Ed. Note: This is a guest post by frequent contributor Lawrence B. Keller, CFP®, CLU®, ChFC®, RHU®, LUTCF,  in which he gives an update on recent changes in the disability insurance marketplace.  It is absolutely stuffed with details which reflect the importance of buying your disability insurance from an independent agent who can sell you a policy from any company.  It will be presented in two parts.  Larry and I have no financial relationship.]

Since my original guest posts in February (Comparing Disability Insurance Companies Part 1 and Part 2), the disability insurance marketplace, as expected, has continued to change.  The insurance companies have increased their Issue and Participation (I&P) limits, made changes to the occupational classification assigned to certain medical specialties, introduced new products and riders and continue to make discounts, in many cases, available to physicians.

Issue & Participation Limits

The main disability insurance carriers physicians use: Berkshire (Guardian), MetLife, Ameritas Life Insurance Corp. (formerly known as Union Central), Principal, MassMutual and Standard Insurance Company will all issue monthly benefits of $15,000-$17,000 to physicians.  However, by combining companies, you can increase the total amount of individual coverage available to $20,000-$30,000 month, depending upon which companies you combine and your state of residence.  MetLife has the highest limit and will participate up to a total of $35,000 month for those physicians with group Long-Term Disability (LTD) coverage inforce (except in California).

As a result, for those in high income earning specialties [and who feel the need to have more than $15K a month tax-free in the event of disability-ed], it often makes sense to purchase coverage from at least two companies – especially if you can use the same exam, blood and urine tests to do it.  You can then continue to increase your coverage, regardless of your health, as your income rises .  However, you must be careful in terms of the order in which you increase your coverage.  If you increase the wrong policy first, you might end up reducing the amount of total coverage available to you which can negate the very reason that you decided to purchase coverage from more than one carrier in the first place.

MetLife Occupational Classification Changes

MetLife has made some significant changes to the way that they classify certain medical specialties.  For example, their top class (6M) now consists of Pediatricians, Oncologists (Radiation Oncologists DO NOT qualify for the 6M occupational class), Physical Medicine and Rehabilitation Physicians (including those practicing Pain Management that are AAPM&R Board Certified) and Neurologists.  As a result of this upgrade, the average rate decrease was approximately 27%.

Additionally, MetLife has also upgraded most surgical or invasive specialists with the exception of OB/GYNs, Orthopedic Surgeons, Emergency Medicine Physicians, Anesthesiologists and General Dentists.  As a result of this upgrade, the average rate decrease was approximately 19%.

Interventional Cardiology and Interventional Radiology were downgraded and are now in the same category as OB/GYNs, Orthopedic Surgeons, Emergency Medicine Physicians, Anesthesiologists and General Dentists.  For this reason, these two specialties should focus their efforts on purchasing coverage from companies that do not place them in the “surgical” or “invasive” category including: Berkshire, Ameritas, or Standard.  

Higher Insurance Amounts For Residents, Fellows, and New Grads

All of the insurance companies mentioned allow residents, fellows and “new in practice” physicians to qualify to purchase up to a specified amount of coverage (based on their medical specialty) regardless of their earned incomes or other employer provided disability coverage.  This higher coverage limit is called “new in practice”, “starting practice” or “beginning professional” special limits.  These special limits are $5000 per month until your last 6 months of training, then $6500-7500 depending on specialty.  [This is significant as the most I could buy as a PGYI just a few years ago was $2500, because it was based on my income.-ed]

A physician should still purchase disability insurance when they are still in residency or fellowship because, in some cases, if one graduates and starts a new job that provides group disability insurance that they cannot “waive”, it will be taken into consideration when determining the amount of individual coverage available.

Unfortunately, as a result, there is a good chance that they will be eligible for less coverage as an attending  (earning 4-5x more income) than they would have qualified for under the “new in practice” available to them as residents, fellows, or new graduates.  To get these special terms on your policy, you must purchase the policy within a few months of training completion, as noted in the following chart.

Company New In Practice  Availability
Principal 24 Months
Berkshire 12 Months
Ameritas 6 Months
Standard 3 Months
MetLife Before Graduation
MassMutual Before Graduation

So, if you find that you are limited based on income and your new employers long-term disability coverage, it would be wise to consider those companies that allow you to qualify for their “new in practice” limits.

The earlier you purchase your coverage, the more companies you will have to choose from.  There are also existing discount plans at many teaching hospitals that may not be available once you enter private practice or change employers. As a result, even if you end up purchasing coverage a few months before you really want to, you might end up saving money in the long run.

Catastrophic Disability Benefit Rider

This is a relatively new rider that has been introduced by the insurance industry.  In the event of a “catastrophic disability” [ed. note: IMHO Any disability that occurs to me is by definition catastrophic], this rider provides an additional monthly payment up to the following amounts above and beyond your regular disability payment (but never exceeding your total pre-disability income):

Company Catastrophic Disability Payment
Principal $8,000
Berkshire $8,000
MetLife $8,000
Ameritas $10,000
Standard $10,000
MassMutual $12,000

Most of these companies qualify you for this catastrophic benefit if you cannot perform two or more of the Activities of Daily Living (bathing, dressing, eating, transferring, toileting and maintaining continence) without human standby assistance, you suffer a cognitive impairment or you suffer an irrecoverable disability.  The exception, Metlife, has a stricter definition:

An irrecoverable and irreparable loss of the use of both hands, both feet or one hand and one foot; the sight in both eyes; speech; or hearing in both ears; or are totally disabled and have Alzheimer’s Disease or other irreversible form of senility or dementia; Aphasia; Hemiparesis; Paraplegia; or Quadriplegia.

Premium Discounts

As mentioned previously, discounts are available for most, if not all, of these carriers mentioned – especially if you are a resident or fellow.  If your insurance agent or broker is not presenting you with at least one discounted option (hopefully coupled with unisex rates if you are female), you should do additional research [i.e. get a new agent- ed].  In many cases, you can purchase the policy you desire with a discount.  An insurance agent or financial planner that specializes in working with medical professionals should be familiar with discounts that may be available.

Part 2 will discuss some new disability products and provisions available at selected companies.