We often get asked, “What is the best physician disability insurance policy?” Clients want to know who the carrier is, how much do they need to make to qualify, what makes this mythical policy the best disability policy for physicians, etc.
The answer, like many other responses in the insurance world, is simple: it depends.
So What Is The Best Physician Disability Insurance Policy?
This question could spark an immediate argument in a room full of insurance agents. Everyone has their favorites and most traditional insurance agents have a policy that they think is the absolute “best” for physicians.
For those that sell almost nothing but disability insurance, like our agency, this discussion might contain a little more professional discourse.
As one can imagine, personal and professional situations vary widely from client to client. A great policy for a 31-year-old fellow may not be very strong for a 45-year-old surgeon. Even with the same age and occupation, health issues, personal finances, and a variety of other considerations can have an impact on what would be considered the best physician disability insurance policy.
What each and every physician (and every other occupation for that matter) should be looking for is the best disability insurance for their personal situation and goals.
Let’s take a look at the components of a great disability insurance policy for a physician.
Five things to look for in a disability insurance policy for physicians:
1. Proper definitions
Looking at disability policies in a comparative setting can sometimes be misleading. First of all, when we do product/carrier education calls, I often use a matrix to compare features, benefits, and pricing. Unfortunately, the numbers don’t tell the whole story. Being able to understand what triggers a claim, how the language is written (is it friendly to the policy owner or the company), and what you’re entitled to once you need your benefit are all very important.
So what definitions should a doctor (or any other high-income-producing specialty profession) be looking for?
For the best physician disability insurance policy, an “own-occupation” definition of disability is a good place to start. There are major advantages of this should you need to make a claim.
2. Non-Cancelable Provisions
This is extremely important but, something that you’re unlikely to run into. Essentially, there are two types of individual disability insurance policies: non-cancelable and guaranteed renewable.
A guaranteed renewable policy is one that does not allow the carrier to change any terms of the policy (unlike what you could end up with utilizing group coverage only) EXCEPT for the premiums. The carrier cannot single you out; the rate increase needs to be across similar occupation classes and demographics. That being said, very few policies that a physician (or any other disability insurance policy for high-income occupations) would purchase, or even be offered, will ONLY be guaranteed renewable. They will likely be guaranteed renewable AND non-cancelable.
A non-cancelable policy typically has all of the attributes that a guaranteed renewable policy has with one additional feature: the premiums are guaranteed as well.
The best physician disability insurance policy should be BOTH guaranteed renewable AND non-cancelable
3. Riders and Exclusions
This is where things can get a little complicated. Customizing a policy with all of the features and benefits that you deem important can be an exhaustive process. There are always trade-offs and sometimes the things that you might want to have are just not cost-effective. Keep in mind, there is a difference between being able to afford something and actually getting value for a premium price tag.
Riders add benefits to your disability insurance policy. Every carrier has their own riders and for the purposes of this post, I’m not going to describe each one individually. For more information on the characteristics of individual riders, see our guide on disability policy riders.
Ultimately, you should be looking for a few things. Residual income riders can be very important if you aren’t totally disabled (for instance, you have cancer and the treatment wipes you out some days and allows you to work others). They provide a supplement to the reduced income that you’re earning during this time. If your income is likely to increase in the future, you’ll want a rider that will allow you to increase your coverage without medical underwriting. Other benefits that are desirable include catastrophic coverage, cost of living adjustments, and automatic benefit increases.
Exclusions are health conditions and/or things that cause a disability that are not covered by your policy. Some of these exclusions can be added due to underwriting (for example: you have a bad back so the policy will not cover a disability due to back related injury) or they are added by policy design (the most prevalent being exclusions or limitations of mental/nervous disorders). In a perfect world, one would want to eliminate as many exclusions as possible.
Of course, the “bang for your buck” needs to be evaluated. Adding benefits, utilizing certain companies, and policy design can all add additional costs to your policy. The worth of those costs is largely determined by the individual. Policies that are set up to service high income professionals are typically competitive in terms of price with each other. HOWEVER, some companies price their features and benefits differently. Thus, it can be critical to select the aspects of a policy that resonate with you and you alone.
The average disability policy is going to cost somewhere in the neighborhood of 2-4% of your pretax earnings. The best physician disability insurance policy (speaking only to cost) is going to be the one that fully covers your income for that typical premium expense. “Fully covered” means that you have the maximum available coverage relative to your income. Contrary to popular belief, that does not mean that you have a disability insurance benefit equal to your gross income.
Disability insurance paid for by an individual (as opposed to being paid for by your employer) is typically tax-free to the insured. Therefore, most disability insurance policies only need to cover about two-thirds of your income. Should you only have coverage that is paid for in full by your employer, then those disability benefits will be taxable. As a result, the disability insurance companies take this into account and will often offer additional benefits to someone who has a group plan that has taxable benefits versus someone who has a group disability insurance plan that is payable in tax-free dollars (meaning that the employee pays the group insurance premiums).
Unlike term insurance and some other insurance types, shopping for the lowest disability insurance premium will often leave you underinsured. Although you might be paying a lower premium, if it is very difficult to make a claim due to your policy definitions and rider types, are you really saving any money?
Disability is certainly one of the rare types of insurance where you really “get what you pay for”.
5. The Company
Throughout this blog, we use the terms “company” and “carrier” interchangeably. In the business, we normally talk about “carriers” whereas most policy owners talk about the “company”. No matter which word you chose, there are a few important characteristics that you need from the issuer of your disability insurance policy.
All carriers are assigned a rating from one (or all) of the major rating agencies. These agencies are Standard and Poor’s, Moody’s, Fitch, and AM Best. For the purposes of claims paying ability (which is what is normally most important for you, the policy owner/insured), AM Best tends to be the favored agency.
AM Best ranks carriers/companies on a scale. Although no rating agency has a crystal ball, they provide extensive analysis (and it’s a good starting point) on the claims paying ability of each carrier.
A++ is the highest rating offered by AM Best. Very few carriers have this rating although a few, like Guardian, MassMutual, and Northwestern, not only have this rating but also offer individual disability insurance.
As a rule of thumb, staying with “A” (Excellent) rated carriers for your disability insurance is a good start. Almost all of the major players that offer the best physician disability insurance policies fall into that category or higher.
There is no “perfect policy” for all physicians. The best physician disability insurance policy is a delicate balance between all of the preceding factors. Consequently, each individual needs to weigh the importance of the previous five characteristics and also delve into each category’s specifics to find the right benefits that fit your goals.
For many of you reading this, a diagnosis is probably something that you often give to your patients. With that diagnosis, there is normally a treatment. There might be a “standard” treatment for the issues that you’re discussing with your patient, often there will be an alternative. No matter which direction you chose, there will be benefits and consequences.
Choosing the best physician disability insurance policy is no different. As an industry, we have a few policies that are “standard treatment”. However, each individual is unique. Therefore, from the benefits that they feel are important to their families, to the company that they choose to purchase a policy from, each alternative needs to be properly weighed so that the best policy is purchased for the insured.
The H.I.P. Insurance Agency provides a comprehensive analysis for each potential client to help them select the policy that best fits their needs. Contact us directly at 888-636-2310 or fill out the quote form to the left to get started.
We can find the “best physician disability insurance” policy for you.