I have written a lot about disability insurance for physicians in the past, but I haven’t written in years about this important financial topic. I have partnered with Pattern in providing this crash course video. The purpose of the rest of this post is to give a broad overview of the “must-know” information about this complicated type of insurance.
Top 10 Disability Insurance Questions
These are the most common questions I get from readers and listeners about disability insurance:
1. Who Do I Buy Disability Insurance From?
Disability insurance should be purchased from an independent agent. An independent agent can sell you disability insurance from any of the “Big 5” disability insurance companies. These include The Standard, Guardian/Berkshire, Principal, Ameritas/Union Central and Mass Mutual (+/- Ohio National.) Each of these offers a strong “own-occupation” disability insurance policy appropriate for physicians. I keep a list of those I consider the best disability insurance agents in the country. Save yourself the work of finding a good one you can trust and use the same agents that have been used by thousands of WCI readers in the past. You do not need someone local that you can sit down across the table from. It is better to have someone who has sold policies to hundreds of docs this year working with you by phone, Skype, and email than someone you can sit down with who has only sold four policies. In addition, if there is some issue with one of these agents, I can usually help you resolve it quickly.
2. How Do I Buy Disability Insurance?
The key is the independent agent. The agent is going to be paid a great commission by the insurance company no matter which policy you choose. Assuming policies with similar benefits, the commission isn’t going to be all that different. Plus, these agents get plenty of business and none of them are starving, so they have little incentive to sell you an inferior policy for a slightly higher commission. Their reputation is worth far more than a few extra dollars in commission. Since you are (indirectly) paying the agent a very nice commission, don’t feel bad about using their time and expertise to fully understand this complicated product. For most docs, this is a purchase that is only done once or twice in their life. Have the agent quote you policies from each of the Big 5 companies and show you the strengths and weaknesses of each. If you have a policy from work or your professional association, bring it in with you and have it included in the comparison. Then you can know you made an educated decision and you can buy it and forget about it. Also be sure to ask for a discount. The vast majority of doctors will qualify for a 5-30% association or employer-related discount and a top-notch agent will help you get that.
3. When Should I Buy Disability Insurance?
Luckily insurance companies don’t ask about extreme tubing
You should buy disability insurance just before you become disabled. Since you don’t know when that time could be, earlier is generally better. However, disability insurance is also expensive, and when you are young and poor you have lots of other great uses for your money. A good compromise is to buy a small policy as you enter residency and then upgrade it just before leaving residency. The younger you are, the healthier you are, and the fewer dangerous hobbies you engage in, the cheaper your premiums will be for the same benefit.
4. When Can I Quit Paying for Disability Insurance?
Disability insurance is a temporary type of insurance, like term life insurance. When you no longer have a need for it, or it is no longer a good deal, you should cancel it and use what you would have spent on premiums to save, spend, or give more than you now do. The idea is to have the disability insurance in place from the time you start earning money until the time when you no longer rely on that earnings stream. Since any type of insurance is, on average, a losing proposition, you should only insure against financial catastrophe. Acquiring a long-term disability while your family relies on your income is a financial catastrophe. Becoming disabled after you are already financially independent or for only a short period of time is not. So when you reach financial independence, you can cancel your disability insurance (and your term life insurance.) In addition, since most disability insurance policies only pay out until age 65 or 67, as you age, the possible payout becomes less and less. As you move into your 60s, you may decide it is no longer worth the premiums to only get a few years of benefits in the event of long-term disability.
5. What Is the Most Important Feature of Disability Insurance?
The most important feature is the definition of disability. Unlike life insurance, where life and death are pretty black and white, disability has fifty shades of gray. You want a policy with a strong, broad definition of disability that will cover any possible type of disability. That means “own-occupation, specialty-specific” and no limitations on things such as psychiatric conditions or addictions. This is the main difference between the “Big 5” companies and others. Even among the “Big 5” there are slight differences. It is okay not to purchase the policy with the very best definition of disability, but the weaker the definition, the bigger the discount you should expect.
6. How Much Disability Insurance Do I Need to Buy?
As a resident, you typically cannot afford to buy as much as you need, but you should be able to do so even as a brand-new attending. Basically, you need to buy enough to cover both your living expenses and your retirement savings if you were to work to age 65, but not your taxes. Disability insurance payouts are generally tax-free since they are usually paid with post-tax dollars. Note that how much you need has little to do with your income and everything to do with what you spend. The less you spend, the less insurance you need to buy. Insurance agents would love to sell you the largest possible policy (which usually works out to be about 2/3 of your gross income, but it is possible to combine two companies to get even more) so you’ll need to decide how much you need on your own. Resident physicians typically buy a $5K per month benefit and attending physicians typically buy a benefit in the $10-15K per month range, but there are plenty of docs who buy both more and less. If your plan in the event of disability is to rely on the income of your spouse, you may not need disability insurance at all.
7. How Much Does Disability Insurance Cost?
Unlike cheaper insurance policies like term life and umbrella policies, disability insurance is expensive, although not quite as expensive as your malpractice insurance. The reason it costs so much is it actually gets used. The likelihood of you acquiring a long-term disability during your working years is approximately 7 times as high as your risk of dying in those years. A typical policy bought on a healthy doc in her 20s or 30s will cost something between 2 and 6% of the benefit. So if your monthly benefit is $10K, expect to spend $200-600 per month for that. Perhaps the sticker shock you get upon being quoted prices will motivate you to reach financial independence as soon as possible so you can cancel the policy.
8. Which Riders Are Worth Purchasing?
Disability insurance is typically sold with a handful of riders, each of which comes with an additional cost (and commission for the agent.)
- Residual disability– This rider should be purchased by everyone. It covers not only a partial disability but also provides a partial benefit as you recover from your disability.
- Inflation Protection- This rider indexes your benefit to inflation, usually starting one year after you become disabled. This is a particularly important rider if you are disabled at a young age, so I recommend it for anyone buying a policy in their 20s-40s. If you are already 55, and the policy is only going to pay until you are 65, you can probably skip this rider.
- Future Purchase Option– This rider allows you to buy a larger benefit at a later date without any pesky questions about your health or hobbies. If you are in a position (such as a resident) where you cannot afford as much as you need, purchase this rider.
- Catastrophic Disability– This rider pays out an even larger benefit if you are REALLY disabled, usually defined as not being able to do 2 or more activities of daily living. Unless you are already up against the maximum amount you can purchase, I think you are probably better off just buying a larger primary benefit instead of this rider.
