There is no “one size fits all” when it comes to disability insurance for physicians. Specialties, income, and protection goals all play a huge role in determining the right coverage for each individual. Complete the quote form on the left for a comprehensive view of the carriers available to you. For a more in depth analysis, please schedule a time for us to discuss your needs. The call is free and there is no obligation to purchase anything.
Disability insurance for physicians is complex but has five main characteristics that every physician should make sure that his or her policy contains:
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Own Occupation Coverage
Own occupation coverage is critical for physicians. The type will vary based on what you’re willing to pay and the state in which you practice.
For example, Principal has three occupational-based riders. One will allow you to receive benefits if you are unable to perform the material duties of your occupation but are not working (not “engaged”) in any other occupation. The second allows you to work in another occupation. For example, a neurosurgeon develops an essential tremor and can no longer operate on patients. She can, however, still diagnose and consult, making less income. This rider would make up some of the difference between the new income and the income when she was still operating. The third rider allows for a full benefit payment regardless of additional income from a second profession. Using the same example, our neurosurgeon would make BOTH the income from her consulting role AND the full benefit from her DI policy, essentially making more money disabled than before her tremor diagnosis.
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Non-Cancelable Coverage
Almost all disability insurance policies are guaranteed renewable. That means that the carrier must continue offering coverage to the insured, regardless of current health or other factors. That being said, a policy that is only guaranteed renewable does allow the carrier to raise the premiums. They cannot raise rates on a specific policy owner, but they can raise rates on a “class” of individuals. That would include an occupational class or a specific demographic.
Potential rate increases can be avoided by making sure that your policy is non-cancelable. This means that in addition to being required to continue offering you valuable disability insurance coverage, the carrier must keep the premiums the same as when you purchased the policy. Although it is very rare for a disability insurance company to raise rates on existing policies, it still makes sense to prevent this possibility by making sure that your policy is non-cancelable.
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Maximizing Your Benefit
How much does disability insurance cost? This is a common question that we see consistently across all of our social media platforms. Typically, an own-occ, non-cancelable disability policy for physicians is going to cost approximately 2%-4% of your gross income. While that might be a relatively small cost to protect what is likely millions of dollars of future income, one must make sure to cover at least 60% of his or her income. This figure might sound low, but keep in mind that if disability premiums are paid with after-tax dollars, then the benefit is tax-free. Alternatively, if an employer pays for the benefit, pre-tax, then your disability insurance benefits would be taxable.
Most of the time disability insurance for physicians will cover this need. However, a high-income earner will face an additional hurdle: carrier coverage limits. Most carriers are going to limit monthly coverage to approximately 20k. Those making north of 400k annually, therefore, will be left underinsured.
Thankfully, companies like Mass Mutual and the syndicate Lloyds of London will provide supplemental policies, designed to augment a traditional policy. Their limits will allow for even the highest income earners to have the full and necessary coverage to protect their paychecks.
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Underwriting
If perfectly healthy, this shouldn’t be a major concern. However, health issues, like a back problem or anxiety can have an effect on your premiums and even your insurability.
Underwriting can vary widely between carriers. Some companies will offer more liberal underwriting while others are much more strict. The most important factor is to disclose any and all potential health issues to us, which allows for a comprehensive search of the carrier universe for the best possible policy based on your health and profession.
Once you apply for a disability insurance policy, the carrier is going to look at two things: your finances and your health.
The first step is to underwrite you based on your income. If you make 200k per year and apply for 20k a month in benefits, you could be (and will be) offered a policy with a lower benefit.
The next step is health underwriting. Your overall health will be taken into account. At the higher benefit amounts (likely for you if you’re reading my blog), the carrier may require a phone interview and a paramedical exam. The exam takes place at a time and place of your choosing and involves a simple health overview: blood, urine, height/weight, blood pressure, etc.
If you have a pre-existing condition, it could be included in your policy as an exclusion. That means that if you have a pre-existing condition that causes your disability (that is also excluded in your policy), it will not allow you to make a claim. Exclusions are a huge detriment to your policy and should be avoided at all costs.
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Carrier Ratings
I worked for an AIG company from 1998 until 2008. Up until 2007, AIG had one of the highest insurance ratings in the industry. In 2008, it almost brought down the entire financial industry and yet, its insurance subsidiaries, like American General continued to make claims payments and annuity payments all throughout the crisis. The moral of this story is that ratings are important but they shouldn’t be the most important part of your decision.
A.M. Best offers ratings for all of the major carriers. These ratings serve as a guide to the potential claims paying ability of an insurance company.
Most of the carriers that offer types of disability insurance for physicians have very high ratings. Guardian, The Standard, Ohio National, and Principal all have “A” “excellent” ratings or higher. Guardian and Ohio National even have a “superior” rating. There are a lot of protections that the policy owners of disability insurance policies possess. Therefore, while these ratings are important, they don’t necessarily need to be the first consideration in purchasing your policy.
Conclusions
Disability insurance policies have a lot of moving parts. The most important factor is that all of the major points from this article are incorporated into your policy. Having some form of an own-occ, non-cancelable, policy that provides the right amount of coverage is extremely important. Making sure that your policy is underwritten correctly and comes from a highly rated company is also paramount.
Disability insurance for physicians is a unique product design. You likely make substantial income but if you’re early in your practice, you probably have very high expenses. If you’re more more experienced, your lifestyle may have adjusted to the point where a substantial decrease in your income can have an adverse effect on your lifestyle.
Paycheck protection, or purchasing disability insurance, is extremely important for physicians and all other high income earners.
To purchase a high limit disability insurance policy, please don’t hesitate to contact us for an impartial, expert consultation. While we appreciate you purchasing your disability insurance from us, it is not required. If you would like to have a personalized quote, created with your specifications, please complete the form on the left. We look forward to working with you.
