Jamie Fleischner
[Editor's Note: This is a guest post from Jamie K. Fleischner, CLU, ChFC, LUTCF, an insurance agent (Set For Life Insurance) and a paid advertiser on this blog. She has specialized in helping physicians with their disability insurance planning needs since 1993. Her niche is finding discounts and unisex rates for her clients and has created one of the largest portfolios of available discounts for physicians nationwide. This post addresses important issues faced by female physicians and other high-income professionals as they seek disability insurance.]
If you were to sitting on an airplane and asked the person next to you how much they paid for their flight, how would you feel if you paid twice as much for your ticket? You had practically the same seat and had the same experience. You inquired about the discrepancy and were told that you had a special tax on your ticket since you are female. It’s always been that way so you should just accept it.
This is analogous to the disability insurance industry. Women pay significantly higher rates and are told that it is based on statistics. Women are statistically at much higher risk and therefore pay much higher rates.
Women DO Get Disabled More
A new study from the State Farm Center for Women and Financial Services at The American College shows that women are actually much more likely than men to develop a disability that prevents them from being able to work. In fact, in the 10-year period between 1999 and 2009, women's Social Security Disability applications grew by 72 percent, while men saw a comparatively smaller 42 percent increase.
Arthritis and rheumatism are the most common disabilities affecting American women. Heart disease, cancer, mental health issues, diabetes and nervous system disorders are also leading causes of disability.
Disability Can Be More Financially Devastating for Women
The American College study also found that women are much more likely to experience financial distress if they become unable to work because of a disability.
Nearly half of all women in the survey reported that experiencing a disability would be “somewhat devastating” to their family's finances. Nearly a quarter worried that their cash reserves would last less than a month if they became unable to work.
Single women were more likely to be worried about financial hardship than married women, though the threat is real for both demographics. Approximately 28 percent of single women and 20 percent of married women responded that developing a disability would be “totally devastating” to their financial well-being.
My Experience with Female Disability Claims
As a woman working in the insurance industry for over 20 years, this is a subject very close to my heart. I work with women on a daily basis and have the same discussion. Is the rate discrepancy justified to the rate of claims? Has the disability insurance industry kept up with the times now that professional women are outnumbering men? Do women really become disabled almost twice as much as men? Is the same true for short term types of claims (pregnancy) as long term (MS)? I have actually had multiple pregnancy claims with clients. However, these claims still have a 90 day waiting period and since pregnancies last up to 9 months, the maximum payout is approximately 6 months.
Personally in my experience, my female clients do not outnumber my male clients when it comes to claims. I have had numerous claims, too. I’ve had people who have been in terrible accidents, even the day after they bought the policy. I’ve had multiple cancer claims, brain tumors, migraines, addiction, depression and pregnancy claims. I know it is anecdotal, but I have worked with thousands of people and have been in business since the early 90s. I have not witnessed a significantly larger number of female claims when compared to male claims.
Cost of Insurance Varies Highly
The difference in cost between male and female rates can be astounding. For example, the cost for a 32 year old female surgeon looking to insure $10,000/month benefit (includes specialty specific definition, COLA, residual, non-cancelable, etc…) the premium would be between $620-$780/month—depending on the company. The same, identical plan at male rates would cost $348/month. That’s a difference of 44-55%.Insurance premiums are set up to cover the risk in all types of insurance. Smokers pay more for life insurance (and disability insurance) since statistically they are more likely to have a claim. Surgeons or physicians working in a higher risk medical specialty such as emergency medicine pay higher premiums since they statistically have a higher rate of claims.
This discrepancy becomes more substantial if you look at the cost differential over the course of your career. Saving $400/month equates to $4800/year. Multiply that by a 30 year career, you are paying more than $144,000. [And if you assume that money could be earning 8% per year, it adds up to $587K-ed]
Conspiracy Against Women?
In my quest for information, I contacted a colleague of mine, Barry Lundquist, President of the Council for Disability Insurance Awareness. He provided me with up-to-date, although not physician-specific, statistics:
- A typical female, age 35, 5’4″, 125 pounds, non-smoker, who works mostly an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
- A 24% chance of becoming disabled for 3 months or longer during her working career;
- with a 38% chance that the disability would last 5 years or longer,
- and with the average disability for someone like her lasting 82 months.