- Retirement Benefit- This rider, in the event of disability, causes the insurance company to put some money into some type of retirement vehicle for you in addition to paying your monthly benefit. Unfortunately, these are generally high-expense, insurance-based investing products and not the best way to save for retirement. You are better off purchasing a larger primary benefit with the money that would have gone toward this rider. Just don’t forget you need to continue to save for retirement using your disability benefit money since the policy will only pay to age 65 or you will be living only on your Social Security benefits.
9. What Is Excluded?
Disability insurance policies generally exclude any medical conditions you have at the time of applying for insurance. For example, if you already have chronic back pain, the policy will not provide a benefit if you are disabled due to a back condition. In addition, if you admit to participating in dangerous activities such as SCUBA diving, rock climbing, flying, and sky-diving, the policy will likely be issued with a rider that excludes those activities from coverage. Other exclusions may also apply, such as acts of war, normal pregnancy, and foreign travel.
10. Is My Employer’s Plan Good Enough?
The most important rule of disability insurance is that any disability insurance is better than no disability insurance. If you are disabled without disability insurance, you will be limited to what is offered by the Social Security Administration, which provides relatively low payouts and can be difficult to qualify for. My last Social Security statement says my disability benefit would be $2,471 a month. Living on that would be a dramatic decrease in our standard of living.
Many employers (and professional associations) also offer disability insurance. If your employer is paying the premiums, be sure to take advantage. If they are not, you will have to compare the group policy to the individual policies that an independent agent can sell you. As a general rule, individual policies have a stronger definition of disability and higher (but flat) premiums but can be taken with you from one job to the next. Group policies are less expensive (although premiums generally rise as you age), often don’t ask pesky questions about your health and hobbies, but cannot be taken with you when you leave. In some cases, an individual policy is best. In other cases, the group policy makes sense. Occasionally, it can make sense to have both. Owning a pre-existing individual policy may limit how much of a group policy you are allowed to purchase.
What do you think? What have you learned about disability insurance that everyone ought to know? How have you structured your coverage? Comment below!
I was diagnosed with bipolar syndrome At age 58. It was amazing the people tolerated my behavior in the OR for years and I thought I was great. I had three disability policies from three highly rated companies sold to me by a “ trustworthy “ agent. Fortunately I kept one policy from a job after I left also due to mental health reasons. Eventually all my privileges were revoked which is hard to take.
The only policy after much paperwork, physian reports and long hours of beurocracy was the one I kept from the job I left. The agent from the others actually recommended I drop this one. I never qualified for the “best” policy because I could not prove that my condition was why I lost privileges.
It is very hard to prove a psychiatric condition has effected your work. Partial disabilities don’t work. Be very careful with the policy you buy. Don’t trust any agent. They all have one thing in mind which is not you. Consider what the policy covers for mental health conditions.
Andrew,
You are exactly correct and you’re not alone in your experience. Whether I speak to resident physicians or during private consultations I make it a point to go over Mental/Nervous Coverages.
Some specialties need to look at the mental/nervous claims benefit offered in the policies more than others because their speciality has a higher statistical chance of being disabled on a mental/nervous condition. As a retired anesthesiologist myself, whose married to an anesthesiologist, whose brother is also an anesthesiologist; Our experience with the hundreds of anesthesiology practitioners over 20+ years has been that they exhibit a higher chance of mental/nervous conditions than some other specialities and these conditions tend to manifest in the second half of their careers as depression, anxiety, substance abuse, PTSD as well as other conditions.
Mental/Nervous Coverage are limited in many policies. In almost every group policy I have reviewed it has been limited to two years. Since some specialties have high rates of Mental/Nervous claims, the limited coverage only assists them for two years and then the claimant is out of options.
There are policies that do cover mental/nervous claims to age 65 and pay full benefits. A vast majority of these are private individual policies. Which one of the private individual policies from which company is best? IF you are a doctor or a dentist reading this: For your life, speciality and medical history that depends on an independent disability insurance broker being only focused on you, the client. As Andrew points out, company-specific agents are in the business of selling. Find someone in the business of teaching disability insurance to learn what is best for you and your situation; I always suggest an independent broker with no allegiance to any one company.
Policy construction: Always couple mental/nervous coverage with the strongest definition of own-occupation, future/guaranteed insurability and non-cancellable/renewal guarantees to ensure absolute coverage for mental/nervous disorders in your private disability policy. Purchase your private disability policy as young as you can, as healthy as you can and in many cases it will cover your entire career income and always be with you as you move through your career and as your earnings climb. When you move or change employment, the group coverage offered will, in most cases, stack on top of your private policy.
Everyone should consider mental/nervous coverage options in their private policies. These claims are the fastest growing area of disability claims nationwide in the insurance business.(1)
Andrew, I feel for you and your experience. My own seven-year struggle, now in Federal Court, with my group disability company has been as traumatic as losing the career I loved. Yet, their mistreatment and utter disregard for me as a person with more life to live… it has given me a new direction, a new education and something to teach to others. I look forward to serving my colleagues and friends in the medical and dental profession for years to come.
Dr. Christopher Yerington
[email protected]otection.com
(1) The Social Security Disability Administration reported mental/nervous disorders accounted for 10% of disability insurance claims in 1981. This rate increased to 24% of workers in 2000, and to 26.9% of workers in 2014. Data from: Annual Statistical Report on the Social Security Disability Insurance Program, 2014 & 2000, and previous reported 1981 data.
I will be starting a military residency this year and was wondering if it would be worthwhile for me to purchase a disability insurance plan? Does the military have good coverage for physicians? Also, are there certain companies that are better suited for military physicians compared to civilian physicians?
Yes.
Depends on how you define “good.” Certainly better coverage is available.
Yes. You need to see an independent insurance agent who can sell you a policy from any company.
Crystal,
If you buy it now it will lock in your insurability while in the military and most will suspend the premium and benefit while you are active duty. We do this all the time for the military in order to prevent adverse underwriting post military service. You can also a carrier or two that will pay benefits while active duty if that is what you are looking for.
Crystal,
It is absolutely worth purchasing your private disability insurance before entering your military residency. As a woman, it is even more vital that you look into getting a policy today with unisex rates. Those rates may not be available in a few years after you have completed your residency.
Reach out, I’d be glad to take a look at your specific circumstances and assist you.
Thank you for your service to our country,
Chris
This post is very helpful. I also enrolled in your Fire Your Financial Advisor course and just finished Section 3. I am working on writing my Insurance Portion of Written Financial Plan.
While doing this plan, I realized that my employer gave me individual disability income insurance from guardian with following benefits:
* Disability Income Insurance Policy: $6,260 (monthly benefit) for annual premium of $1,439.80.
