While many of the doctors in our communities have questions about where and how to buy disability insurance, others have reached a stage of financial security and wonder if it makes sense to keep paying their disability insurance, or if it makes more sense to drop their disability insurance policies. Additionally, many physicians aren’t aware that they can actually adjust their policies as their needs change, so it’s not necessarily an all or nothing thing. Below we will cover instances where it might make sense to change the disability insurance policy or drop it altogether.
Disclosure/Disclaimer: This page contains information about our sponsors and/or affiliate links, which support us monetarily at no cost to you. These should be viewed as introductions rather than formal recommendations. 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.
Article Navigation
Why is having disability insurance important for doctors in the first place?
If you’re reading this article, you likely already have a policy and know about the importance of disability insurance in protecting the financial security that you’ve worked so hard to build.
If you are not familiar with this, please review our guide to disability insurance for physicians.
It’s important to keep in mind the goals you had when you purchased the disability insurance policy as you consider dropping it. At this stage in your life where you’re potentially considering dropping your insurance policy, the question you should be asking yourself is, “Am I so financially secure that having this amount of extra tax free money a month won’t change how I live my life?” If the answer to that question is no, you’re going to want to think very hard about what you’d be willing to give up if you no longer had a policy. We’ll visit this more below.
Where to get a disability insurance policy
If you don't have a disability insurance policy yet, or you determine below you need to replace or supplement your existing policy, we have partnered with the following insurance companies who have helped thousands of doctors on our communities find the right coverage.
Pattern: 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!
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.
What are the circumstances where I might consider dropping my disability insurance policy as a practicing physician?
The most common reasons that we see for physicians looking to drop their disability insurance are listed below. Note that we don’t think they’re all good reasons (see below for commentary), but some of them are very valid.
Becoming financially independent
Financial independence, along with the next one of approaching retirement age, are the two reasons we most often see and support reconsidering the need for disability insurance for. As you become closer to being able to self insure or if you suddenly hit FI because of a financial windfall, it’s worth reconsidering most of your insurance policies and seeing whether you’re insuring against things that you don’t need to insure against.
While it’s usually obvious to most physicians that they can eventually afford to replace an appliance if it fails, allowing them to defer on the insurance policy offered at checkout, disability insurance is a bigger deal.
You want to run your monthly budget and ensure that your existing assets and any additional revenue streams outside of your physician income can comfortably cover your expenses. Leave a little wiggle room for catastrophic disability, as many people also use their disability insurance policies to insure against long term care needs, bypassing long term care insurance.
At this stage in your life, the disability insurance premiums are probably a lot more affordable, so the question that we always ask in this scenario is, would you continue to live the lifestyle that you currently do if there was no longer income coming in? Just because you can live off of your savings may not mean that you are comfortable doing so just yet. If reaching into your savings to pay for that bucket list vacation is not something you’re yet so financially secure that you feel comfortable doing psychologically yet, it may be worth keeping the policy for a few years longer so that you still have some tax free money coming in to cover your expenses while you let your net worth continue to grow in the background.
Also remember that the decision to drop your disability insurance is not all black or white. You could just modify your policy to reflect what you feel comfortable with no longer having (especially some of the more expensive disability insurance riders) instead of dropping it altogether.
Closing in on retirement age
This is the other situation where we often support dropping your policy. As you come closer to retirement age, you’ll want to assess the risk-benefit analysis of the expense of disability insurance. Remember that most policies stop paying out around ages 65- 67. So, for example, if you’re 62 and can only receive three years of benefits, paying $3500 a year for a policy for a potential max benefit period of 3 years may give you such little upside in the unlikely scenario that you’ll be disabled within those three years that you may decide to just rely on your savings. Hopefully you’ve already reached a baseline level of financial independence at that point.
Also, if you have a policy where the premiums aren’t level (which we recommend avoiding if possible), disability insurance premiums can really start to increase in later years of your career, pushing you further towards wanting to invest that money and relying on the nest egg you’ve already hopefully built by then.
Changing to a nonclinical job or leaving medicine to do something else
Many people incorrectly assume that their disability insurance won’t cover them if they are no longer practicing as a physician. Even if you have an own occupation policy that is underwritten according to your current duties, know that if you became disabled, the insurance policy would pay out according to your ability to do what you were doing most recently in the period before disability. Therefore, if you’re not yet financially independent, don’t drop the policy just because your job description has changed.
Taking a new job that provides disability insurance or getting married to another high income professional
For the same reason we don’t see this as a reason not to get disability insurance, we highly recommend against dropping insurance policies for this reason.
You never want to depend on someone else for your financial security (death and divorce happen), and you want your own policy that stays portable with you no matter where the future takes you. Employer disability insurance policies are inferior for many reasons, including that you can’t take them with you, that the benefits are usually taxed because the employer typically pays the premiums with pre-tax dollars, and that these policies may not be own occupation.
Read more on why you should ideally not solely rely on the disability insurance provided by your employer.
Realizing the disability insurance policy that they have is not a good one and wanting to replace it
This is another reason why it may make sense to replace your policy or supplement it. Many physicians find out that they were sold a policy that isn’t true own occupation or doesn’t reflect their needs with the correct riders or premium structure.
First see if the policy can be modified so that you don’t have to undergo medical underwriting at an older age, which will almost certainly result in a higher base premium. If it cannot, contact an independent insurance agent that specializes in physicians and see what your current options are.
If you were sold a policy with graded premiums that increase with age, this is one circumstance where it may make sense to swap out the policy for one with level premiums.