- If this same person used tobacco and weighed 160 pounds, the risk would increase to a 41% chance of becoming disabled for 3 months or longer.
- A 24% chance of becoming disabled for 3 months or longer during her working career;
- A typical male, age 35, 5’10″, 170 pounds, non-smoker, who works an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
- A 21% chance of becoming disabled for 3 months or longer during his working career;
- with a 38% chance that the disability would last 5 years or longer,
- and with the average disability for someone like him lasting 82 months.
- If this same person used tobacco and weighed 210 pounds, the risk would increase to a 45% chance of becoming disabled for 3 months or longer.
- A 21% chance of becoming disabled for 3 months or longer during his working career;
What is curious is that if women have a 24% chance of becoming disabled and men have a 21% chance, then why are the rates so substantially different? According to these statistics, women have a 12% greater chance of becoming disabled yet the rates being charged are 40-50% higher.
I contacted several insurance companies to ask them why there is such a disparity. I was told the same story that it was based on claims experience. I was not able to obtain claims information about the types of claims the women were filing to justify the discrepancy. In another study, statistics show that women’s claims have been increasing in recent years to men’s.
According to this chart, women have close to 55% of the overall claims. This means they have a 22% greater chance of becoming disabled (close to the previous study).
Even though they have a 22% greater chance of becoming disabled, this doesn’t justify the additional 40% or more premiums charged to women. If women have a 22% greater chance of becoming disabled, they should pay 22% more, not 45-55%.
I don’t have a problem with people being charged more if there is statistical justification. It takes less to disable a surgeon than a pediatrician. And if someone is morbidly obese, they are more likely to encounter problems and should pay as such. I do not subscribe to the notion that everyone needs to pay equal premiums, because the risk is not equal. However, if the statistics are not there to back up the increased rate, I try to help my clients overcome that obstacle.
Beating the Conspiracy
To help my female clients avoid paying the “pink disability tax” I have set out tirelessly over the last 20 years to set up discounts at various hospitals, medical schools, employers and associations around the country. By doing so, it has allowed my clients to set up a policy with discounts as well as gender neutral rates, also known as unisex rates. Unisex rates negate the gender specific rates and they are identical for men and women.
For women, unisex/discounted policies will reduce premiums by 45-55% depending on the company. For men, the discounted unisex policy will reduce premiums by approximately 15%.
Where can you find unisex rates? Unisex rates can be set up if you have 3 or more people at the same hospital or employer that purchase a policy. Once these are set up, all subsequent people have access to those rates through that broker (the one who set it up). Some experienced brokers may have already set up discounts at your hospital, residency program, employer or your private practice and they may be available to you. If you do not have access to any current unisex rates, inquire about setting one up so you can reduce your out of pocket costs.
Women Should Usually Get Unisex Policies
If you are a woman who is currently paying female rates on an existing disability insurance contract, it is worth exploring unisex to see if you can reduce your current costs. By doing so, you may be subject to medical underwriting. Therefore if you have had a change in health, it may not make sense. If you are healthy, this may provide significant savings.
For more information about disability insurance for women, visit our website which includes a list of employers where discounts and unisex rates may already be available to you.
What do you think? Do you have a unisex policy? Which one? Did you have trouble finding a discounted unisex policy? Comment below!
Nice post and extremely timely with the end of the academic year.
For those physicians that have left a residency/fellowship program and are now working for a different employer or for those that have entered private practice, discounts are still available from your prior hospital affiliation for 30-60 days after graduation.
As Jamie mentioned, Principal has existing discount plans with unisex rates and a 20% discount at a large number of teaching hospitals. In fact, like Jamie, I have established many of them at a large number of hospitals across the country.
Another option would be to take advantage of Standard’s Guaranteed Standard Issue (GSI) Graduate Medical Education (GME) program which exists in approximately 40 hospitals at this time. This provides a unisex rate and 15% permanent premium discount with no medical underwriting.
Finally, for those that are not residents or fellows, MetLife makes unisex rates and discounts available with two people purchasing policies that work for the same employer and the minimum total annual premium is $5,000.
Great post. I’m a little confused about how the discount works for both males and females though. It sounds like its just because its a group rate (3 or more)?
Do they have unisex car insurance? Males pay more because, even though they have less accidents, their accidents cost substantially more (typically because of higher speed).
@LTRalph
I don’t work with car insurance but I would assume that the rate is based on their perceived risk.
The unisex rates are set up when 3 or more from the same employer apply for coverage. The rates I was discussing are reduced for men, too. Their net difference is 15% less with the unisex than for women. Some companies that offer unisex rates for men actually charge men more than gender specific rates.
Outside of the 16-30 age group, Men are actually better drivers. At least that was the last thing I read on it. I think the main reason we pay higher rates above that age group is that men tend to do the majority of the driving when both genders are in the vehicle.
Men have been similarly treated when it comes to other insurance such as car insurance, life insurance, and umbrella policies, so I don’t really see how this is any different.
Wouldn’t unisex rates mean that the men buying the policies are then paying too much? The insurance companies are in the business of making money, and letting men choose a cheaper male rate and letting women chose a cheaper unisex rate doesn’t sound like a game that they would play. That said, disability quotes I get for myself and my wife were drastically different, despite her’s being a discounted unisex rate and having a much more flimsy definition of disability vs my own occupation definition and male-specific rate.
I think less focus should be placed on “chances of becoming disabled” and instead on actual disability payouts. From my discussions with a couple of agents who sell disability, it sounds like women receive substantially more money from these policies. The fact that pregnancy can qualify as a disability seems like a case-in-point.
All in all, the fact that these policies cost so much, only cover a fraction of what you were making in the first place, and require you to go to great lengths to prove your disability turn me off of these policies.
Craig-
Yes, a unisex rate can increase rates for males (assuming the discount with the unisex rate does not offer a discount with a higher percentage).
For example, Principal offers a 10% association discount. Therefore, males will get 10% off of the male rate and females will get 10% off of the female rates. Their multi-life discount is 20% off of the unisex rate. This translates to 12-13% off for males and 30-35% for females.
If the percentage of the discount amount is the same, men are better off with the male rate (so they “net” the full discount percent) if both discounts are available.
My wife has exactly this problem (late 30s, ER Physician, disability rates about 5x higher than mine).
Her medical group is not listed — can you still help us?
Thank you for your comment. Please contact me directly at [email protected] or visit our website at http://www.setforlifeinsurance.com to request a quote. We add to our list of discounts regularly and can help you.
My wife and I dealt with this same issue and both ultimately ended up going with the Principal because we could get a unisex discounted rate through our residency programs. Saved us ~40% on her policy over similar coverage at other companies.
I wasn’t aware that pregnancy was a disability.
Pregnancy is not a disability per se. However, pregnancy may be covered if there are complications keeping you from being able to work, the same way as any other illness. You must be unable to work due to complications of pregnancy. The elimination period (typically 90 days) is still required to be satisfied before benefits are paid.
Here are two charts I found showing some differences. The tables at the bottom are actually more informative.
http://www.advisorinsuranceresource.com/file/165df7c839de2948a41f879a6b726b5e
http://www.advisorinsuranceresource.com/file/40fbe73b1a1fe3f2164aa9b5d623798b
Female physicians are vastly more likely to become disabled in their early years than male physicians.
I am a financial planner who helps medical residents/fellows with disability insurance in Florida. Principal is my go to program for females and is decent value for males. In fact, I set this program up at my wife’s OBGYN practice and bought it for ourselves. Males could get a discount on sex distinct rates through other multi-life programs if their agent has enough business on the books. I show my female clients how Principal is the best value for female docs and how other contracts may be better but much more costly.
Thank you for sharing!
There is no magic to the unisex or gender neutral rate. You can thank federal laws that prohibit discrimination in the workplace, hence the reason the employer is a required part of the discount equation.
Insurers have three rate structures: Male, Female and Unisex (which is a blend of male and female rates). Based on actuarial science (incidence of claim), male rates are lower; female rates are significantly higher, and unisex rates are higher than male rates but significantly lower than female rates.
Clever agents and complicit insurers can game the system in the near term (invoking federal workplace discrimination protection, by offering unisex rates that are always advantageous to women, and may be to men if the discounts are high enough, remember male rates are lower than unisex) but the differential between the unisex price and female risk must be paid (insurers are required to reserve properly for the risks they assume).
Principal and Standard’s financial strength ratings (claims paying ability) have fallen precipitously in the past five years. It may be just a coincidence.