* Extended Own Occupation Rider for annual premium of $219.10.
* Catastrophic Disability Benefit Rider: $4,570 (monthly benefit) for annual premium of $126.13.
* Cost of Living Adjustment Rider with Maximum Increase Percent of 3%: for annual premium of $481.07.
* Basic Residual Disability Benefit Rider: $172.15.
I am getting total 15% Employer Sponsored Plan Discount on total annual premium, resulting in annual premium of $2,102.51.
Does this look like a good plan.
Should I still reach out to independent agent requesting quotes for better disability insurance; or reach out to guardian asking them to better quotes with removal of Catastrophic Disability Benefit Rider aspect of current disability insurance.
Thanks again. I will post my reviews after finishing your Fire Your Financial Advisor course.
Maybe. I would still reach out and compare what you have to what you can buy on the individual market. Maybe it’s a great deal, maybe it’s not, but there’s only one way to tell. Don’t worry, you can do it with minimal time and effort from your own home.
Thanks you.
Harvi,
This is all I do now: Advise and Educate Physicians, Dentists and Medical Professionals concerning their disability insurance. Your question is very common… “Does this look like a good plan?”
The GOOD: Guardian is a great company and currently one of the three best companies providing physicians disability insurance. The employer 15% discount may be advantageous to the price you pay UNLESS the policy language you have in the discounted policy is not the same as you would have gotten in a private Guardian policy.
You have $75,000 of annual benefit under the Guardian policy right now and that should cost you between 2%-4% annually; thus you should be paying $1,500 – $3,000 per year. Annual Premiums (from your data) are $2,438.25 and with your discount you are paying $2,102.05/year. The pricing is great and actually a bit on the low side for a Guardian disability product.
The BAD: As an employer plan, some of the language may not the same as in the private insurance plan you could have from Guardian. This is very common in the industry that Group or Employer plans are not equivalent to Pure Private Disability Insurance Products. The maximum increase on your COLA Rider of 3% means the minimum is 0%.
You should have your policy reviewed by an independent insurance broker.
Harvi, I also Advocate for claimants or assist them during their claims process. I also lecture and educate resident programs and medical and dental group practices concerning disability insurance. I am a disabled physician and my experience with being a disability claimant myself; both good and bad, taught me that many physicians are not as protected as they believe they are and do not understand the ramifications of having a poor policy. I practiced Trauma and Cardiac Anesthesia for eleven years. In 2010, I was diagnosed with a brachioplexopathy effecting primarily my left median nerve. I lost the good use of my left thumb and index finger forever. It is a progressive and degenerative condition and it ended my clinical medical career. I am a completely independent insurance broker and have no connection to any specific insurance company. I would be happy to look at your situation and assist you in getting yourself fully educated on disability insurance.
Chris
Harvi,
What it looks like you have is a simple Individual Disability plan that was bought with an employer associated 15% discount. That is a solid plan at to its core. You might want to think about some of those optional riders you have but otherwise the question I would have is the $6,260 per month the right amount of coverage? If it is the right amount of coverage then stick with that plan, if it is not enough then augment it a touch. Don’t let someone talk you out of that plan, its a good one.
I agree with Chris and I would take him up on his offer to look at your situation. My main concern is whether your employer-sponsored coverage will be governed by ERISA, in the event you need to file a claim or pursue the company in court to get paid. I can’t tell from your post whether your Guardian policy, obtained through your employer, is ERISA-governed, but there is a good chance that ERISA governs it.
Applicability of ERISA to your long term disability claim is game changer, one that is definitely not in your favor.
Evan Schwartz
Schwartz Law
http://www.schwartzlawpc.com
212-608-5445
[email protected]
Explain more about that. What does ERISA have to do with disability claims?
Harvi,
Mr. Schwartz is correct that group or employer sponsored plans are governed by ERISA law. As I found out the very hard way with my group policy, I had to go to Federal Court to get basic answers from my insurer on items most reasonable people would consider my insurance company’s fiduciary responsibility to their claimant.
I have encountered a very few employer-discounted plans that were actually fully transportable private disability insurance policies. It is most likely you have a group policy from Guardian and are paying a discounted rate. Which is great because you are covered by something and you have paid a lower cost for the insurance. But it is not the best protection you can get for your greatest asset, your lifetime career earnings.
I’d be happy to review what you have and teach you more than you ever wanted to know about disability insurance.
Chris
Dr. Christopher Yerington
[email protected]
ERISA is an acronym for a federal law — The Employee Retirement Income Security Act of 1974. For purposes of this discussion, It generally governs group benefits sponsored by private employers (not government employers, whether Federal, state, city or local government).
If your group policy is governed by ERISA, then only the Federal law and Federal Regulations will govern your disability claim and, if necessary, your lawsuit. No state laws that allow bad faith, punitive damages, emotional distress, or other types of damages are permitted.
What else does ERISA mean to you? Well, if you submit a claim which is denied or your benefits are paid, then terminated, you ordinarily will be required to do a formal appeal, perhaps more than one. This appeal or appeals must be done before you can start a lawsuit. Otherwise, your lawsuit will be thrown out of court, maybe lost altogether. That appeal is almost always made to the same insurance company who is not paying you.
If you go to court, you don’t get a jury.
If you go to court, you can only recover your back benefits and a little bit of interest.
If you go to court, you often will not be permitted to conduct ordinary discovery like any other, ordinary case. Your discovery of the insurance company is typically limited to the documents they put in their claim file — what they like to call the “administrative record.” That means you don’t get to put any new facts in front of the court like medical experts, for example.
Worst of all, if you go to court and your group policy contains a “discretionary authority” provision, the court will only be able to reverse the decision of the insurance company if the court determines that insurance company’s decision to not pay you is arbitrary and capricious or an abuse of discretion. This is a very hard standard to overcome in court, and many cases that can be won or settled in a non-ERISA litigation are lost because of this standard.
In a non-ERISA case, you a get a jury, you get discovery and you can pursue all of the extra-contractual damages allowed by applicable state law.
In addition, the claims process is far less rigid, with far less deadlines, allowing you proper time to build your claim, with a better chance of resolving it without the need of a lawsuit.
The bottom line is that ERISA-governed long term disability claims are for more difficult, typically more expensive than a private claim and, when you get to court, you start the case off with far less rights, and therefore far less leverage, than you have with a non-ERISA claim.
For my two cents, I’d load up on my private coverage as much as possible, and only use group coverage as a an additional layer, if I could.
Evan Schwartz
Schwartz Law
[email protected]
http://www.schwartzlawpc.com
212-608-5445
Thanks.
What do you think about this definition of disability?
