Larry Keller
[Editor's Note: This is a guest post from Lawrence B. Keller, CLU, ChFC, CFP®, a paid advertiser on this site, although this is not a paid post. In this post, he discusses a topic many of us have wondered about when we found out that our disability policies had a limitation on disabilities due to psychiatric and neurologic diseases. Enjoy!]
One of the biggest differences in disability insurance policies today is how claims for mental/nervous and/or substance abuse disorders are handled. While some policies handle these claims in the same fashion as any other accident or illness, others limit these types of claims to a maximum of 24 months (either over one’s lifetime or per period of disability, depending upon the specific insurance company’s policy).
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What Is Limited?
The intent of this rider is to limit the benefit period if the primary cause of disability were solely a psychiatric or substance abuse disorder/diagnosis as defined in the DSM IV (or its replacement), including, but not limited to Post Traumatic Stress Syndrome (PTSD), anxiety, depression, and/or drug and alcohol abuse/addiction.
The limitation would not apply to claims for dementia as a result of a stroke, head injury, viral infection, Alzheimer’s disease or similar organic disease processes, including Parkinson’s disease and Multiple Sclerosis. These illnesses would be covered in the same way as any other accident or sickness.
Also, if the insured had a physical (medical) condition, as well as a psychiatric condition, the mental/nervous limitation would not apply if the physical condition would in and of itself be considered a disability under the terms of the policy.
Doctors Do Get Mental Illness
According to the April, 2011 issue of Current Psychiatry Magazine, physicians are not immune to depression and have an increased risk of suicide. Additionally, the lack of distinction between a psychiatric diagnosis and impairment stigmatizes physicians and impedes treatment. So, should this factor into your decision when purchasing disability insurance?
Given the choice, if premium rates are similar, I would suggest that a policy with fewer restriction and limitations is better compared to a policy with more restrictions and limitations. Therefore, one would want to purchase a policy that has both a true “Own-Occupation” definition of total disability coupled with full coverage for mental/nervous and/or substance abuse disorders. While, generally there is not a substantial difference in premium rates for males, the difference in cost for females can be substantial – especially if a policy with unisex rates and a permanent premium discount is not available.
Principal's Transitional Occupation Rider
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Let’s use Principal’s policy as example. The Mental/Nervous and Substance Abuse Disorder Limitation Rider is required for 5A-M and 4A-M occupations when the Regular Occupation rider is added to the policy. However, when the Transitional Occupation Rider is purchased, this limitation is not required.
So, does “Own-Occupation” really matter with disability insurance? Clearly, there is no right or wrong answer. It is a balancing act in terms of the premiums that one pays relative to the risks that they are willing to accept or transfer to the insurance company.
Setting that aside, I would assume that most purchasers would want coverage that included both full coverage for mental/nervous and/or substance abuse disorders, as well as, a true “Own-Occupation” definition of total disability.
I believe that the only reason that the Transitional Occupation Rider ever enters a discussion is to allow females to purchase a policy with a unisex rate and discount with Principal, if available, the Regular Occupation Rider is not available (this is the case for those in the 4A-M occupation class purchasing coverage in California), or if due to medical history Principal issued a policy with a 5-year benefit period (and in that situation, the Regular Occupation Rider is not available).
Mental/Nervous Limitations Among The Big Six
How do the “Big Six” carriers for physician disability insurance compare in today’s marketplace in this area?
Berkshire (Guardian) – Full coverage for claims related to mental/nervous and/or substance abuse disorders in their ProVider Plus (“flagship”) policy with the exception of Anesthesiologists, Emergency Medicine Physicians, CRNAs, Pain Management Physicians and all policies issued in California or Florida. Berkshire’s ProVider Plus limited has a 24 month lifetime maximum for claims related to mental/nervous and/or substance abuse disorders.
Standard – Full coverage for claims related to mental/nervous and/or substance abuse disorders in their Protector Platinum policy series. However, this is very expensive for Anesthesiologists due to the unfavorable occupation class of 2P (this is not the case for Pain Management Physicians).
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MetLife – Full coverage for claims related to mental/nervous and/or substance abuse disorders in their Income Guard policy series. However, this is not the case for those in occupation class 4M (this includes Dentists, Anesthesiologists (including Pain Management Physicians that are anesthesia trained), Emergency Medicine Physicians, OB/GYNs, Orthopedic Surgeons, Psychiatrists, Interventional Radiologists and Interventional Cardiologists, which includes Cardiac Electrophysiologists)
Ameritas (Union Central) – Generally, a 24 month lifetime maximum for claims related to mental/nervous and/or substance abuse disorders. There may be Guaranteed Standard Issue policies that do not include this limitation.
Principal – The Mental/Nervous and Substance Abuse Disorder rider is required for 5A-M and 4A-M occupations when the Regular Occupation rider is added to the policy (this rider is not available to those in occupation class 4A-M in California). When the Transitional Occupation Rider is purchased, this limitation is not required.
MassMutual – The maximum benefit period for each period of disability caused by or contributed to by a mental disorder is 24 months, with no aggregate lifetime limit.
When you purchased your disability insurance, did coverage for mental nervous and/or substance abuse disorders impact your decision making process? If you haven’t purchased coverage, is this something that you will take into consideration? Comment below!
My wife got dinged for a bout of postpartum depression with one child. Her own occ disability is 700+$ per month with an exclusion of mental issues. The kicker is they will only give her 5 years of disability coverage if she does become disabled for anything else as well. This is Berkshire. It was very frustrating, she has never missed a day of work because of the postpartum depression and is not under any kind of treatment for it now.
Typically this type of medical history results in an exclusion rider for mental/nervous and/or substance abuse disorders, the removal of any increase option riders and a maximum benefit period of 5 years per disability – especially if it was recent relative to the date of application.
After 2-3 years of no symptoms, treatment or medication, benefits to age 65 may be available.
If one has a history of anti-depressant use and things have been stable, benefits to age 65 with increase options may be available with only a mental/nervous exclusion rider.
This does vary from carrier to carrier and individual circumstances always dictate.
Purchased a guardian limited policy during my intern year of an emergency medicine residency from Larry. The cost savings seemed worth it to me at the time. Now that I am finishing up this year, I may shore up that coverage, but it may not be worth the difference in cost to me.
As an aside, I’d highly recommend using Mr. Keller if you need a disability policy.
Thank you for the kind words!
Keep in mind that, at this time, the only carrier that provides policy with both a true “Own-Occupation” definition of total disability AND no limitation for claims related to mental/nervous and/or substance abuse disorders for Emergency Medicine Physicians is Standard Insurance Company.
As a reservist, I need a Standard policy to be covered with my military commitment, so that would work out great.
Yes and, as you know, you can even purchase Standard’s policy as an Active Duty Physician as long as you are still a resident or fellow and do not have call-up orders prior to applying, having the underwriting completed and the policy inforce.
Greatly appreciate the post and all of the help that Mr Keller provided me while I was still in residency and mulling over my options for Disability Insurance.
Since, I was an Anesthesia resident, this particular issue was a big sticking point. I have no personal/family history of substance abuse disorders, but being in a “high-risk” profession, I felt the need to seek policies without this 24 month exclusion. Nobody goes into Anesthesiology thinking that they are in danger, but I have heard that the substance abuse rate is as high as 15% among this profession.
I choose to split policies among Metlife and Principal, with the majority of coverage being from Metlife. At the time, Metlife did not have a 24 month exclusion on Mental Health/Substance abuse disorders. I guess this has now changed, unfortunetly
Yes, that is correct. However, you are still in good shape as MetLife does not issue a new policy when the GIO Rider is exercised. As such, all of the original policy’s terms, rate book (premium rates for GIO exercises are based upon your age at the time of the exercise) and discounts remain the same as before.
Does either of your policies have any offsets? Your benefit may be significantly reduced if you do. Having multiple carriers sounds good but sometimes it can hurt you depending on the fine print in your policies.
I actually replaced a policy from Mass Mutual and lowered my Met Life amount just because of this 24 month limitation. Was able to get a Standard policy, with less bells and whistles and just what I need, for a lot less than I was paying.
When I switched agents he would call and tell me that no-one ever has a mental nervous claim, which didn’t make sense as to why they would have an limitation then…
Here is article “The Painful Truth: Physicians Are Not Invincible” which discusses the rates of psychosocial problems among physicians
http://www.medscape.com/viewarticle/410643_3
Great post. Thanks, Larry.
This is pretty disheartening given that my wife is an anesthesiologist. All joking aside, the in-laws are all very healthy aside from various anxiety issues. On the spectrum of items by which someone could become disabled, mental health seems very common, and much more likely and more devastating than losing a limb or other physical impairment. Though just an anecdote, the only client I have whom I know has made a disability claim was for mental health, and there was a prolonged fight with Northwestern before they would pay up.
This feels terribly unfair, but I suppose it’s set by an actuary with hard data. Substance abuse is definitely more common among anesthesiologists than most other MDs, but where it’s hugely prevalent is among CRNAs. In a 90s study, one in 10 freely admitted to substance abuse, and far higher reported “trying” the drugs at least once (I want to say close to 50%). I need to find the study for myself, but I get to hear about it annually.
The more I learn about disability insurance, the more I feel like the best option is simply to self-insure through diligent saving and investing rather than paying a third-party and subsidizing everyone else’s disability claims.
Thank you!
While this is not the study your referenced, it speaks to
“The Prevalence and Patterns of Substance Abuse Among Nurse Anesthesia Students”
http://www.aana.com/newsandjournal/Documents/opioidabuse-0412-p120-128.pdf
That risk is too big for me to self-insure. I’ve currently got $17K a month insured. $17K*12 months*20 years = $4M. That’s twice as much life insurance as I’m carrying. Even if it’s only for 5 years until I’m financially independent (not counting the site, which probably gives me financial independence now) that’s still a million. Definitely worth what I’m paying every month to me.
Whether or not it’s the right decision, I think it makes vastly more financial sense for a man to obtain disability than a woman simply due to cost. Further, a man is more likely to be the sole breadwinner and the impetus for protecting that is higher. Insuring a female is considerably costlier, about 50%.
Now that I know that Anesthesia faces a considerably higher cost, or simply is ineligible for lifetime coverage, it really scuttles the concept for me. Lots of term life insurance was an easy decision, and I’m now looking into umbrellas, but disability has been a struggle to sell myself on.
Then again, I’m always looking for excuses to talk myself out of spending money. Perhaps when we have kids and more expenses, we’ll feel a greater need, but with insurance, by then it might be too late. Luckily each of us is our own disability policy on the other for now.
I think the solution might be to push her into a pain fellowship and get a Standard policy 🙂
My individual policies have this exclusion, do group policies also often have this exclusion?
Yes, group LTD plans typically have the same mental/nervous and substance abuse disorder limitation, as well as, other contractual features that are more restrictive.
Depends on the policy. They all vary. But in general, group policies have weaker definitions of disability.
Haven’t heard anyone mention Provident for disability insurance in quite a long time. Any idea if Provident can decide to cancel a long standing policy because they do not want to be in that business anymore?
Provident is now in the Guaranteed Standard Issue (GSI) marketplace in conjunction with employer provided group LTD coverage. Their policies are no longer sold on an individually underwritten basis.
Back in the day their disability insurance for physicians was excellent. However, this has not been the case since 1995/1996.
If your policy is Non-Cancellable and Guaranteed Renewable, the premium rates and contractual provisions will remain the same. In fact, the first personal disability insurance policy that I purchased for myself was from Provident.
Not without going out of business. But read the policy for the fine print.
I’m actually dealing with this right now. I chose a DI policy through Principal partly due to Principal not having a mental illness limitation. I’m currently looking at getting DI for my wife and was not prepared for the difference in rates. Now I have to decide if I should go for the MassMutual policy or the Principal. The MassMutual agent said it was infrequent for people to have a Mental Illness w/o a physical disability but I responded that if that were true, MassMutual wouldn’t need to have the rider.
For physicians and dentists that purchase the Regular Occupation Rider, Principal requires the mental/nervous disorder limitation to be part of the policy.
The other option is to forego the Regular Occupation Rider and purchase a policy with a Transitional Occupation definition of disability in order to have full coverage for mental/nervous disorders.
Especially for females it will come down to price. If your wife is a physician employed by an academic institution, the odds are very good that a policy with a unisex rate and 20% discount is available through Principal. This reduces the cost by 40-50% compared to the normal female rates and brings the cost much more in line with what males pay for their policies.
Where you have a choice with Principal (in most states), MassMutual’s policy has a 24 month limitation per period of disability built into their policy (which is different as most carriers have a lifetime limitation for those types of claims).
Of course, if your wife is not a physician or dentist, you can also look elsewhere and potentially establish a multi-life discount.
These claims definitely exist (often without a physical disability being the reason behind it) and the incidence and duration of claims associated with policies that include a true “Own-Occupation” definition of total disability AND no limitation for claims related to mental/nervous and/or substance abuse disorders are much higher.
Thanks.
Neither my wife or I are physicians although I have a physician’s income level. My wife is a teacher which is why I’m debating on whether to get her DI and/or worry about mental illness limitations when the premiums are so high.
Just to add some perspective: 5 years into my own, very busy practice, I developed severe depression and have now been out on claim 3 separate extended periods for Mental/Nervous. I have an excellent disability policy that I actually got from Larry 25 years ago. I am married, own a home, have 2 cars and 2 kids in college. At this stage of life, life is more expensive than people realize and despite having an excellent disability policy, my life savings are now gone. Mental/Nervous is very important and more common than you think.
The fact is, becoming disabled is more common than you think. I never saw my illness coming. Without my disability policy, I have no idea how I would have made it to this point in my life. Don’t look at price when purchasing a disability policy (and you MUST have one). It’s expensive and you may never use it so it sucks. Get over it! Saying it’s too expensive thus not purchasing the best policy you can is an excuse you tell yourself. You can afford it. Hopefully, you’ll never have to use it and you can complain about it during a long and healthy life. If you do have to use it but you didn’t get the best policy available to you when you had the chance, it will be an uncorrectable mistake that will affect you and your family for the rest of your lives.
Wow! Thanks for sharing your story. If you really did buy your policy from Larry 25 years ago he needs to send me an updated picture. 🙂
Great post Larry.
This is a very important subject, there is literature that shows roughly 20% of claims paid are for M/N disabilities. I know 2 docs who would have went on claim if they had policies, but they didn’t buy a policy.
The option to not have M/N is also a state driven issue, here in Florida all the carriers except for MetLife make you take the limitation. You can buy a policy with Principal as part of a group with Trans Occ only and not have to take the limitation. My biggest issue with Trans Occ is that it doesn’t provide any benefit to residents or fellows since they would only be protecting there $50,000 incomes!
25 years ago I was 12, Larry you are looking good to have been doing this for so long!
Thank you for the kind words!
Don’t forget Standard’s Protector Platinum policy is also available in Florida with unlimited mental/nervous coverage.
Believe it or not, I have two clients with policies that had full mental/nervous coverage disabled in that area and neither wanted to file a claim – even though their policies would have paid benefits.
Sadly, neither one of them have been able to return to the practice of medicine to this day.
We always like to talk statistics, but the truth is if it happens to you, the statistic is 100%.
Male EM intern here. The quotes for Principal transitional with full NM vs regular occ with rider came out about the same for me. Tough decision, but I decided on the transitional, even though no risk factors for psych or substance issues, because I feel like as long as I’m paying $2K/year for my DI it should cover as much of the common stuff as possible. Yes, this won’t protect me as much if I get disabled as a resident, but as Mr Money Mustache points out $60K/year is actually quite a princely sum, and I’m sure I’d figure out how to save for old age with it.
If I get disabled as an attending, some other thread on here about transitional vs regular occ made the great point that most physicians would be hard-pressed to find a non-clinical job that pays more than $120K/year. And certainly that’s enough money to save up a great old-age nest egg over 20–30 years. So if that happened my plan would be to do one of the many other things I enjoy as much as medicine without even trying to draw any compensation from it.
I’m a resident in California. It seems as if it is pretty much impossible to get a plan in my state with a full mental health disability benefit. The brokers that I have spoken with have basically told me there really isn’t an option with full benefits. All the competitive plans have a 2 year limit on mental health payout. Is there any way as a resident in California that I can obtain a competitive plan with full mental health benefits?
Catherine-
The brokers that you are speaking with are misinformed. You can purchase Standard’s Protector Platinum policy which includes both a true “Own-Occupation’ definition of total disability, as well as, full coverage for mental/nervous and/or substance abuse disorders.
If you email me at [email protected], I would be happy to send you an illustration of coverage and specimen policy to review.
You may also wait to buy coverage if you plan to leave California after residency in order to have more options. Standard can be pricey, especially when you take into account that it’s Comdex financial strength score is the lowest of the “Big 6”. You may be able to purchase with Metlife depending on your medical specialty.
hdo,
As an EM doc you will probably be ok with Trans once you get into practice.
