you a better idea of the costs involved. From there, compare the alternatives and their prices to decide which one ultimately stands out the most.
Step 2: Applying for Coverage
Once you decide which policy to apply for, you’ll need to fill out an application for coverage. Details vary somewhat from one provider to the next, but all of them require certain basic information regardless of the carrier or the type of coverage in question.
Physician disability insurance applications generally ask for personal and contact information as well as employment, income, and medical data. You must provide documentation to go along with the details as well. This might include proof of residency and employment, bank account information, and medical records. Depending on the provider, you may also have to authorize credit history and driving record checks.
Failing to provide some of the information requested on the application can result in approval delays. Doing so may also lead to a denial of coverage. Because of this, it’s important to fully complete the application forms and have all the necessary documentation ready for submission. If you’re unsure of exactly what to submit, your agent can help clear up the confusion.
Step 3: Medical Exam
After submitting the application and all the accompanying documentation, the coverage provider will schedule a medical exam. This helps determine your overall level of health and aids the insurance company in determining the risks involved in insuring you. Though your medical records get the process started, insurance companies need a more in-depth idea of your health and potential for developing a debilitating medical condition.
During the examination, medical personnel will check your height, weight, heart rate, blood pressure, and other basic elements. Blood and urine samples are also required, and you’ll have to answer a list of questions regarding your health and family medical history.
The exam will probably take place in a clinic, but a handful of insurance companies offer in-home health checks. Coverage providers usually foot the bill for the medical exam, but the cost sometimes falls on the shoulder of the applicant. If the latter is the case, your medical insurance may cover at least a portion of the cost of the exam.
Step 4: Underwriting
When the medical examiner receives the results of your health check, he or she will forward them to the insurance company’s underwriter. As mentioned previously, underwriters determine the risks involved in insuring a person and establish the actual cost of coverage. The underwriter will also take a look at your financial records and other information. A form from your primary care physician, known as an attending physician’s statement, will also be requested.
All this helps determine your potential chances of having to file a disability claim at some point. Though no one can predict an unexpected vehicle accident or work-related injury or illness, your medical history and current state of health go a long way toward pinpointing the likelihood of developing a debilitating medical condition. All this information also helps define the premiums you’ll have to pay for coverage and the types of coverage you’re eligible for.
Step 5: Getting an Offer and Potential Policy Issuance
After the underwriter assesses your personal information and the possible risks for the insurance company based on your medical history and current health, you’ll receive a response from the coverage provider. If you’re approved for coverage, it’ll include an offer stating how much the premiums will be for the policy and riders you’re considering.
If you accept the offer, you’ll have a specified number of days to decide for sure if the coverage fits your needs and budget. Carriers are legally required to allow policyholders an opportunity to change their minds about the coverage they’re thinking of purchasing. After someone applies for coverage, insurance companies usually take about a month or so to issue the policy. The process could take a little longer depending on the carrier.
What to Expect When Filing a Physician Disability Insurance Claim
Once you obtain coverage, it’ll be there to fall back on if you ever sustain a debilitating injury or develop a disabling medical condition. If that time comes, the next step is to file a physician disability insurance claim. Be sure to file the claim as soon as possible after becoming disabled.
First off, contact your agent to let him or her know about the situation. From there, the insurance company will send the appropriate forms to complete to file a claim. They’ll arrive by mail or via email. You’ll need to provide certain information in those forms and understand a few finer points of your coverage.
Insurance companies require an explanation of a policyholder’s diagnosis when he or she files a claim. It’s a good idea to work closely with your physician and other healthcare providers to create a paper trail that documents the disability, the events leading up to it, how long it may last, and other important details.
When Did You Become Disabled?
Your coverage provider will ask for the date you officially became disabled. If you were injured in an accident, the day it occurred would be the date to provide. For conditions that develop gradually, determining the exact date can be a bit difficult. Your physician can specify the trigger date, or the date the condition began to keep you from your duties.
Keep in mind, benefits won’t begin immediately. Every policy has a waiting period between the time an injury or illness takes effect and the time a policyholder starts receiving benefits. This could be 30 days or more depending on the policy.
Setting the claim-filing process into motion as early as possible after becoming disabled is crucial because most coverage providers have a predetermined timeframe in place. It’s usually 30 days or less, but you’ll find the specific deadline in the policy. If you don’t submit the claim in time, you may not be able to receive benefits.
Which Benefits Does Your Policy Provide?
Be sure you’re fully aware of the benefits the policy and riders provide, so you’ll know what to expect once they kick in. That way, you’ll be prepared for the exact payouts, the portion of your monthly expenses they’ll cover, and for how long. Adjusting to life with a disability is difficult in its own right, and unpleasant surprises will only make matters worse.
