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Guide to Disability Insurance for Physicians

(Why disability insurance is necessary, costs, and what riders to include)

Disability insurance is essential for most physicians.  It is, in our opinion, one of the best things you can do to protect your ability to support yourself and your family after working so hard to get to this point, and will protect against financial catastrophe in the unfortunate case that you are not able to practice medicine anymore due to disability.  Imagine something were to happen to preclude you from being able to practice at this stage - injury, freak accident, long term illness, pregnancy complication - what’s your backup plan for income?  This page is intended to give you resources to buy disability insurance, as well as answer FAQs we often see on the groups.  

 

Disclosure: This page contains information about our sponsors, as well as affiliate links, which support the group at no cost to you. These should be viewed as introductions rather than formal recommendations - please do your own due diligence before making decisions based on this page. We are not formal financial, legal, or otherwise licensed professionals, and you should consult these as appropriate. To learn more, visit our disclaimers and disclosures.

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Where to buy

Where to Buy Disability Insurance

We recommend that you use an independent agent broker that will run quotes across the major insurance companies offering true "own occupation insurance." It doesn't cost you anything to use them, as they are paid by the insurance company you ultimately choose. This is one of the few cases where having a middle person is beneficial, as they may have access to discounts you may not be able to get on your own, and can guide you through the various options and riders, as well as be your advocate in the process.  You may be comfortable just talking to one broker, or you may want to run a few quotes to feel confident in your decision.  Generally, differences in prices will reflect which discounts the agent has access to.  

 

These are our sponsors/advertising affiliates, who thousands of members of our groups have used and said positive things about.

Patternhttp://www.patternlife.com/partner/psg.  This convenient option will allow you to enter your information and immediately begin generating quotes from the major disability companies, as well as schedule a meeting with the Pattern team to discuss the options and figure out which plan is best for you.  Many in the group have had a great experience with this process.

Moment Insurance: Complete your quote inquiry information in less than five minutes and easily schedule an appointment to speak with a dedicated, experienced disability insurance expert who will walk you through the process from start to finish and help you compare different options. Many in the group have worked with their experts previously, and had a great experience! Contact them here.

PolicyGenius: This is not a physician specific company, but well known in the insurance space.  They may be a helpful resource if you are looking for another place for quotes.  Make sure that you're comparing apples to apples in terms of true own occupation insurance, as not all fields emphasize the need for this equally.  Contact them here.

Do I need?

Do I Need a Disability Insurance Policy?

Most likely. Unless you can confidently say that you have achieved true financial independence that would allow you to both live the life you would want and to pay your bills indefinitely without the help of others (i.e. not your spouse or family), disability insurance is one of the core tenants of personal finance for physicians.

You should buy a disability policy AS EARLY AS POSSIBLE AFTER GRADUATING MEDICAL SCHOOL. It is cheapest in training and when you're younger.  Many people choose to wait until the end of training to save money, but unfortunately we as physicians know that life can change in an instant, and a sporting accident, pregnancy complication, or new medical problem could preclude your ability to qualify.

5 reasons physicians mistakenly decide not to get disability insurance

There are several common questions physicians ask about if they need disability insurance. These are two of the most common.

What If My Employer Offers a Plan?

For multiple reasons, you want your own policy.

  • You could change jobs (and statistically, you likely will).  You don't want to take a chance you won't qualify for an individual policy at that time (or that it is much more expensive because you're older) or that the new job's policy is not good.

  • Group long term disability plans are typically not "own occupation."  They may not cover bonus income or may have a maximum monthly benefit associated.  They may also have offsets for Social Security Disability, or Workers comp.  They can also be harder to claim. 

  • You usually pay taxes on the benefit you receive from work policy because they are paid by the company in pre-tax dollars.  You pay your premium for your individual policy in post tax dollars so then if you need to use your benefit, your benefit will be in post tax dollars.  If you are disabled, having that extra money every month could make a huge difference.

What If I Have Family Support?

Unfortunately betting on someone else to support you is, statistically speaking, not a great idea.  Divorce and death happen, and you want to make sure you are able to have the life that you worked so hard to build without needing to ask someone else for support.  Also, while your parents may be happy to make sure you have a home over your head, they may not want to pay for your vacation or your child's piano lesson.  