Here is an easy way to think about Trans Occupation, which I am generally a fine with:
1) Doctor has no ambition to do any other employment if disabled; then there is no difference between Trans Occ/Reg Occ/”True Own Occ”
2)Doctor would want to work if disabled and doctor makes over $250,000 per year; then there is probably very little difference between Trans and True own Occ. It all depends on what the doctor could make while being unable to work in their specialty.
3)Doctor is in low paying specialty (Peds, Family, etc), making anywhere between $125k and $200k. Trans occ could be a big disappointment in this situation if the doctor wants to work and could find employment making $60k to $120k. Doctors are smart enough to find employment that pays them over $80k if they want it, especially if they get an MBA or other certification after becoming disabled.
4) Residents/Fellows – If disabled in residency/fellowship then the Trans Occ is a horrible “solution” as they are only protecting their $45k to $65k incomes. I know its rare, but it does happen. The whole idea of buying disability or life insurance is to buy it today because a life changing event could happen tomorrow.
Regarding 4) above
For residents you list transitional occupation disability as a poor deal. Is it not reasonable to get coverage as a resident to do your medical underwriting then escalate the Future insurability option to attending salary?
Agree that transitional is suboptimal as a resident, but as I mentioned, $60K/y is still a decent living. And which is more likely: that I will become disabled for any reason as a resident, or that I will become disabled due to neuro/mental issues at any point over the course of a 30-year career? I guessed it was the latter, because otherwise it would be harder to get insurance as a resident than as an attending and the actuaries wouldn’t be doing this funny business with MN riders to start.
There are plenty of non medical professionals earning comparable wages to EM physicians. For that reason I disagree with the argument that transitional and true own-occupation are indifferent for a higher paying specialty like EM. It might be a fair argument for the physicians making $500-600k+, but not those earning ~$250k.
What needs to be considered is whether the consumer is comfortable with working in a new profession, making a comparable salary, and not getting anything from their disability insurance policy as a result. Let’s be honest – there are far worse things than being disabled and still earning a comparable salary to one’s pre-disability income without their disability benefit, right. That said, there is also something nice about having a policy that pays a specified benefit regardless of how lazy, ambitious, or resourceful I am following a disability. A claims process with fewer financial requirements doesn’t hurt either.
As Larry stated in the post – “It is a balancing act in terms of the premiums that one pays relative to the risks that they are willing to accept or transfer to the insurance company.”
MCK,
Sure, getting coverage as a resident is smart. The problem is that if you actually become disabled in residency and you have the Trans Occ rider, then all you have done is insure your resident income, not your attending income.
Example:
Internal Medicine resident, makes $50,000 per year, is disabled in year 2 of 3 year residency and can no longer practice medicine. The resident purchased a disability policy out of MS with a $5,000/month or $60,000k per year benefit.
1) Trans Occ – the resident has a couple of options. First is to no longer work and collect the full benefit. Second, is to embark on a new career path, say that pays $50,000 per year. When this resident starts making $4,250 per month, the disability policy will start to only pay $750 per month. If the resident was able to find a position that paid over $60,000 per year then the total DI benefit would go to $0.
2) Reg/True Own Occ – again this resident has a couple of options. First – is to no longer work at collect the full benefit. Second – is to start a new career and still collect the full $60,000/year benefit, no matter how much the new career’s income can provide, as long as the resident can no longer work in his specialty.
Trans occ is a viable solution for attending physicians, it is a risk for residents/fellows in my eyes.
I have been wondering about this in regards to a female resident. Looking at 2 policies, one trans-occ w/o M/N limitations, the other true-own w/ M/N limitations, both for the same price and $60k in benefits, it seems trans-occ offers the best income protection. If I understand correctly, if I were to get disabled during residency and had trans-occ w/o limitations, I will have at least $60k of income, whether I choose to work or not, no matter the disability. Whereas a true-own w/ limitations, I could potentially not make any income if I have a M/N issue and am unable to work at all.
If I were to get disabled as a resident, but was still able to work, I have a hard time thinking of a situation where I couldn’t make a decent living using my medical degree in some way. With a trans-occ, sure I won’t have that extra DI benefits if I earn more than $60k, but that seems like an acceptable situation given unlimited M/N protection.
What state are you residing in?
The cost between Transitional Occupation with no mental/nervous limitation and the Regular Occupation Rider with the mental/nervous limitation should be similar (except with the Transitional Occupation definition of total disability, you are not entitled to the 10% mental/nervous disorder limitation discount).
Transitional Occupation essentially states that between what Principal pays you in disability insurance benefits plus what you receive in other disability insurance benefits from individual, group or association plans (there is no offset for group LTD for policies purchased in New York state), and what you earn in a new occupation or medical specialty, you cannot earn more than what you were earning prior to your disability.
For example, if you were earning $300,000 prior to your disability and purchased $10,000 month from Principal ($120,000 annually in benefits), you could not earn more than $180,000 elsewhere ($300,000 minus $120,000). If you were not in New York state and your employer provided you with group LTD coverage of 60% salary with a $15,000 maximum monthly benefit ($180,000 annually), then you could not work without reducing your disability insurance benefits on a dollar for dollar basis ($120,000 from Principal plus $180,000 from group LTD equals $300,000, which is what you were earning before).
For residents and fellows this is much worse. Your total income is likely $50,000-$65,000 annually and you are probably provided with some group Long-Term Disability coverage as a House Staff member. Therefore, while you are paying the premium for $5,000 month of coverage, you will most likely not be able to collect that amount due to the group LTD offset (unless you are in New York state). Therefore, your the Transitional Occupation policy has limited your ability to work elsewhere without having your benefits immediately reduced or eliminated.
Personally, I don’t like Transitional Occupation. Since the amount you will potentially be paid in benefits is directly tied to your earned income, you must document your income on an ongoing basis to the insurance company so they can calculate how much they need to pay you, if anything. This will get “old” extremely fast.
Of course, only you can decide if you would rather have “Own-Occupation” coverage with the mental/nervous limitation or Transitional Occupation without the limitation but if you are in a procedure oriented medical specialty, I would really think about the value of true “Own-Occupation”. Of course, if you are not, and in a specialty like psychiatry, a case can certainly be made for Transitional Occupation.
Michael,
I don’t disagree with you. I left the wording slightly ambiguous with a “probably” because the facts and circumstances can change the end result. I think this blog would be very appreciative to find out which positions ER docs can get into and still make $300k to $400k per year.
Sure, $250k may be cutting it close but for those with $8000mo/$96,000yr policies that allows them to make about $150,000 outside of medicine without having any cuts to a Trans Occ policy. If they have $15,000mo/ $180,000 policies then yes, Trans becomes an issue.
I would argue that True Own Occ/ Trans Occ isn’t needed for those earning over $500,000. It really depends on lifestyle (spending habits). The Principal base policy (no Reg or Trans) would pay full benefits until the doctor makes 25% of their pre-disability income. In other words, a doc making $500k pre-disability could make up to $125,000 and receive full benefits without ever paying for Reg/True/Trans Occ. They would need the residual rider though to make that work.
I’m curious how a Transocc policy would deal with someone like me who has another high paying job prior to becoming disabled. Let’s say I was making $300K practicing medicine and $300K blogging and had a $180K a year benefit. If I were disabled from medicine but not blogging, would it pay me the $180K?
WCI,
I did think about your situation but obviously had no numbers to make any assumptions. I believe it would pay you a residual benefit because your blogging income is now a part of your claim. Your total income is $600,000 but you can now only make $300,000 (due to illness or accident) as a blogger then I believe that you would get $90,000 benefit as a 50% residual claim on your total earnings.
This is a good case study, this is my opinion on your situation, what say Michael and Larry? I am sure they have more experience on claims than I do. I was only 12 when Larry started in the business!
And presumably, only earned income is applied. If I went S corp for WCI and called $150K distributions instead of salary, then I’d get 2/3 residual claim instead of 50%, no? Interesting stuff.
At the time of a qualifying disability, your Occupation is based on the substantial and material duties that you were performing immediately before the disability began.
To determine the substantial and material duties, Principal takes into account such factors as the specific duties, the amount of time, and the
amount of income derived from the duties.
You essentially have two occupations, one as an Emergency Medicine Physician and the other as a Blogger. If you could not practice medicine but could still work as a Blogger, you would be paid benefits based upon your percentage of lost income under the Residual Disability Rider.
