By Dr. James M. Dahle, WCI Founder
If doctors know anything about disability insurance, it's that they should buy “own occupation” insurance and preferably make sure that their specialty is designated as their occupation. WCI often gets inquiries from readers about just how important “own occupation” is and whether it is really necessary.
Definition of Disability and Your Policy
The most important feature is the definition of disability. Unlike life insurance, where life and death are pretty black and white, disability has 50 shades of gray.
Own Occupation
Your policy will pay if you cannot work in your occupation/specialty, even if you can and do work in another field and make as much money as you want. Just make sure that your occupation is defined as your specialty, not just “physician”.
Own occupation policies cover people based on the occupational duties they’re performing at the time of claim. If your policy includes an own occupation definition of total disability and you are exclusively performing the customary duties of your medical specialty or sub-specialty at the time of claim, the policy will cover you when unable to perform your specialty or sub-specialty. If you have transitioned into a different role or expanded into a new career path that requires much less direct patient contact or procedural duties, you may no longer be considered totally disabled when unable to work in your specialty or sub-specialty. This is because your “occupation(s)” involves additional material and substantial duties, no longer limited to the performance of your medical specialty or sub-specialty. In these instances, you may be considered partially disabled or not disabled at all, depending on the exact circumstances.
Transitional Own Occupation
Your policy will pay if you cannot work in your occupation/specialty, even if you can and do work in another field. But if you exceed your previous income while you now work in another field, your monthly benefit from the policy would likely be lowered.
Modified Own Occupation
Your policy will only pay if you can't work in your occupation/specialty AND if you are not working in another field. This definition is also sometimes called “Own Occupation, Not Engaged” or “Own Occupation, Not Working.”
Any Occupation
Your policy will only pay if you cannot work in any occupation. Note that some policies are own occupation for a couple of years, then transition to any occupation.
Be aware that the last two categories are common in group disability policies. Naturally, the less risk you ask an insurance company to take on, the less expensive the policy. My sense is that most procedural physicians are going to want at least transitional own occupation, and most non-procedural physicians are going to want at least modified own occupation, depending on the price difference. Though I no longer have disability insurance, I used to have true specialty-specific, own-occupation policies in both my individual and group plans.
What Definition of Disability Is Important for Physicians?
Own occupation, specialty-specific coverage. That's what you want. The definition of disability is all-important. The most important aspect of a policy is that it actually pays you when you become disabled. This is particularly important for surgeons, dentists, and other procedural specialties, but most specialties do at least some procedures. You don't want a policy that incentivizes you to not do any work at all after a disability or, worse, won't pay you because you can still do some sort of work you don't actually want to do. There's a reason people have to hire an attorney to get their Social Security disability benefits. With a strong definition of disability, you won't have to do that. Yes, it costs more to get a top-notch policy from one of the Big 5-6 companies, but you get what you pay for.
A few years ago, we asked blog advertiser Jamie Fleischner, CLU, CHFC, LUTCF, with Set for Life Insurance to address the question of just how important “own occupation” is and whether it is really necessary.
Jamie Fleischner, CLU, ChFC, LUTCF
Here's what she wrote:
Q. How important are own-occupation riders for non-procedural fields, and what is the role of transitional own-occupation riders?
A. “It is important for an individual disability insurance policy to cover you if you can't work in your medical specialty, even if you are not performing procedures. Without having an occupation-specific definition in your policy, you open yourself up for the risk of the insurance company deciding whether or not they think you could work in another capacity or are gainfully employed (depending on the contract). Having an occupation-specific rider protects you, as it gives you the control if you wish to work in another medical specialty or field of work. If you choose to work elsewhere, you will still be able to receive benefits. If you are capable of working in another capacity but choose not to while on claim, there are no negative consequences.
The transitional occupation rider protects you in the same way as the own occupation rider if you become too sick or injured to work in your specialty. The difference is that with the transitional rider, you are not able to double-dip. With an own occupation rider, you may earn an unlimited amount while on claim as long as you can't work in your medical specialty. With the transitional occupation rider, it covers you up to 100% of your income. Once you earn more while on claim, the insurance company will start to reduce benefits.
The transitional rider is a variation of the own occupation rider, and it is more than adequate. Using the analogy of homeowner's insurance, you are insuring your income up to 100%. With your home, you purchase insurance for the replacement cost of your home. If your home is worth $500,000, you purchase a policy that would pay $500,000 if the home burned down. Same with the transitional rider. If you are earning $250,000, the policy would pay you benefits even if you work elsewhere. If you were to earn more than $250,000 elsewhere, the benefits would start to reduce. Looking at it realistically, if you were earning more than $250,000 elsewhere while on claim, there is no more economic loss.
With some carriers (depending on the state you reside in), transitional occupation is the only option. Other carriers, such as Principal, offer a choice between transitional occupation and own occupation. With the Principal policy, choosing the transitional occupation allows you to eliminate a mental nervous limitation. Based on experience, you are more likely to file a claim for a mental nervous condition than for a true own occupation claim where you earn more money elsewhere. Guardian also allows you to choose between a true own occupation rider and a modified own occupation rider. I would not recommend the modified own occupation rider for a physician as it makes it much more restrictive, and you do not save much on premiums.
It is important for all physicians regardless of specialty to have coverage in their specialty whether it is an own occupation or transitional occupation rider. Without coverage in your specialty, your policy becomes much more restrictive and limited if you ever file a claim. This is the most important part of your contract as it determines how and if a company will ever file a claim. Without it, your policy becomes an ‘any occupation' or ‘total disability' policy, which would cover you in catastrophic situations if you are sick or hurt and are not able to work in any capacity.”
More recently, another agent who advertises here, Scott Nelson-Archer CLU, ChFC, provided a counterpoint in a recent comment:
“A lot of folks in the primary care and non-technical specialties do buy Own Occupation Not Engaged once they are informed about it. Let’s face it, if one is in psychiatry, family medicine, internal medicine, pediatrics, and so on, and become so disabled that you can’t do that job even on a partial basis it is hard to then come up with a different occupation which you could do while not having the skills to do your medical specialty. I am not saying there are no scenarios but there are not many and then it becomes a matter of probabilities vs. possibilities and how you want to spend your money. Now if you are an ER doc like Jim (WCI) then you certainly need True Own Occupation, just like Anesthesia, all Surgeons, Interventional Radiologist and several other specialties, in my opinion.
At the end of the day, the contract is the client’s contract not my or any other rep's contract. Whatever the client wants is what we will get for them and they should buy, but I think having the knowledge and understanding of options is important in making a good decision on this very important topic.”
Scott also warned about the importance of understanding any group policy you may own. He says:
“Now most employer provided policies will tell you in the brochure, online write up and such that they are Own Occupation contracts but they will also go on to tell you that ‘this brochure does alter the policy, please see the policy for exact details'. Always get a copy of the policy and read the policy or send it to someone to read for you and show you what the performance metrics are. The vast majority I see will state Own Occupation Not Working then after 24 months the carrier can force you into any occupation they think is reasonable for you. That is not a good solution for any doctor because there is too much experience and too much education and thus it opens up the opportunities for ‘reasonable occupation' way too much.”
Be Wary of Northwestern Mutual's “Medical Own Occupation” Policy
I understand that decades ago Northwestern Mutual (NML) used to have a true own occupation definition that probably worked just fine for doctors. I don't know why, but the company went away from it. Then it came up with a “Medical Occupation Definition” (MOD), which sounds awesome because it's “Medical” and we're “Medical” so it must be great, right? Except it's not. It's not based on the inability to do your job; it's based on a loss of income. So if a doctor chose to work at something other than what they were disabled from, they were only paid proportionately rather than getting their full benefit.
Well, Northwestern Mutual realized doctors in the know weren't so interested in that. Doctors wanted true own occupation disability insurance. So NML came up with a “Medical Own Occupation Definition” (MOOD). Not only does it have the words “own occupation” in it, but it also has the word “medical” in it. So it must be even better than regular old own occupation insurance, right? Well, not exactly.
As insurance expert and WCI advertiser Lawrence B. Keller, CFP®, CLU®, ChFC®, RHU®, LUTCF, wrote a few years ago:
“Northwestern Mutual used this ‘unique' definition that states the physician can be considered totally disabled in one of two ways.
- If you are Totally Disabled and you can no longer do any of your substantial and material duties, you can take your full disability benefit.
OR
- If you can do one or more of your substantial and material duties, you can change your occupation altogether and receive some or all of your benefit.
To be considered Totally Disabled the second way; you must meet all of the following:
- The majority of your time prior to Disability has to be spent in direct patient care and services
- You are unable to perform the duties that accounted for more than 50% of billed charges
- You are not working
Billing Codes mean codes generally accepted by the healthcare and insurance industries, such as Current Procedural Terminology (CPT) or American Dental Association (ADA), that are used to identify and describe medical, surgical, diagnostic, or dental services directly performed by the Insured.
If the Insured can perform one or more of the substantial and material duties of the Regular Occupation and is not considered Totally Disabled, the Insured may qualify as Partially Disabled.”
It's certainly something to consider.
Conclusion
Listen, disability insurance is expensive, especially if you're a resident or a young attending. But disability insurance is all about mitigating risks that you cannot afford to self-insure against. It doesn't make sense to calculate your return because you really do have a need for this insurance. If you become disabled as a doctor before you're financially independent, it is a financial catastrophe.
Long-term disability insurance shields the most valuable financial asset of a doctor—your ability to trade your time for money at a high rate for the next 30-40 years. Doing it with an own occupation policy is the best protection you can get.
If you need help evaluating your disability policies or just need to get this important protection in place, be sure to check out our recommended insurance agents.
What do you think? Is your disability policy true own occupation, modified own occupation, or something else? Why or why not? Comment below!
[This updated post was originally posted in 2014.]
When I got my own occ policy with Metlife, I remember on the application that I had to write down percentages on how I split my clinic vs surgery time. At the time I was fresh out of training, so not doing very many surgeries, so I put down a really low percentage for surgery; something like 2 or 5%. That number has gone up significantly to the point where about 30% of my current income is from surgical procedures. Will that 2-5% on the initial application have any effect on my benefits in the event I get injured and can no longer operate, but can still see patients in a limited capacity in the office? I’ve wondered if I need to reapply for another policy with updated numbers.
What you stated at the time of application was correct. However, don’t forget that your duties at the time of disability is what will be taken into consideration. The only reason that carriers ask the percentage of time that you perform each of your duties initially is to determine the correct occupation class (which also impacts the premium rates and, in some cases, the policy provisions available).
The only time that MetLife will ask you for an update is when you are exercising the GIO Rider or when you file a claim for benefits.
You do not need to notify MetLife regarding the change in the percentage of time that you now perform surgery compared to your clinical duties.
Thanks for the information!
When I saw that this post was coming up, I was very interested to see what it would cover, as well as, the author’s opinion in terms of the value a true “Own-Occupation” definition of total disability might have compared to some of the other definitions available in the marketplace.
I must say that after reading it, I respectfully disagree with several of the points made, however, for now, I will limit my comments to the Transitonal Occupation Rider.
The author makes a case for the Transitional Occupation Rider in order to not accept a limitation for claims related to mental/nervous and substance abuse disorders and states that “The transitional rider is a variation of the own occupation rider and it is more than adequate”. I believe this is simply not the case.
MetLife’s policy states that “While You are Transitionally Disabled, We will pay a Monthly Transitional Your Occupation benefit.
The benefit will be the lesser of:
1. The Maximum Monthly Transitional Your Occupation Benefit; or
2. Your Loss of Earnings minus benefits received from Other Disability Coverage for the month in which You are Transitionally Disabled, but not less than twenty-five percent (25%) of the Maximum Monthly Transitional Your Occupation Benefit,
and will be paid in place of all other benefits for Total or Residual Disability.
Other Disability Coverage means all coverage and benefits payable to You for a disability and provided by individual (excluding this policy), group or association disability income coverage. Business overhead expense, key person and buy-out disability coverage are excluded from Other Disability Coverage”.
Principal’s Transitional Occupation Rider allows you to continue receiving disability benefits if you become totally disabled in Your Occupation, but are working in another occupation. Benefits are paid up to 100% of your prior earnings from a combination of current earnings, other disability benefits from other sources
and your Principal Life Individual DI policy, but will not exceed the Maximum Monthly Benefit plus any Social Security Substitute benefits. Benefits
are payable until the end of the Transitional Occupation Period only.
According to their policy, OTHER DISABILITY COVERAGE – “means all Disability coverage and benefits payable to You each month while You are Disabled and provided by:
1. Individual, association, or group disability coverage;
2. Benefits from an employer-sponsored plan or payroll deduction plan that provides sick pay, salary continuation, salary replacement, disability income, disability retirement, or retirement;
3. Worker’s Compensation monthly benefits or settlement received in lieu of monthly benefits.
(Note that in New York State, for Principal, Other Disability Coverage used to calculate benefits only includes Individual and Association plans; Social Security and other governmental agencies, as well as Group DI, not considered).
While I can potentially see a justification in terms of price for female physicians that have access to a unisex rate and discount (for MetLife or Principal), unless the pricing is substantially different which is often not the case for males, in most specialties, purchasing MetLife – not including 4M occupation classes under the Income Guard policy series), why would one purchase anything other than a policy with BOTH a true “Own-Occupation” definition of total disability AS WELL AS full coverage for mental/nervous and substance abuse disorder claims?
Additionally, anything other than a policy with a true “Own-Occupation” definition of total disability is subjecting the insured to a life sentence of providing income documentation to the insurance company for the duration of their claim.
Thanks for the information on some of the other downsides of a transitional own-occ policy and especially how it might relate to other policies in place.
Thanks for posting that Larry. I was initially offered a Transitional policy from a well known firm with the same premise that it is “more than adequate”. I spoke to a different agent and this is what he told me (see below). Can you please comment if this is correct?
Let’s say that I am earning $30,000 per month as an ER doc. The group provides me with $15k of group coverage and I have another $15k of individual with Principal using Transitional. Now if I become disabled and can’t do ER, but return to work doing anything else and earning $15k per month, then Principal won’t pay me anything. The $15k that I am earning + $15k group coverage already replaces 100% of my income. In this case, the individual policy was basically a waste. The only time it would pay is if I earn less than $15k in a new job or just don’t work at all.
Is this right? If so, why would anyone buy transitional?
That is correct for Principal, with the exception of the policy being purchased in the State of New York, where group LTD is not used in the “offset” calculation.
For MetLife, even if the combination of disability benefits plus your new income was in excess of $30,000 month, you would not receive less than 25% of your individual policy’s monthly benefit.
For 4A-M occupations, in California, Principal does not offer the Regular Occupation Rider (“Own-Occupation”). As such, some agents and brokers can make a case for it (mainly for females that have access to a multi-life discount with unisex rates) if the cost difference between it and another company’s policy with a true “Own-Occupation” definition of total disability is substantially higher.
For policies that have been modified in underwriting with Principal due to medical conditions and an insured is only eligible for a 5-Year benefit period (not age 65 or longer), then again, the Regular Occupation Rider is not available. This is the case in all states.
As the post stated, some agents feel that the trade off in terms of the definition of total disability in order to have full coverage for mental and nervous conditions is worth it. I, however, am not one of them.
Ultimately, as an insurance buyer, you need to make a well-informed decision that you can feel good about based upon your individual needs, goals and circumstances relative to the premium that you are willing to spend and the risks that you are willing to accept vs. transfer to the insurance company.
Hi Larry,
Thank you for your comments. This is a subject that regularly arises and it is important to offer the information to physicians as it can be very confusing.
I agree that true own occupation in addition to the full mental nervous coverage is ideal. Of course it is! However, it is important to have physicians look at all of the available options as well as the cost. It is also important to consider the likelihood of various claims.
I’d be interested in finding out how many true own occupation claims you have actually witnessed vs. mental nervous claims. Based on my book of business over the last 20+ years, (I know it is anecdotal) I have never had a client have a true own occupation claim and earn more income elsewhere. I suspect that it is a very small percentage of claims. I have had numerous mental/nervous claims (dozens). If there is a choice between own occupation with a 2 year mental nervous or a transitional occupation rider, the transition rider with full mental nervous coverage ought to be considered.
You noted at the end of your comments that it is justifiable for women receiving unisex rates to take a transitional occupation rider. I agree. Paying less than 1/2 the cost of other insurance is substantial.
Jamie, I appreciate some of the points you made in this post, but must also respectfully challenge a few of them – One in particular being the percentage of claims that are caused by mental/psychiatric conditions. In the post you stated that “you are more likely to file a claim for a mental nervous condition (almost a third of all claims) than for a true own occupation claim where you earn more money elsewhere”, but I’m having a difficult time validating this. From my experience and plentiful research, I’ve never found a study that indicated 1/3 of claims were caused by mental/nervous conditions. In fact the closest I’ve seen to 1/3 was a study put out by Principal that indicated it was approximately 18% as of March 2009. For anyone that has reviewed a proposal from Berkshire recently, you would see that they claim the percentage to be around 9.1%. According to the CDA’s 2013 Long-Term Claims Review, 8.9% of new claims and 7.7% of existing claims in 2012 were caused by mental disorders. CDA data accessible here
So while I do agree that, ideally, a disability insurance policy should include FULL benefits for claims caused by mental disorders, I simply do not believe that one’s decision should be based on the assumption that one-third of claims are caused by these conditions – it seems that 9-10% may be more accurate.
I’m not certain if the claim against true own-occupation policies and being able to earn higher wages elsewhere is correct. Interestingly enough though, the few claims I do know of happen to be professionals who became disabled and now earn higher wages selling insurance and providing financial advice.
If you are open to sharing, Jamie, it would be interesting to know how many of those dozens of mental/nervous claims extended beyond 24 months.
Jamie-
Another huge potential problem with Transitional Occupation for a resident is that we are insuring them based upon their future earning potential and not their actual earned income.
Therefore, if a resident earning $60,000 annually purchases a policy from Principal for $5,000 month and is also provided with group LTD by their hospital, and goes on claim while still in residency, the Principal benefit will be reduced dollar for dollar by the group benefit that is payable.
Assuming the resident had $3,000 of group LTD, in this situation, the resident is actually paying for a $5,000 monthly benefit when the maximum that they could collect is only $2,000 per month ($5,000 month individual Principal policy – $3,000 group LTD Policy).
Again, this is not as bad in New York State as policies issued in NY do not offset for group LTD).
Obviously, this is not the case with the Regular Occupation Rider.
Lawrence, you are absolutely right about Trans Occ for residents. I have a multi-life case with Principal at a local Residency/Fellowship program. I like the Trans definition in Florida because you don’t have to take the M/N limitation but I chose to go Reg Occupation because if the resident is disabled in residency then they become SOL, you’ve in affect protected their residency income, not their future way of life. I have the Trans Occ multi-life set up at my wife’s OBGYN group where all the women there get Unisex – 20% and no Mental/Nervous limitation. They have no group DI and are all protecting 200k in earnings, not 45-60. It is hands down the best value for female docs.
Hi, I will be starting my intern year in Internal medicine. I would like to know if there are any specific things I should look for in a disability insurance plan if I wanted to specialize in the future. For example: If I put Internal Medicine as my occupation and in the future that becomes Cardiology. Thank you!
Since your regular occupation means your usual occupation (or occupations, if more than one) in which You are gainfully employed at the time You become disabled, unless you are going to change specialties or occupations within six months of purchasing the policy, it does not matter.
At this point, you would want to find the policy that best meets your individual needs and goals as an Internal Medicine Resident. In the event you go into a medical specialty that is considered less favorable in terms of occupational classification (like Cardiology vs. Internal Medicine for MetLife), you would be locked into the more favorable (less expensive) premium rates not only for what you purchase now but also when you increase your coverage in the future.
Thank You!
1. How is current salary calculated for a claim? What is the look back period typically and what proof do you need? Say you earn based on production instead of a salary.
2. What is the definition of true own-occ for say a general surgeon who cannot operate, but can teach others about surgical management of pts or round?
3. What is the definition of mental/nervous? Obviously psychiatric conditions, but would Multiple Sclerosis count, a brain tumor? How narrow is mental/nervous?
Thanks
At the time of claim, they will require documents based on the way you are paid. As you mentioned, it is different if you work based on production or on salary. It will also depend if you have a partial (residual)claim or a total disability claim. The amount of documents and look back period will depend on your contract. Typically they will look back at least 2 full years.
Own occupation would pay you benefits if you couldn’t perform surgery, even if you were teaching and earning an income. There would not be a reduction of benefits.
Mental nervous claims relate to psychological conditions such as depression, addiction, etc… It does not exclude neurological conditions as you mentioned such as MS or a brain tumor. Those would be fully covered.
Although I’ve read most, if not all the prior posts here about disability policies, it wasn’t until this one that I realized (after re-reading my group policy – my only policy) that I actually have a transitional own occupation policy.
Interestingly, my policy reads that if what I earn while I’m on claim is <20% of my prior earnings (indexed to inflation), there is no reduction (i.e disability payments + new income is max'd out at 119.99% of prior income). Once I'm earning 20% or more of my prior income, disability payments + new income caps at 100% of prior income. I've re-read it several times and that's how I interpret the policy. Assuming, say 25K/month prior income, that means if my "new" income goes from say $4,750 (19%) to $5,000 (20%) of my prior income, my total inflows drops from $29,750 (119%) to $25,000 (100%).
So I can do any other type of work outside of my own occupation, but I'll never make more than what I made previously except if I make <20% of what I made in the job I can no longer perform in my new line of work.
Does anybody else's policy read like this?
Also, what are the pro's/con's of seeking out an individual policy now in the context of this type of group policy (I'm 5-10 yrs out of EM residency)?
I have both a group policy and an individual policy. There are pluses and minuses to both. No reason you couldn’t buy an individual policy now. The main con is it costs more. The main pro is it is more likely to pay you and you can take it with you when you go.
Keep in mind that a Tranitional Occupation definition of total disability only exists in individual disability insurance policies (and only with the two companies mentioned) although your group LTD plan may include a transition benefit for a limited period of time.
In the best case, your group LTD plan will require that you have an inability to do one or mor of the material and substantial duties of your occupation AND you have a loss of earnings of at least 20% compared to your pre-disability income. This definition might also change after a period of time to become more restrictive and take your education, training and experience into consideration.
Additionally, your group LTD plan’s benefits may be taxable and, most likely, governed by ERISA.
Therefore, based on the time that you have been out of training, you would not be considered a “New In Practice” physician. As such, you would look for an individual policy to make up for the taxes that you would owe on the group LTD plan (if applicable), as well as, make up for any shortfall for your earnings that are in excess of the cap on the group LTD plan.
If you would like to post a link to or email me a copy of your group LTD plan, I would be happy to review it for you.
Finally, you would look for all of the things that have been discussed previously in terms of an individual plan. Although you are older and not a resident, these policies are purchased by physicians in your situation on a daily basis.
Is it possible for a specific insurance company’s policy premium to vary based on the person you use to obtain the insurance? For instance, if I purchase a specific policy through Guardian from local person X, could Lawrence get that EXACT same policy + riders for cheaper? Reading through the posts, the only discount I have seen mentioned is the “multi-life” discount (I am male), which I understand and having to get at least 3 people to sign up for the same plan.
Also, is there a publicly available resource to compare general “standard” or “common” policies and their premiums across multiple different carriers? My agent guided me towards Guardian or MetLife, and after requesting about 4 different quotes from both companies and reading through here, decided on Guardian. However, talking with other colleagues, I feel the premiums I have been quoted are quite high. Thanks in advance.
Aside from the discounts, the prices should be exactly the same from every agent.
There is no resource that is the equivalent of term4sale.com for disability insurance. Part of the issue is that there are so many moving parts in a disability insurance policy. Your premiums might be high compared to others because your policy is better, or you’re older, or you’re sicker, or maybe you should have considered Principal or Standard. Hard to say. It may be worth meeting with a good independent agent to see if you really do have the best deal. But after a few years, a slightly more expensive, but older policy is much cheaper than the cheapest thing you can get now due to your increased age.
Since the premium rates and contractual language is regulated by each state’s insurance department, aside from a multi-life or association discount, the rates will be exactly the same.
Guardian has a Student and Resident discount, the would provide you with a 10% savings if the policy was purchased as a medical student, resident or fellow. Other than that certain associations may also provide a 10% discount.
A difference in premium could be based upon your occupation class, riders included (or not), a graded or level premium structure or different benefit period (age 65 vs. age 67).
While there is no resource easily available to compare the options available, most agents would be willing to review your current policy and let you know how it compares to what would be available in the marketplace today.
This issue arose recently for us. 2 physician home (ER & Surgical Sub Spec); we obtained disability from Guarding (true own occ) while 4th year medical students and as we are graduating our residencies have made the decision to go with Principal transitional occupation.
The principal offers the peace of mind that should we have mental disability claim, we are covered. Having 2 different polices allows for us to draw (once our income reaches these levels) a total disability of $25K vs. $17K with one company policy.
I see the arguments against transitional occupation and income replacement. Though, lets be honest, if I’m truly disabled, I’m probably not going back to work as a surgeon and will probably not make as much as I did as a surgeon when and if I choose to work again. For us, having these two polices makes the most sense.
Rick-
I don’t disagree that for high income earners, Transitional Occupation can work just fine. In fact, I can even argue that the more one earns, the less important “Own-Occupation” coverage really becomes.
However, if you increase your coverage as your income rises and change jobs where a large amount of group LTD coverage is provided (without the ability to opt out), it will offset what you have purchased from Principal.
As a result, you might end up paying premiums for the full benefit that you have purchased and only being able to collect on a portion of it if that is the situation at claim time.
Clearly, there is no right or wrong answer. It is a balancing act in terms of 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 substance abuse disorders, as well as, a true “Own-Occupation” definition of total disability.
Agree, I think it’s a balancing act-premium cost did come into play here. Frankly the Principal policy was less and combined with aforementioned benefits, we chose to supplement with the transitional policy.
Further, I agree there is the risk that the group policy may end up causing the benefit to be less than the premium I’m paying for. However, there are other things to consider, most LTD policies have limits on nervous/mental claims, benefits are taxable, are not portable, as well as some other restrictions. Transitional coverage would again take over once the restriction on a nervous claim is up. Further, early in our career, we will likely be at times between jobs. For now, the security of having our own policies (own occ and transitional occ) made the most sense to us.
Thanks for your thoughts
is anyone familiar with the current metlife policies? have the own occ language now and includes mental health. also able to increase coverage at anytime. thanks for the help. first year fellow in ophthalmology. considered 5m w metlife.
Hi,
Yes. The MetLife new Income Guard policy has a transitional occupation definition with no restrictions for mental health.
Feel free to contact me with any further questions!
MetLife’s Income Guard policy is very comprehensive and priced extremely well – especially with an association discount.
Very often, for high income specialties, I often combine it with another carrier to allow clients to reach $25,000-$30,000 month.
For more details on how the policies compare, look for some of my updates in the disability insurance marketplace guest posts.
Hope this helps.
For your specialty, there is no need to purchase Transitional Occupation as Specialty Your Occupation is available along with no limitation for mental/nervous and/or substance abuse disorders.
Hello,
I know I am late to the party here, but I have a question regarding purchasing a policy in Ohio as a resident physician and moving to California to start as an attending anesthesiologist. Will the fact that I will be living/working in California affect my ability to increase amounts as my income grows (1099 independent contractor)? I am currently considering Principal’s true occupation vs Berkshire’s while stacking options later with Met Life or mass mutual for further increases to 25K-30K/month. Will I have any problems living/working in one state while my agent works in Ohio. Also, can you comment on whether there are large differences in gaps of coverage of Principal Vs. Berkshire? I ask because the monthly cost is significantly different.
Hi David,
If you purchase your policy now as a Ohio resident, you will obtain Ohio rates even though it will cover you while living in California. The main difference between the Principal and Berkshire and MetLife in your situation is the way you can increase the benefits in the future. With the Principal policy, it is adjustable. As such, when you increase your policy in the future, they will amend your Ohio policy even when you increase it in California. Since California rates are 20% or so higher, this will save you. With Berkshire and MetLife, you will need to purchase California policies when you increase the benefits. This most likely will increase your premium when you increase benefits in the future compared to the Ohio rates.
Living in California will not impact your ability to increase benefits in the future.
If you work with someone who is licensed in both CA and OH, it shouldn’t matter. Feel free to contact me directly at [email protected] with further questions or if you would like me to compare your options for you.
David-
If you purchase Principal, MetLife, MassMutual or Ameritas, you are guaranteed to have the same contractual provisions as your original policy and you will not be penalized for subsequently residing in California.
If you purchase Berkshire’s ProVider Plus Limited policy, any increases to your coverage will be made under a separate policy and will be based upon the California premium rates.
If you purchase Berkshire’s ProVider Plus policy, you will have the choice of using Ohio or California’s policy form for your additional coverage. Ohio as that was your contract’s domicile state or California as that would be your then current state of residence.
Generally, I have found that Anesthesiologists typically purchase Principal’s policy, MetLife’s policy or, as you stated, a combination of the two in order to potentially reach a total monthly benefit of $25,000-$30,000 month of individual coverage.
Hope this helps.
Wow thanks for the prompt responses and taking the time to answer my questions. I definitely want to purchase while I am a resident here in Ohio. As an independent contractor with no Group LTD plan in my future practice, which options would you recommend? I have narrowed it down to two options of Principal vs Guardian ProVider Plus and I just can’t decide on which (later I’ll stack it as my income grows with MetLife). Principal quoted me at a much lower monthly rate than Guardian for an equal amount of coverage. This is following a physical exam and testing. Are there really any downsides to Principal? Is Guardian more of a cadillac plan? Lots of bells and whistles that aren’t necessary?
I would recommend doing a combination of both MetLife and Principal now. This will best protect you now and in the future.
If you look layer MetLife’s policy on top of the Principal policy in future when you are in California, it will be more expensive and less favorable in terms of contractual provisions.
The premium rates for Principal and MetLife should not be significantly different when all of the applicable discounts are applied.
Awesome thank you. I really appreciate the advice.
Came across this post and had me reconsidering my DI policy. First, I agree that the best policy is one that offers true-own without M/N limitation. However, such a policy can be 2x-3x more than other policies, at least it was for me as a female resident and a policy with $60k/year in benefits. So I had to decide between true-own with M/N limitation vs trans-occ w/o limitations. Initially I thought that true-own would be best at a resident’s salary, but now I’m wondering if doing a trans-occ policy, even at a resident’s salary, is actually the best option. As I understand it, with trans-occ, there won’t be a situation where I am unable to receive an income. I can either be employed and/or receive benefits, no matter the disability. With true-own I could possibly get no benefits if I have a M/N issue. Even at a “lowly” $60k, it seems trans-occ can offer me better income protection. Any thoughts?
Complicated isn’t it? I think it’s basically a case where you lay down the two policies side by side, understand the weaknesses of the cheaper one, and decide whether it is worth your money to pay for the better one or not. Bear in mind that the most likely thing to occur is that you NEVER get disabled and never collect a dime from this policy. The most important thing is to have some kind of policy in place. Beyond that, the details are the details and the more you spend, generally the more you get, taking into account that some policies are just better for some specialties, genders, states etc and that you’re making sure you’re getting all available discounts.
Just to clarify, the expensive one (Guardian) is/was never a consideration due to cost. It was 2x-3x more expensive than other policies (Principal) that are either true-own w/ M/N limitation or trans-occ w/o limitations, both Principal policies are about the same price for the same amount of coverage.
Transitional occupation is basically useless for residents, especially if you become disabled as a resident. Transitional Occ is only protecting the income that you are making when you become disabled, i.e. $45,000 to $65,000. If you are disabled as a resident and decide to work doing anything else then you will not receive a full benefit, if any benefit at all, no matter what your disability is. With Reg or True own occ you would be paid $60,000 per year no matter what you decided to do albeit for only 24 months if the disability is a M/N substance abuse claim.
I think Trans Occ is fine for attending physicians. I have Principal Trans Occ with no M/N limitation at my wife’s OBGYN group. Trans Occ will only be reduced if my wife somehow makes more than $180,000 per year if she were disabled whereas if she were a resident the benefit would be reduced to $0 if she earned only $50,000.
Remember, the limitation is for 24 months and only for M/N substance abuse claims. All other claims will be paid according to your max lifetime benefit period. It’s not like it is $0 coverage. Being in Florida, pretty much all carriers have this limitation save for Principal with Trans Occ and Metlife who is leaving the DI business.
Don’t forget about Standard’s Protector Platinum which also has no limitation and Berkshire’s new policy, when approved in Florida, will also have unlimited mental/nervous coverage with the exception of certain medical specialties.
I would disagree in calling trans-occ useless. What if a resident develops a mental condition that prevents them from ever working again? With trans-occ w/o M/N limitation, they’ll receive $60k until age 65/67. With reg-occ they’ll get $60k for 2 years then nothing.
I am a general surgeon out on total disability due to a thoracic outlet syndrome so I can’t operate. I have had no problems over the past 7 years, even though I worked in an administrative position.
I would like to do a 1 year fellowship in Surgical Critical Care and get a job in this field, which is anon-surgical field. At most, a large IV or small bedside procedure would be done which would be a minimum. I would be pursuing a largely teaching position.
My coverage is “own occupation” and the policy clearly states that if I engage in activity in another specialty, I will still be considered totally disabled.
If I pursue this course, am I going to have a problem with the company (Guardian) holding my payments and “accusing” me of still being a surgeon? At the time of my disability my practice was 100% surgical.
Thanks for the advice.
I would doubt that you would have a problem as the job duties are vastly different.
You might want to speak with your claims examiner and let them know what you are considering in advance to see if it would be an issue.
Thanks very much. I will do that and keep you posted
Hi, this thread has great information. I’m an ENT surgeon currently still in residency and trying to decide between Principal versus Guardian for my own-occupation disability insurance. Like others have mentioned, Principal is much cheaper. The only thing that I see that appears meaningfully different between these policies is the “mental/nervous/substance abuse benefit.” (Principal covers 24 months while Guardian covers until age 67). However, I am not too concerned about this (and certainly don’t anticipate needing more than 24 months to recover in the small chance I actually need to claim it!). My 2 questions are:
(1) Is there anything else that justifies this more expensive cost of Guardian? If not, I’m certainly going to go with Principal.
(2) Some earlier comments mentioned layering MetLife’s policy on top of Principals? But I wasn’t clear on why? Is there something the Principals insurance policy is missing? Any clarification would help.
Thanks!
/Sal O.
These are all questions you should be asking to your independent agent that can sell you both a Principal and a Guardian policy. You do have one, right? At any rate, some thoughts.
1) Yes, there are probably a couple of little things, but it would certainly be reasonable to buy a slightly less robust policy that was much cheaper. Docs do this all the time.
2) If you need more coverage than you can get from one company, you have to buy policies from two and “layer” them.
Bear in mind, lots of people who ended up with disabling psychiatric illness had it show up out of the blue. There is some risk to buying a policy with a 24 month limit.