TOTAL DISABILITY means solely due to Injury or Sickness:
1. During the Your Occupation Period
a) You are unable to perform the substantial and material duties of Your
Occupation; and
b) You are not Working.
2. After the Your Occupation Period You are unable to Work in any occupation
You are reasonably suited to by Your education, training or experience.
3. Both during and after the Your Occupation Period, You satisfy the requirements
of the Claim Information section.
If You are Retired, Total Disability means, solely due to Injury or Sickness, You are
unable to perform any of the normal activities of a retired person in good health and of
like age and You satisfy the requirements of the Claim Information section. If You are
Unemployed, Total Disability means, solely due to Injury or Sickness, You are prevented
from obtaining a job that You are reasonably suited to by Your education, training and
experience and You satisfy the requirements of the Claim Information section.
I also have a residual rider:
RESIDUAL DISABILITY AND RECOVERY BENEFIT RIDER. This rider provides a
portion of the Maximum Monthly Benefit if You are not Totally Disabled and, solely
due to Injury or Sickness, You have a Loss of Earnings equal to or greater than
20%; and You are able to perform some, but not all, of the substantial and material
duties of Your Occupation or You are unable to work Full Time in Your Occupation;
or You are Working in another occupation. The Maximum Benefit Period for these
benefits is the same as provided by the policy for the Disability Benefit. This rider
also pays a Recovery Benefit after You are no longer Disabled but You continue to
have a Loss of Earnings of at least 20% solely due to Your prior Disability.
I would want to know the following:
1: What is the amount of months or years you have in your Own Occupation because #2 states after that you will have to work ANY occupation that is based on your education, training, OR education. Now that opens it wide open as to what you might be asked to do.
2: What are the terms of your elimination period, not just the days but the language.
3: What are the terms for them changing the rates?
4: What are the terms of them changing the language?
5: What are the terms of them canceling the policy?
6: What other income benefits do they offset for?
Once you know the way a contract is going to behave during premium paying time and claim time then you can decide what you think about the contract in terms of you, your specialty, your family, and your needs.
Let me know if we can help further.
1. until age 65 for own occupation
2. 90 day elimination period defined as ” the number of days of Disability from the start of a Continuous Disability for which no benefits will be paid.”
3. rates will stay level
4 and 5. guaranteed and noncancellable
6. unsure
addendum: Part 1b makes it sound like it’s not a true own-specialty; would I still get disability if I worked in another field or career?
It is Not a true own specialty, you can tell that because it states you get paid during your own occupation period as long as you can’t do your job AND you are not working. If you go take another job the the residual feature makes this contract payout with the following formula % of pre-disability income lost is % of benefit in this contract to be paid minus benefit offsets. If you made $300k, now you next job pays you $150k then you lost 50% so you would get 50% of the benefit minus offsets. For this residual feature you would need to read the policy because some of them state that once you have this new income for 24 months that will be deemed your new occupation and you will be removed from claim….all depends on the exact language in the policy.
This is obviously a group policy and the language they have varies all over the place.
My next question is how long does your own occupation period last because when that ends then some claims adjuster gets to decide what you should go do for a living and they get to reduce or eliminate your benefit at that point regardless of if you take that job.
Claims on group plans are always interesting because few people ever read them when they are the insured or even the office manager purchasing it for the group, they just read that it has a 180 day wait, benefits to age 65, 60% or so to $10-15k something about own occupation is in there maybe and the cheapest bid gets the business. Those are the times that claim day is like a birthday, tons of surprises when you open up your gift!
Tom,
The wording you provided seems to be right out of the IDI policy offered by Principal. If that’s the case, this is easier than it may seem. Depending on your medical specialty and the state you live in, you can make it a True Own-Occupation policy by adding the “Regular Occupation” rider.
If it is Principal and it is an IDI contract then just add rider HH757 to it and you will have a true own specialty definition in your policy.
I don’t like the “your occupation period” unless the “your occupation period” is the rest of my life.
The Your-Occupation Period is really not an issue, so long as the policy is structured properly. The Your Occupation Period just needs to be identical to the Benefit Period.
Had an insurance application denied due to low platelets, around 90K. Asymptomatic, chronic, no bleeding events. What are chances they will reverse the decision after getting cleared by a hematologist? Or do they just look at the number and think it’s too big of a risk to insure?
It’s frustrating to me that there was an application submitted. That stuff should be informally “shopped around” by a good independent agent so you know what’s going to happen without applying. Now you have to put that denial on future applications.
As far as your question now, that question should be shopped around by a good independent agent. They have contacts at the insurance companies that can tell you how that would likely be looked at.
I could not agree more with WCI on the pre-screen. Anytime someone has more than HBP or Cholesterol issues we simply have the client write us a paragraph or two about what is going on. We then send that along with age, gender, specialty to the carriers to get an informal response back so that everyone knows what we are dealing as a possible outcome with BEFORE you go giving all of your personal information and subjecting yourself to a full underwriting process.
Now if you did not know you had that prior to the underwriting then truthfully this was the only outcome. I know over the years we have had people find many things wrong with them through the underwriting process, several of which allowed the client to get surgery or treatment prior to it turning into a catastrophic event. Even though we did not get the underwriting results we wanted the clients did get the medical treatment needed for something they did not even know was going on.
It depends on the carrier and what kind of success or failures they have had in that area of issue. Most carriers will certainly listen to a reasonable stance, medical records, assessment of treating physician and labs backing up normal range. In addition, make sure your rep and their team know how to position your situation with the carrier in question.
Hi all,
First off, I want to say thank you for all the information. I’ve learned so much from WCI and I find that I’m reading more and more of it as I am nearing graduation from residency (funny how that works).
Looking for advice here:
I’m in the process of acquiring private DI before I graduate through an independent agent. I’m 33, healthy, no medical problems, and doing a 1 year fellowship next year in minimally invasive surgery. I’m looking at Guardian Provider Choice with:
– true own occupation, 90 day elimination period, up to age 65
– non-cancellable, guaranteed
– enhanced partial disability
– COLA
I have options of choosing 5k, 6.5k, or 7.5k (since I’m within 6 months of graduating) with FIO up to a total of 17k (so FIO of 12k, 10.5k, or 9.5k respectively). The level annual premiums for each are around (~2.1k, 3k, 3.4k respectively).
Questions:
1) I know everyones finances are different, but should I be going for as much as possible now (i.e. 7.5k) even though the FIO are up to the same amount for all policies? Any huge drawbacks to not purchasing as much as possible now?
My plan is to start with graded annual premium and then pay attained level annual premiums after I’m done with fellowship (1 year) and increase as much as the company will let me me (est future starting income ~350-400k).