However, if you spent more time on the blog as you could not practice clinical medicine and income from it increased, your disability insurance benefits would be reduced.
While you could try to make the argument that the income earned from this blog is unearned, you spend a significant amount of time writing posts, editing guest posts and responding to comments. If this was to end, I would suspect, the income from the blog would also be dramatically reduced.
I’m not a claims examiner but I don’t think you would have much of a case claiming that income from this blog is passive – even if it might be reported as such on a tax return.
I would agree with Joshua and Larry.
We often compare True Own-Occupation and Transitional Own-Occupation, but these refer to the definition of “Total” disability only. The definition of residual disability is neither True Own-Occupation or Transitional Own-Occupation, but simply based on the loss of income. Being that your claim would almost certainly be residual, any increase in earned income from the blog (or any other source, really) would reduce the amount of benefit you’d receive from your policies.
The question on residual vs. total disability however, is still interesting. As Larry mentioned, material/substantial duties are partially determined by the amount of time spent doing those particular duties. If you had hired staff and considerably reduced the time spent on the blog prior to a claim, there could potentially be a stronger argument for total disability.
All kinds of interesting angles here. For example, I could sell the website to my wife- voila, no income aside from some nominal amount she pays me to write occasionally. Hopefully I never have to deal with any of this, but it is frustrating to be paying for what I once thought was a $180K a year benefit knowing it is really only a $90K a year benefit (again, not actual numbers).
My comment on your situation would cover both Trans and True Own Occ. You are no longer just a physician. I would like to see what Larry and Michael would think here.
Putting the purchase of Principal’s Transitional Occupation definition of Total Disability as a resident aside, here are a few things to keep in mind:
1. Under Transitional Occupation, benefits are paid up to 100% of your prior earnings from a combination of your earnings in a new occupation, disability benefits from other sources and your Principal disability insurance policies benefits.
Disability benefits from other sources include individual, association, or group disability coverage, benefits from an employer-sponsored plan or payroll deduction plan that provides sick pay, salary continuation, salary replacement, disability income, disability retirement, or retirement, Worker’s Compensation monthly benefits or settlement received in lieu of monthly benefits. Note, in New York State the only offset is for individual or association disability coverage (which is much more liberal).
So, let’s assume you purchase a $10,000 month Principal policy when you are earning $300,000 (after expenses, before taxes) as an independent contractor. This means that if you were disabled, Principal would pay $120,000 year. Assuming you had no other coverage inforce, you could earn up to $180,000 in another occupation and still receive full benefits under the Principal policy.
A year or two later, you decide you no longer want to work as an independent contractor and take a job at a hospital for the same $300,000. As part of your employment, you are provided with Long-Term Disability benefits and you cannot waive this coverage. You are given 60% salary to a maximum monthly benefit of $15,000. In this case, you would receive the $15,000 monthly maximum ($180,000 year). How much can you now earn in a new occupation before your Principal policy’s monthly benefit is reduced? Unless you are in New York State (where there is no offset for group LTD), the answer is ZERO (as you are receiving $120,000 from Principal and $180,000 from your group LTD plan).
2. Most physicians have no idea what the future holds, where they will be working and what LTD benefits will be provided. As a result, I generally don’t understand why someone would purchase this. After all, you are paying 100% of the premium when there is a very good chance you would not collect 100% of the benefit from the policy.
I have had clients in psychiatry, emergency medicine and anesthesiology consider it and a few purchase it for the same reason as hdo and it can make sense in limited circumstances. In my mind, the only real place for it is female physicians that have access to a unisex rate and multi-life discount and, as a result, the cost savings is significant compared to going elsewhere. The same can be true for Anesthesiologists (since they are in the 2P occupation class with Standard with the exception of Pain Management Physicians).
Otherwise, why settle? If you want true “Own-Occupation” AND full coverage for mental/nervous and/or substance abuse disorders, there are other options.
3. Let’s not forget that since the Transitional Occupation Definition of Total Disability’s benefits are tied to your income, you must also document your income to the insurance company as long as you are on claim and working. This will get old very fast!
4. Finally, physicians are very drive people and competitive by nature. If they can work, they will work. They will not strive for mediocrity. If they work, they will work hard and want to be rewarded for their efforts as a result. If you are too successful in your new occupation, you will essentially be punished as a result of your efforts by having your benefits reduced or even eliminated.