Make sure you understand the policy’s definition of disability as well. As we explained before, not all coverage options view disabilities in the same way. Depending on your limitations, work restrictions, and terms of coverage, you may only get partial benefits. If so, you’ll need to know how to schedule work accordingly or make other arrangements.
Proving Your Disability
Insurance providers require thorough proof of a disability before doling out benefits to policyholders. This includes the previously mentioned documentation from doctors, physical therapists, and other members of a filer’s healthcare team to confirm the condition or injury and how it will affect his or her ability to continue practicing medicine.
Required documentation might include x-rays, MRIs, copies of your treatment plan, and written statements from your doctor. It should also explain the condition or injury in detail and clarify whether you’re able to work at all or which limitations might be in place if you return to work.
Answering Common Questions about Physician Disability Insurance
So far, we’ve discussed several aspects of physician disability insurance. We also still have many to cover. No doubt, you probably have a number of questions regarding policies and other coverage options. At this point, we’ll go over some of the most common questions people ask.
When Should I Get Disability Coverage?
Some say it’s never too early for medical professionals to apply for disability insurance. Others argue it’s best to wait until later on in life. In truth, you should get coverage as soon as possible after finishing medical school, so during residency is the perfect time to find a suitable policy. This will most likely result in lower premiums, too.
At this early stage, benefits will probably have a cap of around $6,000 per month or so because they’re based partially on income. You can add a future increase rider to ramp up the coverage amount once your income grows. Some policies have future increase options built into their basic coverage.
How Do I Compare Disability Insurance Policies?
Comparing disability insurance for medical professionals isn’t exactly a straightforward process. Some carriers include own-occupation, residual disability, and other benefits in their basic policies whereas others only offer them as riders. Each provider has its own list of waiting periods, coverage limitations, benefit terms, and definitions of disability.
In light of all the variables, it’s usually best to consider your circumstances and make a list of all the basic essentials as you go. Include the coverage options you think may be necessary in the future as well.
Start with Your Income
For starters, think about your salary and where you are in terms of your career. How much income will be lost if you become disabled either partially or completely? What’s the bare minimum amount of money needed to cover monthly expenses? It’s usually best to choose a policy with payouts somewhere in the middle of those two figures or on the higher end of the spectrum if you can afford the premiums.
Assess Your Risks
Consider your risk factors for becoming disabled as well, such as age, lifestyle, health, and family history of debilitating conditions. Even seemingly minor details like your daily commute could contribute to the likelihood of needing coverage. Any elements that increase those risks will help determine the basic coverage and add-ons you may need. They may cause premiums to increase as well.
Consider Your Field of Specialty
Your specialty or the one you’re planning to pursue also factors into the equation. Some come with higher risks than others. For example, anesthesiologists are more prone to drug addictions, and emergency room personnel tend to suffer from mental breakdowns, anxiety, depression, and similar conditions. If you’re in a high-risk field, be sure to choose a policy with provisions for such scenarios. Not all of them include mental disorders or substance abuse.
Look at Your Future Earning Potential
At the same time, be sure to think about the possibility of future income increases. If you’re still in residency, your earning potential is likely to increase significantly over the years to come. That means a future increase rider would be extremely beneficial. If you own a practice and are only a decade or so from retirement, there may not be much of an income change, so that type of coverage wouldn’t be quite as important.
These are only a few of the aspects to take into account when comparing policies. Numerous additional components will come into play as well. Though your budget will be a major influence on the amount of coverage you choose, it shouldn’t be the deciding factor. Don’t hesitate to reach out to your agent for further guidance.
Is it Possible to Get Physician Disability Insurance with an Existing Chronic Illness or Other Medical Condition?
The short answer here is yes. You should be able to get physician disability insurance even with a preexisting condition. If one carrier denies you coverage, there are others that will welcome you into their policyholder family.
Still, the policy probably won’t cover the preexisting condition. For example, if you suffer from Crohn’s disease and it puts you out of commission for an extended period of time, you won’t receive benefits for the resulting lost income. Other illnesses or injuries will be covered, though.
It may even be possible to find a policy that includes coverage for a preexisting condition though the benefits may be limited more so than those for other disabilities. Premiums will most likely be higher for this type of coverage as well. If there’s a good chance you’ll miss extensive periods of work because of a preexisting illness, though, the extra cost could certainly pay off in the long run.
How Will Disability Benefits Affect My Taxes?
Disability benefits may or may not affect your taxes depending on the circumstances. If you pay the premiums, your disability benefits won’t be taxed. If you’re part of a group plan with premiums being paid by the employer, the benefits will be taxable.
Which Benefit Period Should I Choose?