2) It seems as though Guardian is one of “big” companies that offers true own occupation, and is more trusted. I have also read stories that they put up a fight to paying out DI benefits. Not sure how true this is or not. Are there companies that do make getting DI benefits difficult in the unfortunate circumstance true disability occurs, and if so, should this be part of our decision making process in choosing which company to go with?
Thanks again,
Bodi
Bodi,
In short Guardian is a good company and that is a good product so you should be fine even though those rates seem fairly high for your age and specialty. The thing that you should do is buy what you need and you can afford so if that is $4k up to $7,500 that really is a personal decision. When you add the increase options if/when your needs changes then you can increase the policy at that time. The thing that causes most policy holders grief at claim time in the policy are the provisions nobody ever reads like waiting period language or definition of disability. What I mean by that is, I had prospective client email me today on his policy, some contracts will have that you have to be Totally disabled to be benefit eligible. What does that mean to him? Well if he is in PT 4 days a week for 3-4 hours but that is it then he probably is not Totally disabled but rather partial thus he won’t qualify for benefits. In the main stream IDI series you only have to lose 15-20% of your income to qualify for benefits. Just the same when the carriers determine your definition of disability does that have a clause that states after a period of time you will be required to do anything you are reasonably educated, trained, OR experienced to do? You will be surprised at how many contracts from employers and medical associations have this type of language embedded in it. My point is really read through things understand what is there and not there since you don’t want to be at claim time saying “the company found a loophole”, the reality it was there all along and either the rep did not know about it or if it was self purchased like an association plan then that responsibility is totally in your hands.
Scott
1. I’d probably lean toward the cheaper one since you can buy the same future increases later, but the huge drawback is if you get disabled before you increase the amount.
2. I don’t know that Guardian is more trustworthy than the other big six and yes it would be great to include that sort of information in your decision making process but good luck getting that information in any reliable way.
Bodi,
You have done many things correctly in your decision. Guardian is a great company. You stated you have enhanced partial disability, do you have Guardian Recovery Benefit included for the life of the policy?
As a surgeon, if you had an illness/injury that had you out for one-year with an additional six months of part-time capabilities prior to returning full time; depending on your group, hospital, employment situation, you may lose access to your referral network and hence your new patient population. It could take a year or more to completely recover your income level and patient throughput in your office/hospital.
The Guardian Recovery Benefit will continue to pay monthly benefits after you have returned to full time work and your income loss is at least 20% of your prior income. As a bonus, Guardian will continue to waive premiums while you are receiving a Recovery Benefit. Please make sure this is in your Guardian contract as a Minimally Invasive Surgeon.
I am not a big fan of graduated payments for doctors in their last year of training and especially not within months of graduating to an attending position. You are simply too close to making your attending salary. My advice to you would be to maximize your benefit amount and choose level payments. Then, with your documented new income, increase your policy as soon as you are able.
You asked, “Are there companies that do make getting DI benefits difficult in the unfortunate circumstance true disability occurs?” Yes, I have been disabled for eight years and have just now gotten into Federal Court against one of my disability insurers (it is not Guardian or any of the big six players) I cannot think of a single case of true physician disability from injury or accident with a Guardian policy where Guardian has made it difficult.
Yet, for mental/nervous benefits with Guardian, I cannot say the same… but every well documented disability case, where they individual is going to therapy for their mental.nervous diagnosis, where they are using their medications correctly, etc… they have not had an issue… but their claims are limited on the Guardian policy to two years. If you were going into say, Anesthesiology, where the mental/nervous claims are one of the highest comparatively to other specialities, then I would have you compare the policy you are looking at to companies that offer lifetime mental/nervous coverage.
Bottom line, you are way way ahead of the curve of your contemporary colleagues! You’re working with an independent agent, you have selected a great company that has great policies and you have asked for second opinions on your selections. Add Recovery or make sure it is in the policy for the lifetime of the policy, lock in the max, pay level payments, not graduated… and lastly, absolutely make every payment out of a checking account with your name on it from only post-tax funds.
Dr. Christopher Yerington
Disabled Anesthesiology and DI Advocate for Physicians
Thanks for the tips Dr. Yerington – yes, there is a provision included for recovery, which is nice.
Scott – I know premiums vary from state to state (and company to company), but out of curiosity, what would the ballpark estimate be for someone of my age/health/specialty for this type of coverage? Trying to figure out if there are other reasons why the premiums are higher than you typically see.
Bodi
Bodi,
Assuming great health, male, age 33, surgeon, you should be able to get a fantastic contract for $25-28 per month per $1,000 of monthly benefit. There are a number of reasons why it might be higher but I don’t want to speculate on why that rep suggested that cost structure to you. If you want to chat just to to my contact info and email or call me.
Bodi,
Costs for disability insurance will run from 2% to as high as 4% of the monthly benefit amount you select.
Say you purchase a DI policy that pays $10,000/month then the monthly cost for that coverage should be in the range of 2% to 4% or $200/month to $400/month or $2,400/year up to $4,800/year.
Scott is correct that for $25-$28/month for $1,000 monthly benefit is very possible for a healthy male at 33 y/o, or 2.5% – 2.8% of the benefit amount.
You were given these prices:
$5,000/month for $2,100/year or $175/month which is 3.5% of the monthly benefit
$6,500/month for $3,000/year or $250/month which is 3.8% of the monthly benefit
$7,500/month for $3,400/year or $283/month which is 3.8% of the monthly benefit
There is no reason to wonder why your pricing is where it is at, one would have to review the quote to give you that specific information. If you would like another opinion, just reach out. All I do is advise and advocate for medical professionals to have the best disability insurance to protect their income and their greatest asset, their career earnings.
Dr. Christopher Yerington
I was wondering if you can recommend any insurance agents for non-physician disability insurance. My husband is a pharmacist, and we would like to obtain disability insurance for him as well since he is the primary income earner while I am in residency. Thank you.
Any of us on the recommended list can easily do that for you.
Any of the agents on my recommended list should be able to help: https://www.whitecoatinvestor.com/websites-2/insurance/
I don’t know of anyone who specializes in just pharmacists.
CAT,
This list here on White Coat Investor is a good start as Scott suggests. Find an independent agent and someone with experience, ask how many policies they have written and how many of those were for pharmacists, specifically. Remember, you can and should get a second opinion even on something like disability insurance.