If I do become permanently disabled by some very small chance, it doesn’t matter to me who’s paying my benefits, as long as I have enough income to take care of myself, and I am betting $60K/year is enough. I guess I settled on Principal because my Standard Protector Platinum quote was $3300/year, which is $1300/year more than Principal. On my limited resident budget, that starts cutting into my 403(b) contributions and other savings. So there is an opportunity cost to buying more insurance than I think I need.
Sounds like I fall into your “limited circumstances” category of physician. Yes, I have a personal need to work hard at something I enjoy, but “success” to me has never been defined as making 6 times the average American household income, or even twice as much. I am also pretty unusual because I have no student loans or other debt.
Larry, if I were to buy the transitional rider while doing residency in NY but then moved out of state for an attending job, would I still retain just the two offsets?
If you purchase a policy in New York with a Transitional Occupation definition (with no limitation for claims related to mental/nervous and/or substance abuse disorders), between what Principal pays you in disability benefits plus what you earn in another occupation cannot exceed your pre-disability income. There is no offset for group LTD if your policy is purchased in New York.
However, keep in mind that Principal does not make unisex rates available to Residents/Fellows anymore so you may potentially be better off looking elsewhere for coverage. You should compare all of the options available to you, before making your final decision.
Hi, I am a 46-y/o ophthalmologist who has had guardians own-occ provider plus since I was 28. I was diagnosed with narcolepsy when I was 38, and 2 years ago I exercised my FIO to increase my guardian coverage by $5,700. I also purchased some Ameritas at that time to cover the extra $1,500 my salary allowed for, but it has a 50% rating and a 2 year mental-nervous limitation. I was surprised they even chose to insure me, but now I find out that narcolepsy is listed in the DSM-5 and therefore counts as mental nervous (?!)… I have a neurological disease, not mental/nervous issues. Although the gross misconceptions about this rare disease–even by doctors–could drive me to have mental/nervous issues! Is there any way around this 2-year limit of my condition worsens?
Thanks in advance,
Laura
This is a good example of why having the strongest possibility definition of disability can be important. It may take legal action to get them to pay, and even then, you may not be successful depending on how the contract reads- i.e. how it defines mental/nervous issues. Enlist your agent in helping you get all that you can.
Not all physicians are driven and competitive (to get back to work). From my time as a VA doc and all the professionals including docs who seem willing to spend more time trying to increase their VA rating than rehabilitating themselves back to work, I can understand the insurance companies concerns which no doubt are based on some historical stats. (Of course getting 100% VA disability is a plum that carries a lot more of a cash and benefits payoff than simply doubling the proceeds from a 50% rating; but it isn’t worth even a low paid doc’s salary.)
Follow the money. Now I choose not to earn money since medicine has gotten a lot less fun since I started and I can afford not to. If my inclination not to work or not to work full time were further rewarded if I could lay blame for it on any of my middle aged ailments I would be well motivated to prove a connection and collect, and would feel like an idiot not to try to overcome any qualms of conscience I might have about doing so (along with the feeling that the insurance company is a faceless corp. who’s collected thousands of $ from me in the past). Same problem as the SSI disability affect on returning to work, just with higher numbers. (I also dropped our term life policies when we no longer needed them- marriage is tough enough without a half million $ reward if something happens to your spouse .)
In the VA I would love to halve all disabilities we cannot measure and see (or that one could fake), and further halve all those not directly connected to a combat (or deployment- eg Leishmaniasis) incident/exposure. Further annoying to those working in the VA is that the folks with the most time and energy to selflawyer their way through appeals and increases are those well enough to do so, and that the industry and expense we taxpayers carry for them to do so is obscene. The neglected vet in a rural nursing home or whose overwhelmed spouse can’t spare the time to ask for help sometimes never make it to the well, oft crowded out by the not so bad off folk if they even start the process.
You youngsters who live the big life- wakeboats etc- of course want to keep your family from being poor if you can’t work, but I understand why it’s so costly and with all the convoluted limits. I also hope you have a dedicated advocate to untangle the paperwork if you ever need to exercise it- talk to your spouse about it while you’re well!
Larry, if I were to buy the transitional rider while doing residency in NY but them moved out of state for an attending job, would I still retain just the two offsets?