No matter what, if you still require disability insurance, don’t drop the existing policy until you have a new one secured, as underwriting is always a risk and you’ve now had several or many years of interim health history and an increase in age, both of which can affect the ability to get a new reasonable policy with the features that you need.
Taking an extended break from work
We occasionally see posts on our physician communities from physicians who have elected to take some time off from working for a few years to raise their young families or who have quit a job and aren’t sure they’re going back to work. As cashflow becomes tighter, they wonder if they can save some money by dropping their disability insurance policies and then getting new ones when they start working again. We highly recommend against dropping your policy in this situation if you are not yet financially independent (yourself, not dependent on a spouse or family). There is no guarantee you will be able to get a disability insurance policy again depending on your health and other factors, and even if you can, the difference in the price of premiums may be so significant because of interim medical issues or increase in age that you wish you’d kept your original policy.
What are the circumstances where I might consider modifying my disability insurance policy as a practicing physician?
No longer needing as much coverage
As you progress further down the road towards financial independence, you’ll slowly shed some of your monthly expenses (although you may pick up some new expensive hobbies or spending habits to replace them). These include things like paying off your mortgage, paying off your student loans, no longer needing a nanny, or your children being able to support themselves. You will also be building your net worth in the background, therefore enabling you to rely more on your nest egg as a safety net if something catastrophic were to happen, so that $15,000 a month you thought you needed when you first graduated residency may now be only $10,000 to maintain your lifestyle. Decreasing the coverage will roughly proportionally decrease your premiums.
No longer needing disability insurance riders you are paying for
There are several disability insurance riders that we recommend looking into at the beginning of your career when you have decades of practice ahead of you, including the future benefit increase riders and the cost of living adjustment (COLA) riders. Somebody may have also sold you on a student loan rider. These riders may no longer make sense as you progress through your career.
COLA benefits don’t kick in until you start using your policy. When you have 30 years of potential benefit ahead of you, you want to protect against inflation. You may see less value in this when you only have 10 years of potential benefit ahead of you.
Future benefit increase option riders are great when you’re in your career building years, but once you’ve increased your insurance to the maximum amount that you need, you no longer need this rider. Many people end up dropping it by default because they don’t elect to use it.
No longer needing the benefit for as long of a time
As you become more financially secure, you may no longer need the policy to pay out until you’re 65. If your policy has the option to switch to a benefit period of 5 or 10 years instead and this would get you to the point where you felt comfortable dipping into your existing savings, you may want to consider this. Making this switch can significantly decrease your premiums.
Having a larger emergency fund
If you purchased your disability insurance policy as a resident, you may not have had a large emergency fund to cover you in the short term if you were without income for six months. Because of that, you may have bought a policy where the benefits kicked in as soon as possible, such as at 30 days or 60 days. However, as you build up a larger emergency fund, you may now be able to wait for 6 months until your benefits kick in. Changing the waiting period to a longer period of time can significantly decrease your premiums.
Changes in your earnings such as going part time or earning more
If your income changes significantly, it may be time to reassess how much coverage you have.
If your income goes up and you want to protect more of it, you have a few options. If you bought a future benefit increase option rider when you bought your policy, you could simply exercise it. However, if you didn’t, you may have to purchase more disability insurance separately, which will require undergoing medical underwriting again.
If you make a permanent change in how much you work that will result in a decrease in your income, it may not make sense to pay for a large benefit (which you then may not even qualify to get all of depending on your policy). In this case, decreasing your benefit would make sense.
What should I consider before I drop my disability insurance policy?
There are several things to consider before you drop your disability insurance policy. For one, know that it may not be possible to get disability insurance again. Additionally, know that there are alternatives to dropping your policy, which include adjusting your coverage. Of course consider that while you may be able to make ends meet without the disability insurance policy, you may not be able to do so stress free - would disabled life without the policy be more stressful than the cost of the premiums right now? Are you comfortable dipping into your savings at the age you’re currently at and feeling confident that you’ll have enough money for your remaining years? Is the money you have liquid enough to be accessible without financial losses (having to sell a house or investment, for example, at an inopportune time)? And finally, consider whether your expenses could go up in disability and whether you have sufficient funds to cover that.
How do I drop my disability insurance policy?
Fortunately, dropping your disability insurance policy is easy. It can be as easy as just not renewing your policy by not paying your annual or monthly premiums when they are due. However, most physicians will opt to formally drop the policy by contacting the disability insurance agent that they purchased the policy through or by directly contacting the insurance company that issued their policy. There are forms that will be filled out, and you can choose the date where you officially stop the policy.
Before you take this step, make sure that you’ve considered all of the talking points above as well as the options discussed above to modify your policy. Once you’ve dropped the disability insurance policy, you should assume that you can’t get it back without having to undergo medical underwriting again, and likely at higher premiums. Some policies or policy terms are no longer even offered. For example, if you’re a female that locked in on a great feature like gender neutral pricing when that was still being offered, you will almost definitely be looking at significant premium increases.
If you let your policy lapse by accident, contact the disability insurance agent that sold you your policy or the insurance carrier and see what your options are. Sometimes, if you are within a grace period, you can reinstate the policy, although it may not carry all the same perks as your original policy.
Conclusion
There are many valid reasons for dropping or modifying your disability insurance policy, but you want to make sure your reason is one of them. Many of the reasons people cite for dropping their policies, such as getting one through work or being on an extended leave of absence such as taking a few years off to raise their children, are risky and not recommended, Once you’ve dropped your policy, it can be very difficult, if not impossible, to reverse this decision or reinstate your policy. If you’re dropping the policy because you’ve become financially independent or are retiring soon, congratulations!
Additional Disability Insurance Resources for Doctors
Explore our related articles and resources: