TJ PorterBy T.J. Porter, WCI Contributor

Physicians are highly specialized, and they have spent many years and hundreds of thousands of dollars acquiring the knowledge necessary to work in medicine. One of the greatest financial risks that they face is a loss of the ability to earn an income—disability insurance, whether it's the traditional model or Guaranteed Standard Issue—is key for any physician to eliminate that risk.

If you find yourself facing an extended period or even a permanent disability, it's important to have a plan for how to replace your income.  However, with different types of disability insurance on the market, it might be tricky to choose the right type of policy for your situation.

 

What Is Guaranteed Standard Issue Disability Insurance?

Guaranteed Standard Issue (GSI) disability insurance is a type of disability coverage that is designed to be easy to qualify for. In fact, some policies require no underwriting at all. You can often find these policies in your resident physician program. What makes this type of coverage unique is that it’s guaranteed. 

Typically, insurance is based on risk. If an insurer thinks there’s a good chance that you could become disabled in the future because of your health history or hobbies, they may not want to take the risk of giving you a policy. With GSI, you don’t need to worry about that. You can qualify for coverage even if you’re a high risk to the insurer. 

Unlike group insurance, which is another form of coverage that is typically easy to qualify for, GSI is portable. That means that it isn’t tied to your employer, and you can take your policy from one employer to another.

The primary drawback of GSI is that it isn’t all that customizable. You’ll typically have to accept an off-the-rack insurance policy with set coverage amounts and premiums. Some minor customizations, such as cost-of-living riders or partial disability riders, may be available.

More information here:

Disability Insurance: Your Health Is Your Wealth

 

GSI insurance vs traditional disability insurance

What Is Traditional Disability Insurance?

Traditional disability insurance, unlike GSI, involves a much more thorough underwriting process. To get this form of coverage, you’ll have to apply for a policy with an insurer and then follow the required steps that allow the insurer to assess your health.

During this process, you’ll undergo a health examination and provide details on your medical history so the insurer can estimate your risk of becoming disabled. You may also have to answer questions about your hobbies. People with risky hobbies, such as skydiving, will likely pay more for coverage than people who spend most of their spare time reading. After you finish this process, the insurer will decide whether to offer a policy and how much to charge.

Many employers offer disability coverage to their employees. You can certainly sign up for these plans, but keep in mind that if you leave your employer, you’ll also be leaving your insurance behind. Getting a policy that is portable could be better, especially if you plan to change employers in the near future.

If you’re buying a portable, individual plan rather than signing up for a group plan from your employer, your insurance is usually quite customizable. One key customization to keep in mind is how the policy defines disability. On one end of the spectrum, own occupation, specialty-specific policies define disability as something that prevents you from working in your current occupation and specialty but which will pay you even if you continue working.

For example, a surgeon who loses a finger, which makes it difficult to operate, would qualify for disability under this type of plan, even if they take on another job as a doctor and make similar (or greater) amounts of money. On the other end of the spectrum, any occupation policies define disability as something that prevents you from working in any occupation. For example, when looking at a doctor who gets an injury that makes it impossible for them to continue working as a physician but who could feasibly work in another industry—even at lower pay—the insurance would not pay a benefit.

That's why own occupation policies are so important. Of course, own occupation policies tend to cost more than any occupation policies, so it’s important to consider the pros and cons of different definitions of disability.

 

How to Choose the Right One for You

As a physician, choosing the right form of insurance coverage is essential.

If you feel like you might struggle to get a traditional insurance plan, either due to your medical history or having risky hobbies, GSI is a no-brainer. It’s worth looking into even if you aren’t worried about qualifying for traditional coverage, just because it’s easy to qualify for and worth comparing premiums.

Women, in particular, may want to compare prices for GSI and traditional disability insurance. Premiums can be significantly higher for women than men due to the risks involved in pregnancy and some GSI plans offer uni-sex pricing meaning premiums are lower. 

If you’re looking for a highly customizable policy where you can add a variety of riders and adjustments, traditional disability insurance is probably the better choice. This is especially true if you’re relatively young and healthy.

More information here:

A Pain in the Butt – My Dental Disability Story

Why Disability Insurance Is More Expensive for Women

 

The Bottom Line

Disability insurance is something that every physician should buy. Without adequate disability coverage, you could endure a life-changing disease or injury that also destroys your ability to earn an income, leaving you to deal with both financial stress and the major changes you’re facing due to your illness or injury. 

Take the time to consider the pros and cons of GSI compared to traditional disability insurance, then get quotes from multiple insurance providers. Shop around for a good policy with a strong definition of disability and the customizations that you desire.

The White Coat Investor is filled with posts like this, whether it’s increasing your financial literacy, showing you the best strategies on your path to financial success, or discussing the topic of mental wellness. To discover just how much The White Coat Investor can help you in your financial journey, start here to read some of our most popular posts and to see everything else WCI has to offer. And if you're inspired to build a sturdy financial foundation, make sure to sign up for our WCI 101 email series.