You’ll have a range of choices when it comes to benefit periods, or the length of time for receiving payouts after becoming disabled. Short-term policies generally provide benefits for up to two years. Long-term coverage may pay out for anywhere from two to ten years or more. Some benefit periods extend through retirement age.
Longer benefit periods come with higher premiums, but they help support policyholders through long-term illnesses and injuries. That said, long-term coverage might not be absolutely essential. You may only be out of work for a few weeks due to a minor injury or short-lived illness.
Choosing the right benefit period isn’t easy since you have no way of knowing if you’ll become permanently or temporarily disabled in the future. Consider your current age and how long benefits might be needed if you become permanently disabled. If someone is in his or her 30s and only choose a five-year benefit period, there’ll be a sizable gap between the end of disability payouts and the beginning of retirement benefits. Generally speaking, it’s best to err on the side of caution.
How Long of a Waiting Period Should I Choose?
Waiting periods, or elimination periods as they’re called in the insurance sector, are the lengths of time between filing a disability claim and receiving benefits. They vary in length with 30, 60, 90, and 120 days being common options. They can even be as long as a year. Choosing a longer elimination period will result in a lower premium up to a certain point. In most cases, you won’t benefit much from choosing an elimination period that’s longer than 120 days.
Remember, though, you won’t receive benefits during this timeframe. If a disability puts you out of work for two months and the policy has an elimination period of 90 days, there will be no point in filing a claim. On the other hand, the cost of paying a higher premium for a 30-day elimination period will certainly add up over time especially if you end up never having to file a claim.
Again, we advise choosing a middle ground. Factor in the amount of money you have in savings as well. Consider building your savings as much as possible to bridge the gap left by the elimination period if you’re unable to work for any length of time.
Should I Pay a Level or Graded Premium?
Yet another choice to be made when selecting a policy is whether to go with a level or graded premium. Both have advantages and downsides. Which one is best mainly depends on your financial circumstances.
Level premiums are a bit like fixed mortgage rates. They stay the same from one payment to the next. This means there won’t be any unpleasant surprises when the time to pay the premiums rolls around. Graded premiums increase over time. They may go up annually, every five years, or at other intervals depending on the coverage provider.
If you’re in residency or just starting out with your own practice, graded premiums may be the best option. Payments will start off on the lower, more affordable end of the scale. As your income increases, paying the rising premiums won’t cause undue financial hardships.
Is There a Difference between Critical Care Coverage and Disability Insurance?
Critical care insurance typically covers acute illnesses rather than injuries and chronic medical conditions. Some of the issues critical care policies protect against are cancer, stroke, heart attack, kidney failure, paralysis, and organ transplants. They only cover a limited number of illnesses and medical issues.
This type of coverage usually provides a one-time payment that may range from $10,000 to $1 million or more depending on the policy. Chronic care insurance is designed to cover immediate expenses, like treatments and medical bills stemming from the illness for which the policyholder receives benefits.
Disability covers injuries and a broader range of medical conditions than chronic care insurance. Benefits come monthly instead of in a single payment. Disability is also meant to replace ongoing lost wages rather than to pay for specific medical expenses.
Does Life Insurance Cover Disabilities?
Life insurance policies generally don’t cover disabilities. You may be able to purchase a disability rider to supplement your life insurance, but it probably won’t provide the same benefits as disability coverage. It certainly won’t measure up to the amount of money you lose while out of work.
Although you can get cash from a life insurance policy to be used to replace lost income, it’s not necessarily advisable. Doing so means giving up the policy or losing a portion of its value. You may also have to pay taxes on the money you take out of the life insurance policy or pay higher premiums to rebuild the full death benefit.
All Things Considered
Some medical professionals obtain physician disability insurance as soon as they leave medical school and maintain coverage through retirement age without ever needing to file a claim. Others put off purchasing a policy until it’s too late and end up missing months or years of work with no disability benefits to fall back on. It’s always better to be safe than to be sorry.
Physicians, nurses, doctor’s assistants, and other medical professionals need disability coverage without a doubt. How much coverage may be necessary is the real question, and the answer depends on your distinct situation. Plenty of choices are out there, it’s simply a matter of knowing what they are and how to use them to your fullest advantage.
At InsureSTAT, we’re here to help. Our independent agents work with a variety of carriers to bring clients a vast selection of policies to choose from. This means you’ll have access to the most comprehensive coverage options and competitive prices in the industry. We’re also well-versed in all the policies, riders, and other features available to medical professionals, so we’re fully equipped to guide clients in choosing the best alternatives.
Let us help you find the right coverage to secure your financial future in the event you become disabled. We’ll provide advice, answer your questions, and guide you through various phases of the insurance acquisition process.
Contact us to learn more or request quotes from the carriers we work with. From there, we’ll walk you through the benefits and downside of each policy and provider to ensure you make the best choice for your family and future.