Dr. Christopher Yerington
Can you recommend any resources on short term disability coverage for female physicians, specifically those considered using coverage to supplement maternity leave? I was under the imporession maternity leave, even without complications from childbirth, would be covered by short term disability. I was reading the website of Set for Life, which stated maternity leave is only covered if medically necessary. I understand a good plan would be to read the specifics of any policy I am interested in, but not sure if you have come across any resources or articles on the topic.
Disability insurance is designed to provide cash flow for someone who can not work due to an illness or injury. If you are not medically required to stay home then that will not be considered a disability from traditional standpoint. Some work-site carriers such as Colonial or Aflac might have some coverage capacity so check with your employer’s HR department.
It depends on the policy. As you can imagine, many companies and people don’t think a normal pregnancy is a disability. But I’ve certainly seen policies that cover it.
In general, I’m not a big fan of short term disability. That’s what an emergency fund is for. ST usually means 90 days and that’s about what you should have in an e-fund, especially if you have 8-12 months notice of the little “emergency” coming. If your employer pays for it, sure, take it. But I wouldn’t spend extra on it.
If you’re really interested in this sort of thing, you might check out AFLAC as well. They have some unique pregnancy-related coverage.
Alisha,
First off, great question. In general, disability insurance, even specific short term policy language excludes “normal pregnancy” thus I would have to do some research to find a policy, if it exists, that includes, in your specific query; maternity leave. Reading the specifics within a disability policy can be difficult and the legal language most disability companies utilize somewhat obfuscates any definite concrete considerations. This is done to protect the insurance company… and it is frustrating for many clients and claimants.
Reach out to me and I’d be glad to assist you,
Dr. Christopher Yerington
Disabled Anesthesiologist
Independent Physician Disability Insurance Advisor and Advocate
Alisha,
The only addition I would make to the suggestions above is to know what State you are in:
Some States have started offering paid short-term disability benefits to all qualified employees in the state. These short-term disability plans allow you to receive a portion of your pay if you are unable to work due to injury to illness, including pregnancy. A few states also offer paid family leave benefits, which you can use to care for a new child.
California provides eight to ten weeks of benefits for a normal pregnancy and childbirth. California’s paid family leave program also provides up to six weeks of paid leave for qualified employees. Benefits under both programs are 55% of normal wages.
Washington D.C. provides a varying length of paid family leave. Employees must have worked at least one year, at least 1,000 hours in the past 12 months.
Hawaii provides up to 26 weeks of paid benefits! Employees must have worked at least 14 weeks for their employer, worked at least 20 hours per week, and been paid at least $400 per week. Benefits are either 58% of your wages or as decided by the employer’s plan.
New Jersey provides up to 26 weeks of paid benefits. Employees must have worked at least 20 weeks and earned at least $145 per week. Or, they must have earned at least $7,300 in the previous year. Benefits are 66.7% of your average weekly salary.
In 2018, New York will start phasing in its paid family leave program, which will provide up to 12 weeks of paid benefits to employees who need time off to care for a new child (among other reasons).
Rhode Island provides a program that includes up to four weeks of temporary caregiver insurance, which employees can use to care for a new child.
Washington State passed a law in 2007 that would provide up to five weeks of paid leave BUT this program has been suspended due to lack of funding.
What is most important about your query is that it is one of the most asked about short term disability benefits. The issue is that insurance is designed to shift risk away from individuals to a pool of people where the risk insured itself is unintended… everyone would love to pay into a benefit plan and then have a guaranteed outcome of a benefit that is larger than the premium payments. That is not what private insurance is designed for, in general.
However, the States above do attempt to assist with the leave caused by child birth.
Good luck!
Dr. Yerington
My school is offering a plan for recent graduates for 280 a year. We have a month to decide to sign up. I am looking for some insight into whether this seems like a good plan. Thanks!
Coverage can continue during residency WITHOUT MEDICAL EVALUATION!
Monthly Benefit:
$2,000 in Years 1 and 2
$2,500 in Years 3 and 4
Definition of disability: 2 year own occupation, thereafter any “reasonable” occupation
90 day waiting period/benefits to age 65
No offset until sum of benefits exceed $7,500/month
$200,000 loan payoff provision
Conversion after Residency/Fellowship
Individual, non-cancelable policy Conversion WITHOUT MEDICAL EVALUATION!
Monthly Benefit:
Up to $5,000/month
90 day waiting period/benefits to age 65
Pure own specialty definition of total disability
On the first option I am not a fan of the ‘after 2 years’ provision since that can mean they decide what you do based on your education level, heck that could mean you are a Biology teacher to 9th graders. That does not mean you would not like being a Bio teacher but if they control the policy at that point you kind of have to do what they say to do. An example of this is a friend of mine had this language in his group policy, received a double lung transplant and at 2 years into the claim the carrier cut him off saying he could go from being an executive at a satellite radio station to now driving Uber. After a lawsuit they reinstated the benefits but he had to go through the lawsuit to get them to do that. In addition, no idea what the premium is for this plan so hard to value based on costs.
As for the Conversion plans some of these can be really nice but it depends on the cost for this plan vs. what can you find in the open market which is determined by your age, gender, medical specialty, state of current residency, state of future residency, and health status.
I hope that helps, if not PM me and we can chat on specifics.
Stephanie,
Scott always beats me to reply… I know it is not a race… but as a doctor, I literally was used to be first at everything! 😉
If you have major medical problems already, this option would be better than nothing because you never have to undergo medical exams. However, if you are basically healthy you should look to lock in an individual disability insurance product from one of the top three carriers and spend the $280/year times X-number of years of residency on that instead of this.
This offer is basically a two-year product… after that you will be told you can pass out tickets on a turnpike and therefore be reasonably employed… which means benefits end. It cost me over $100k in legal fees to fight my disability company in Federal Court and I lost in the end.
The conversion.. Scott is right… without pricing on what this would cost you it is difficult to imagine that it would be your best choice.
Reach out and I can walk you through your choices. Scott also would do an excellent job of guiding you.
Chris
Hello. I bought a $1k benefit policy ($6k extended partial) in residency with Mass Mutual, this was in Lousiana, when I was an intern (IM resident). I have completed training and I am now a dermatologist in Tennessee. I am told the mass mutual policy has a 30% premium reduction given I bought it as a resident. I think its a unisex policy, (and/or the new one would be unisex?). To increase to full coverage (~16k coverage), it still doesn’t beat out Ohio National, but does come close and it seems like the likelihood of getting a claim paid out might be slightly higher with Mass Mutual (based on a law firm review of public claim history and/or their experience litigating cases against these companies).
1. Can you comment on how likely it is that continuing with Mass Mutual is my best bet? Or is there a chance that Ohio National (or other) has a better policy (considering how likely they are to pay a legitimate claim)?
