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Do Physicians Need to Buy Their Own Disability Insurance Policy if They Have an Employer Sponsored Plan?

One of the most common reasons we see physicians (usually erroneously) believe they don’t need to buy their own individual disability insurance policy is because they have access to an employer sponsored plan. In fact, it’s one of our most common reasons why physicians mistakenly assume they don’t need a disability insurance policy. While employer provided disability insurance can be a nice perk, in most cases, we believe physicians should still have their own policy - and in fact have secured it well before getting their first attending job. Below we will cover the weaknesses of group disability insurance for physicians and why it’s so important to have your own individual disability insurance plan, as well as the cases where the employer sponsored disability insure plans can be helpful or additive.

Disclaimer: Our content is for generalized educational purposes.  While we try to ensure it is accurate and updated, we cannot guarantee it. Rules/laws can change frequently.  We are not formal financial, legal, or tax professionals and do not provide individualized advice specific to your situation. You should consult these as appropriate and/or do your own due diligence before making decisions based on this page. To learn more, visit our disclaimers and disclosures.

Comparison of individual versus employer disability insurance policies

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Why is having disability insurance important for doctors?

If you’re reading this article, you likely already know something about disability insurance (DI). Disability insurance is a foundational piece of physician personal finance and financial security for the vast majority of physicians in their first decades of practice. It’s critical to protecting the financial security that you’ve worked so hard to build in the off chance that you are no longer able to make money as a physician. 

After hearing so many stories on our physician communities of physicians regretting not buying disability insurance, we are big believers that physicians should buy their own individual disability insurance policy as soon as they can after finishing medical school. They should do this through an independent insurance agent that specializes in doctors, as physicians have unique considerations when buying DI.

Do I need an individual policy if my employer provides a disability insurance plan?

Many physician employers have a group disability insurance policy available to their employees as part of their benefits package. In some cases the employer includes it automatically and pays all the premiums, whereas in others there may be an opt in to buy DI through the employer, potentially partially subsidized by the employer.

Even if you are lucky enough to have an employer sponsored group disability insurance plan where the employer pays the premiums, we strongly recommend getting your own disability insurance policy for the reasons listed below. As you'll see, employer disability insurance policies are often insufficient to fully protect you throughout the course of your career, and should be thought of as an additional benefit and layer of protection rather than your primary layer of income protection.

Of course, if your employer is giving you a disability insurance policy for free, there’s no reason not to carry that as well to augment your benefits through your individual plan. 

One thing to note here - if you know you’re going to be signing a contract with a job that has a very strong disability benefit such as a federal or military job, make sure that you secure your disability insurance before signing your contract. In general, the benefit that is offered to you by the independent insurance company will be limited by the amount of benefit that you get through your job, as they don’t want to incentivize you not to work. When you have particularly strong benefits through work such as with these federal or military positions, your ability to get a significant benefit through your personal plan may be very difficult. This is one of the many reasons why locking in a disability insurance policy early in training is beneficial.

Why is having an independent disability insurance policy better than that of your employers?

There are several reasons for this, including: 

  • Your employer policy is most often not portable. Statistically, it’s likely this isn’t your forever job. You don’t want to be in a position then where you have to purchase your own policy. This is problematic because:

    • If you’ve developed any interim medical issues or have anything more on your medical record (even as benign as ‘my back was hurting’’), you may have a problem qualifying for a policy and get denied outright, have them put exclusions on your policy, they may limit your total benefit, or your policy may be much more expensive. 

    • Disability insurance gets significantly more expensive when you’re older, as well as when you’re out of training as you won’t qualify for trainee discounts for disability insurance. 

    • You won’t have access to GSI plans, which can help if you have medical issues that would lead to denials with conventional policies.

  • You are almost always taxed on your disability insurance benefit from your work policy should you need to use it. Disability insurance premiums paid by an employer are paid with pretax dollars. This means that if you become disabled and have to claim the benefit, you will be taxed on the benefit. This could be the difference between $10,000 in spending money per month and $6,000 in spending money per month at a time where you don’t have other income sources, so it is much better that the taxes on these policies are paid upfront and then the benefits are untaxed, like it is with your personal disability insurance policy.

  • Your employer plan may not be true own occupation. This would make it harder to get significant benefits when you need to claim disability insurance benefits because you could still do some work, even though it’s not working as a physician.

  • Employer disability insurance policies are not customizable. These policies are offered to all employees and are with the same company and the same terms and conditions. With your own policy, you can add disability insurance riders that reflect your needs and risk profile.

  • Employer disability insurance policies may not cover bonus income or may have a maximum monthly benefit lower than what you’d like to secure your income.

  • Employer disability insurance plans may also have offsets for Social Security Disability, or Workers comp.

  • Employer disability insurance benefits can be harder to claim if you do become disabled. 

7 reasons an independent disability insurance policy is better than an employer policy
Why you should not count on an employer disability insurance policy alone

Who should make sure they lock in on employer sponsored disability insurance policies?

One of the biggest categories of physicians who should seriously consider using their work policy as their primary disability insurance policy are those with preexisting conditions who hadn’t locked in on a guaranteed standard issue (GSI) disability insurance program during training. These doctors will find it very hard to qualify for and pass underwriting with independent disability insurance policies, and should consider paying for a disability insurance policy through work. In most cases, the employer sponsored policies don’t require medical exams and medical underwriting.

Can I have both an individual policy and an employer policy?

Absolutely yes - and many of our members do.

If possible, you should secure your own disability insurance policy prior to having an employer policy, as mentioned above. The reason for this is that your individual policy coverage can be limited by your employer policy. Typically, your individual policy will only cover up to about 60% of your income. The benefit from your disability policy at work may count against that amount, whereas your personal disability insurance policy is unlikely to interfere with the amount of benefit eligible through work.

As such, stacking your work policy on top of your individual policy can actually result in more disability insurance coverage than you would be eligible for with your individual policies. This can also be a way to get around the maximum disability insurance benefit amounts that many own occupation disability insurance companies have, and is valuable if you are a very high income physician.

If you do have to pay the premiums for the disability insurance policy through your employer, consider that if you are young and healthy, that same amount of money spent towards an individual disability insurance policy may yield more benefit. Also remember it is in your best interest to use post tax dollars to buy your disability insurance so that you aren’t taxed on the benefit should you need to use your policy.

Stacking individual and employer disability insurance policies for doctors


While an employer sponsored disability insurance policy can be a nice added perk (particularly if you don’t have to pay for premiums), if you qualify for an individual disability insurance policy, you should also have that. Individual disability insurance plans are customizable and travel with you if you change jobs, and you aren’t taxed on their benefits if you unfortunately do become disabled. 

If you need to buy an individual disability insurance policy, make sure to use an independent disability and life insurance agent that specializes in physicians and can help you navigate the options as well as give you access to discounts. 

Additional disability insurance resources for physicians

Learn more about disability insurance with our Physician’s Guide to Disability Insurance.

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