Disclosure: This is part 2/2 of an interview I did with Michael Relvas, CFP® who sells insurance for a living and pays for advertising space on this blog. Although I have an obvious financial conflict of interest in recommending his services to you, I do appreciate it when you support those who support this site. If you do use his services, please mention you saw him here. You can read part 1 here.
Let's change gears a bit and discuss a subject my blog hasn't hit on much. What happens when you need to make a claim on your disability policy?
I think people worry about this too much. In my experience, legitimate claims are processed quickly and without much hassle. You have to fill out a form as the claimant, your employer has to provide some information, and then they request records from your primary doctor. I had a lady who developed MS on a group policy recently whose claim took less than 2 weeks to process. Two other recent claims, for dentists who developed cancer, also pretty much sailed through. Very black and white.
We've seen some fraudulent claims come through the office too. There's usually some pretty big red flags and so the insurance company starts digging deeper into them. Self-inflicted injuries that mysteriously occurred after business revenues had been dropping off over a couple of years. That type of thing. But these companies don't want to have a reputation for denying claims. If the disability is a bit of a gray area, say for something related to an excluded condition, then they may request an independent medical review at their expense. But it's usually pretty straightforward.
How often do you have to be recertified as disabled?
It depends on the disability. For a serious condition that you're obviously not going to recover from, you may never have to do anything again, certainly no more than a form once a year from your doc, who you're going to be seeing more often than that anyway. For a soft tissue injury, or something from which you're expected to recover relatively soon, more frequent certification may be required.
So if you get disabled should your first stop be a disability attorney's office?
I personally would not. Most of these are pretty straightforward. I think if the insurance company hears first from your attorney the first thing they're going to say is, “Why's this guy got an attorney? Maybe we ought to look at this more closely.” If you're in a gray area, maybe, otherwise I'd wait until there's an issue. The company does assign you a claims consultant whose job it is to help you get all the necessary information to the company and walk you through the process. They may ask you for more information, but I'd just try to be as cooperative as possible.
What about going back to work? What's that process like?
Well, for some people the residual disability rider may kick in. Even if you go back to working full-time, your practice may have been devastated since your patients all went elsewhere. So on a policy with a strong residual contract, you still get your full disability payment until you make at least 25% of what you used to make. At that point the residual disability rider kicks in on a proportionate basis up until you're making 80-85% of your previous salary. So if you make 50% of what you used to make, the policy pays you 50% of the policy benefit. So if your income was $15K a month, and your policy was $10K a month, you'd be earning $7500, and receiving $5000 from the insurance company for a total of $12,500.
Some policies with a weaker contract, however, stop paying residual disability benefits when you're able to work full-time, even if you're not earning anywhere near your previous salary.
What's the deal with Guardian? They're touted as the “best” disability insurance company for docs, although usually they're the most expensive. Are their policies really that good?
I think so. About half the policies I write are for Guardian, and most of the ones for doctors. I used to work for a firm that was associated with MetLife, and even then found myself recommending a Guardian policy most often. The strong policy language is pretty important, and most people are willing to pay a little more for it. Guardian actually recently came out with a policy series that is a little cheaper, but with weaker contract language. I don't even discuss that with most people. I do occasionally recommend other companies, but it is usually due to an underwriting issue, or because they want something a little cheaper, or because they don't care so much about true own-occupation coverage (it isn't nearly as important to non-doctors as to doctors I've found.) I may also recommend another company due to occupational classification. For example, emergency docs have a mental/nervous limitation with Guardian but not with MetLife or Standard. Pediatricians are rated 6M with MetLife, but only 5M with Guardian. This could create a significant difference in cost.
The important thing with disability policies is to keep things simple. That way you don't get caught in the midst of complicated contract language when the time to make a claim rolls around. For example, with a specialty-specific own-occupation contract, it's very cut and dried. You can't do your specialty? You get the full payout. With residual disability, if you're not making at least 80% of what you made before, you get a proportionate payout. You don't want to be subject to 3 or 4 different clauses that determine if the contract is going to pay you.
Anything else my readers should know about disability insurance?
Women are more likely than men to get disabled, and so their polices are significantly more expensive. One of the best ways around this is to get a multi-life program that offers unisex rates. A group can be as small as 5 or 6 doctors, and only 3 of them would have to buy policies in order to get the multi-life rate. Professional association discounts can also be quite significant, and the contracts are all exactly the same as if bought individually. For some reason doctors don't like to talk about this with their partners and business associates so they all end up buying their policies individually at full price.
Thank you for your time Michael Relvas, CFP.