2. Is Mass Mutual more likely to pay a legit claim in your professional opinion?
3. Whats the current status of unisex policies with mass mutual?
Thank you for your time
I’d like to hear more about the law firm review you’re referring to.
1. I’m not familiar enough to judge between the two. You need to meet with an independent agent and go over the two policies side by side.
2. Dunno. You seem to have more info on this than any one else I’ve been able to find. They don’t exactly publish that info.
3. Unisex policies are usually best for women. Men should usually get a gender specific policy.
1. Noted
2. Unfortunately, I did not bookmark it, and the trail went cold. But from what I remember, it was basically their firms experience (they did mostly/all disability litigation). But I understand and agree with the forum, there isn’t enough data to make a reliable conclusion, and it is subject to change.
3. Understood.
Thank you very much for your work and reply. I’ve read the book, bought another, and passed them around. Enjoying the podcast too. Keep the tough questions coming
Q1: Mass is a fine company, I would have no reservations about owning them for my coverage. In addition, if you build the Ohio policy correctly then it too is a fine contract where I would have no reservations. The main thing you never get to hear when people say one is better than the other at claim time is exactly what was built into the policy and what exactly they were expecting the policy to do. Often people will pay for one thing but expect it to perform in a completely different manner. A few examples would be:
A: If someone did not elect to buy an Own Occupation rider but at claim time was surprised that the policy did not pay 100% of the benefit as the client started working in a different occupation post claim.
B: One bought a policy with the language “you must be totally disabled for the entire elimination period” and was surprised when the policy did not pay because they were working part time in their occupation. The word ‘Total’ means something in there.
C: A policy gets bought without a residual or partial rider on it and then the insured is surprised to find out that at claim time it does not pay when someone is working part time in their specialty. Without that rider then the policy either pays 100% or 0%.
2: No, a legit claim is a legit claim, feel comfortable with both carriers.
3: Unisex with Mass is out there but not everywhere. In some places it is exclusive to the agent that established it and other areas it is open for use by anyone. It helps females far more than males so always price shop across carriers since they might have a large discount but if the original price is higher then it may still not work out in your favor.
If we can help further let me know.
Understood. Excellent information and examples. Thank you
Kyle,
I would be glad to review both policies for you and give you the side-by-side comparison and the equivalent policy information from a few others so you then know what is available to you, specifically. The LANGUAGE in the actually policy offered to you is critical (as Scott points out) and your understanding of that language creates the ‘expectation’ of that benefit. Mass Mutual and Ohio National are currently, in 2018, two of the top five or six individual disability insurance carriers in the nation and either policy (in general) will be well written and well serviced in the event you become a claimant.
You said, “based on a law firm review of public claim history and/or their experience litigating cases against these companies” – as I have sued (6-years it took) a major disability insurance carrier and I went the distance with it through Federal Court; I can tell you with certainty that a law firm has very little chance of actually knowing the information you mention. Furthermore, the information that law firms have available to them based on database searches inside the legal system (they do have better database search options than Google) is ‘washed’ data as the insurance companies pull the egregious cases prior to records being created by settlements.
There is more to an insurance company than it paying the claim. My ‘subpar’ carrier is paying the claim but will not speak to me, will not answer questions other than to tell me to read the policy (which was poorly constructed in my case with sections omitted completely) and until I got an attorney involved they told me to shut-up on the phone, teased me with emails about a settlement, asked for repeat testing and doctor visits and frankly told me it would be easier if I died for them (after I was hospitalized with suicidal ideation for what they had denied me, information on how to return to gainful employment).
YOU WILL have NONE of these problems with Mass Mutual or Ohio National, as both their service departments are far superior to that of my ‘subpar’ company. Luckily, I had two Disability Insurance policies and my experience with the other one was and continues to be excellent! The other policy is with one of the current top six companies.
As far as Unisex goes, female rates are higher than male rates for disability insurance for a multitude of actuarial reasons. Unisex rate offers vary carrier-to-carrier and State-to-State but, in general, they have been declining over time for the last decade. As a male, this really will not be an issue in the pricing of your specific disability insurance policy. More important in your case is this 30% premium reduction from Mass Mutual… assuming the policy is superior to what you could get on the open market from others, including Ohio National.
Let me know if I can be of further assistance to you in getting your income protected properly and securely,
Chris
Kyle: As a lawyer who has handled long term disability claims and lawsuits for 25 years, I can tell you that it impossible to know which company would treat you better during the claims process, because no one knows what will be going on at MassMutual or Ohio National at the time you may need to file a claim, if ever.
My advice would be to make sure you have the best coverage you can get from either MM or Ohio, with the advice and assistance of any of the more than qualified, independent brokers on this site.
Evan Schwartz, Esq.
SchwartzLawP.C.
es[email protected]
http://www.schwartzlawpc.com
“Making insurance companies keep their promises”
Noted. Thank you for your time
You forgot to mention the key piece of knowledge one needs to divine what an insurance company will or won’t do during a lawsuit? The background on the person running the division of long-term claims at your carrier at the time you, as a claimant, have a difficult time or have to file a lawsuit.
Kyle, about every 7-9 years there is turnover in the highest leadership positions dealing with long-term disability claims within these large bureaucracies. When the new leadership arrives, they often clean house on claims that need to be settled (those in the lawsuit process or those that are destined to end up there) in order to do several favorable things for the company and for their own division’s numbers going forward ‘on their watch’… even though it can mean taking a short-term loss when they do this. That is just one more reason Evan says with 25 years of experience, you cannot tell what will happen with an insurance company and a lawsuit against them. You will never get to know the hows, whys or whens of a large insurance company’s decisions, including when a claimant must file a lawsuit.
https://opmed.doximity.com/group-disability-insurance-nightmare-coming-to-an-end-ae99ca35ebd0
I wrote that article for Doximity about my own experiences. Worth the 5-6 min read. In the end, getting your own individual disability insurance policy as young as you can and as healthy as you can with the top providers: (Alphabetically) Ameritas, Guardian/Berkshire, Mass Mutual, Ohio National, Principal and The Standard (2018 List) is the only way to go to KNOW your Income is Protected. That is what I have committed my second career to, teaching physicians how to protect their career income and to teach basic financial literacy. Based on your questions Kyle, you may already have more financial knowledge than many of the docs I have known.
Your underlying question is which policy is best for you… which entails a few things: age, health, speciality, history, hobbies, State of Residence and then more specifically, you’ll want someone you will look at your broader financial picture: loans, married/not married, kids, planning on kids and some of the other big life events that tend to derail financial plans if not considered ahead of time. These are big questions and if who you are working with is not taking the time with you; get a second opinion.