Learn more on our disability insurance FAQs: do I need disability insurance as a physician if...? page, where we discuss more of the common reasons why physicians think they don't need disability insurance (spoiler alert - they usually do).

When To Buy

When Should I Buy Disability Insurance?

You should buy a disability policy AS EARLY AS POSSIBLE AFTER GRADUATING MEDICAL SCHOOL. There are several reasons for this.

 

To start, it is cheapest in training when you have access to trainee discounts, and when you're younger.

 

Most importantly, though, we as physicians know that life can change in an instant, and a sporting accident, long COVID, pregnancy complication, or a new medical problem could preclude your ability to qualify for a policy, add exclusions to your policy for complications related to preexisting conditions, or increase your premiums. 

 

Many people choose to wait until the end of training to save money, but unfortunately we've seen many examples of physicians who are either become disabled or diagnosed with a chronic illness during residency, thus preventing them from having the financial security they've worked so hard to achieve. 

Additionally, policies offered by your employer or other benefits (military, etc.) may reduce eligibility, so it's best to lock your policy prior to signing a contract.

It's okay to get a smaller policy at the beginning with a future increase option rider to increase your benefit amount later, but lock in the policy as early as possible so that you won't have to go through medical underwriting again in the future.

Terminology

Disability Insurance Terminology That You Want in Your Policy

"Own Occupation" Disability Insurance

 

This will ensure the policy will pay out as long as you can’t do the job that you were doing prior to disability. Policies that are not true 'own occupation' may decrease your benefit if you're still able to make money doing something else, and may dis-incentivize you from finding other work or income streams. We feel that own occupation is very important for physicians, as though they may be capable of doing other jobs, those jobs are unlikely to pay as much as their physician income.

Example: You’re an interventional cardiologist and develop a back issue that prevents you from doing procedures and have to stop practicing and claim disability. You then take a position as a Medical Director for an insurance company.  If you don't have an own occupation insurance, the money you get from this could decrease your benefit.

The importance of own occupation disability insurance

The major 5 companies offering true own occupation policies are:

 

  • Principal

  • Mass Mutual

  • Ameritas

  • Standard

  • Guardian

 

Disability insurance companies specializing in doctors will generally run quote illustrations with all of them, so that you can get the best plan for you. Several other popular insurance companies are NOT true own occupation, and you should be cautious about accepting other definitions despite what you may be told by an aggressive financial advisor that makes commissions from selling you insurance (this is one of our red flags for financial advisors!).

Guaranteed Renewable and Non-Cancellable

Guaranteed renewable means the company can't cancel the policy, but could raise the price​.

Non-cancellable means the company can't cancel, raise the price on, or reduce the ben​efits as long as the customer pays the premiums.

If a policy can cancel or raise prices, it may seem like a great deal initially but then rise quickly as you get older/higher risk (and at that point it'll be harder for you to qualify for a reasonably priced policy or you may not be eligible secondary to new medical problems).

 

This is a flaw in several medical society plans​ as well as some other policies that bring you in at a cheap rate, so make sure you check the terms and conditions if somebody is offering you a plan that seems much cheaper than the ones at the companies above.

Graded vs. Level Premium

A level premium is one where the premium doesn't change. These are best for those people who intend to carry their policies over the long run​, and the one that we feel the most comfortable with for the majority of physicians.

Graded premiums change over time. This could make sense for a physician who anticipates hitting financial independence early in their career and doesn't want their pricing to factor in risk factors later in life. Just be careful in assuming you will drop your policy in a certain amount of time (you may choose to deploy money into illiquid assets, there could be an economic downturn or personal event that changes your numbers).

Coverage specifics

Understanding Disability Insurance Coverage

How Much to Get

In training, many just buy as much as they can initially ($5,000/month pretty standard). If affordability is an issue, lock in on a cheaper policy as a trainee and get a future benefit increase rider that will allow you to increase the policy later without having to re-qualify ​based on health.

After training, assess:

  • How much money you think you and your family need to cover expenses 

  • Account for lifestyle inflation and potential increase in expenses if significantly disabled (caretaker)

  • Enough to save for retirement (disability will stop paying at 65-67)

  •  If you have employer or social security benefits, factor this in

You can generally only qualify for 60% of your gross income as a benefit - they don't want to incentivize you to not work. However, this money from an individual policy won't be taxed, unlike a typical employer provided disability policy, so it will go further.

Tip: Work policies or other benefits (military, etc.) may reduce eligibility, so try to lock your policy prior to getting your contract.

If needed, you can at times get more through a 2nd policy with a different company.

How Much Should Disability Insurance Cost?

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How much your policy will cost will depend on many factors, including:

  • Gender (women pay more unless unisex policy, which can be hard to find)

  • Age

  • Specialty

  • Amount of coverage

  • Health status

  • State you live in

  • Availability of discounts at your institution or insurance agent

  • Riders applied to policy

General rules of thumb (will vary):

  • Annual cost may be 2-6% of the annual benefit

  • Unisex - around $500 annually per $1,000/month of benefit

  • Non-unisex and without discounts - can be $1,000 annually per $1,000/month of benefit

  • Shop around for disability insurance!

Common Disability Insurance Riders

Common disability insurance riders for doctors to consider

Own Occupation Rider

If your policy doesn’t include it, get it as a rider

Residual or Partial Disability Benefit Rider

This can be essential as it protects against partial disability and while recovering from disability, and most people purchase this rider

Cost of Living Adjustment (COLA) Rider

Inflation adjustment which increases the monthly benefit after disability has lasted for 12 months. This is more beneficial early in your career as it doesn’t start adjusting until you’re disabled.  Policies only pay until you’re 65-67, so the closer you get to that age the less that inflation matters

 

Future Purchase Option/ Future Increase Option Rider

​This gives you the ability to increase your benefit later based on salary, without having to re-apply. Important in residency or fellowship and early attending years where you know your salary will increase, or if you can’t currently afford the policy that you need (military, part time, etc.).

Learn more on our future increase option rider for disability insurance FAQ page.

 

Guaranteed Renewable Rider and Non-Cancellable Rider

You want a policy that contains both these provisions, which prevent the company offering your policy from changing the terms of your policy down the road or deciding they no longer want to insure you.

Student Loan Rider

This makes your student loan payment if you get disabled (or you can just buy a larger policy).

 

Catastrophic Rider

Pays more if you can’t do multiple activities of daily living (or you can just buy a larger policy).

Retirement Benefit Rider

The insurance companies contributes some money toward your retirement for you if you were to become retired. Like whole life insurance, we don't generally recommend mixing insurance and investing products.

Dive deeper into what riders physicians should get.

Special Circumstances

Special Circumstances

Pre-Existing Conditions, Mental Health, Self-Prescribing, Pregnancy

Disclose everything you can to your insurance agent prior to application. They will be able to help determine whether it's better that you apply for a Guaranteed Standard Issue (GSI) plan if available to you.  Once you have been declined for a standard disability policy, it will preclude you from qualifying for the GSI policy.  Some insurance is better than no insurance, so it's important to know what things will lead to a denial.

Learn more about Guaranteed Standard Issue (GSI) plans.

Some companies are friendlier to mental health than others.  ​Your agent will able to guide you through this.

Policies may exclude disability claims related to your past medical history.  If this resolves, they may be able to remove those exclusions later.

The insurance companies will check your prescription history and prior medical records during the underwriting.  Even if you've never been given a diagnosis related to a condition, they may exclude or deny you based on prescriptions you have filled.

Visas

There are several special circumstances to keep in mind with visas. You will want to work with an agent to ensure you are getting the coverage you need.


​If possible, your policy should continue to pay you overseas if you are disabled in the United States OR even overseas during incidental travel (31 days or less).


You may not get paid or for only a short amount of time, depending on your situation and policy.

Military

Only certain companies are able to issue policies.  In some cases you can buy coverage while not in active duty (HPSP, not active duty), but not during active duty.

 

Your disability benefits may only be associated with your base pay but not specialty pay or moonlighting income.

 

You may not be able to receive benefits for claims as a result of an act of war, declared or undeclared (but may be covered for accidents during training exercises).

Cancel

Canceling Your Disability Policy

When can you cancel your policy? When you've reached financial independence to the point where having the extra 'x' dollars in tax free income every month if disabled wouldn't make a difference (account for potential increased expenses due to disability).

Most policies only pay out until 65-67, so if you're approaching this age, consider if it still makes sense to pay your premium amount when considering the total amount of benefit you'd potentially get.

It is not complicated to cancel - you can literally just stop paying at the time of annual renewal.

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