You would never tell a patient they do not need a second opinion, in fact, if your patient asks you for someone to recommend getting a second opinion from; I’m sure you have multiple names of other dermatologists that would be happy to see your patient for that purpose. Why? Because you know your stuff, doc. That is not always true in the financial representation world, especially from company-specific providers.
One of my son’s has had incredible skin issues (He”s 21 now), secondary to a number of food allergies and it is amazing what the right diagnosis and medications have done to improve his skin over the past 4-5 years… which improved his attitude, improved his self-esteem and improved his nearly everything. I have a far better appreciation for dermatology than I ever did in medical school or when I practiced because I saw what one compassionate expert could do where others had failed.
Good luck to you and your practice!
Chris
Point well taken.
It’s funny the way business works sometime (most of the time?). A quarterly, or other timeline, responsibility can do weird things.
Nice read. Scary story. Maybe a future children’s book, ala, wolf in sheep’s clothing? : )
Right.
And you would hope that after 2-3 second opinions (or more), a concensus would emerge. The fact that it hasn’t, and that some of the second opinions didn’t even care to evaluate the cost/benefit of upgrading my current policy (with built in discount), contributed to my frustration with the services.
I’d be interested to hear more about your son’s case. Frequently, food allergies are blamed inappropriately, but can be causative of certain rashes, and contributory to others. I am always interested in learning more, especially in areas in which the validated literature has gaps (if thats the case for your son).
Thank you all for the comments. Great thoughts, and thank you for giving of your time to help me
Kyle,
The reality is that disability insurance basics should be taught to residents and medical students AND it should never be as complicated as what you have experienced. Unfortunately, I have seen this behavior with financial representatives; more so from those that work for a single carrier.
Here’s what should be taught to all doctors:
Step one: Buy a good policy while in residency! While you are young and healthy; for females, preferable before becoming pregnant for the first time. (Kyle, you did this with the Mass Mutual policy; locking in a FIO (Fixed Increase Option) up to their $15k-$18k/monthly benefit range – and you did this with a top rated company!)
Step Two: Graduate from residency! Between residency and working as an attending, or shortly after becoming an attending get your disability insurance REVIEWED. (Kyle, you’ve done this as well and you’ve sought more information on White Coat Investor.)
Why the review? This is for a few reasons:
1) IF you have not done Step One, then this is time to correct. If you bought with a carrier that is not top rated or a policy that does not include exactly what you want, you have a chance to correct this earlier choice.
2) WITH your attending income, one MAY opt to utilize part or all of the FIO (Fixed Increase Option/Rider) from initial policy.
3) HOWEVER, as an attending; IF your gross income is going to climb over a certain amount, making the maximum allowable monthly benefit total EXCEED the top limits of the policy purchased in residency, THEN the physician should look at layering (2) different individual disability policies.
Step Three: Layering Disability Insurance
1) IF your maximum allowable monthly benefit total is within the residency-purchased limits of the initial policy, AND it is a good policy, WITH a good company you are almost done! But, you and your insurance broker should also look down the road 20 years. BECAUSE your net income will nearly double within that time. As your income slowly climbs through time, your maximum allowable monthly benefit total from individual disability insurance will also climb.
Let’s consider some (3) examples:
Ex #1: You are done with your residency training and making $20k/month in 2018. You did not complete a fellowship, nor do you ever plan to… well, you can expect that your income, via inflation and other factors may reasonable double over the next 20 years to $40k/month. At that level, the initial policy you purchased may be the only one you will even need BECAUSE the maximum allowable monthly benefit total for your individual disability insurance will be met with only the one policy. IF you are in this category, congratulations! Next life item, proper life insurance!
Ex #2: You are done with your residency training and making $20k/month in 2018. You are planning on completing a fellowship in the next few years. You can expect that your income to increase because 1) after fellowship as a specialist you will make more, 2) via inflation and 3) other factors as well – your income may reasonable more than double over the next 20 years to $40k-$60k/month by the year 2038. At that level, the initial policy you purchased in residency MAY cover the maximum allowable monthly benefit total for your individual disability insurance – if you are on the low end at $40k/month range. HOWEVER, that one policy will not be adequate if you are making closer to $60k/month. At the $60k/month range you will need two (2) individual disability insurance policies from (2) different carriers in order to cover your maximum allowable monthly benefit total. This is known as Layering disability insurance policies. IF you are in this category, seek expertise… and yes, it matters a lot to your future, so get at least (2) opinions from (2) different experts as to how you should proceed.
Ex #3: You are done with your residency training and fellowship(s)/speciality training making $40k/month in 2018. You can expect that your income, via inflation and other factors may reasonable double over the next 20 years to maybe as much as $80k/month by the year 2038. At that level, the initial policy you purchased will NOT come close to the maximum allowable monthly benefit total for your individual disability insurance. The solution is to layer (2) policies. IF you are in this category, make sure your financial advisor or insurance broker is independent or independent enough to work with multiple carriers. Get a second opinion and understand the following:
IF you choose to layer, there are a number of things to consider:
Buying the second policy as young as you can, and as healthy as you can is ALWAYS a good thing! Hence, either in fellowship or in that first year out.
Make sure you but that second policy from a second carrier that is either the best company or one of the top three in the industry!
Then, in concert with an advisor, plan out how you wish to layer:
Each policy will have (FIO) Fixed Increase Option(s) that can be used individually (one policy at a time) or in concert (both policies) to increase the total monthly benefit as your net income climbs through time; say from the year 2019 through 2040. This can be done without medical reexamination because you have (2) policies that are hopefully Non-Cancelable/Guaranteed Renewal.
Mandatory Riders: BOTH policies must have (FIO) Fixed Increase Option and Non-Cancelable/Guaranteed Renewal in order to use them effectively over a 35 year career to layer your individual disability insurance.
Riders: Each separate policy may have different riders; including different calculations for COLA (Cost of Living Adjustment(s) or for expanding the coverage for various situations: Loss of procedural ability only, partial or residual language(s), etc. You may want the second policy to cover your remaining student debt or have mental/nervous coverage for the life of the policy, as opposed to only 2 year (found in many policies). The DIFFERENCES may interlace nicely 1) keeping total costs reasonable for both policies while 2) having the best language and riders in one or both policies.
That’s enough teaching for one post!
~Chris
I am a 4th year medical student and wanted to know if it is necessary to have disability insurance at this point or wait until I match into a residency position. Sorry if this has been addressed somewhere in the 230+ comments.
Thanks!
If you don’t have any health issues come up, you don’t get any older, and the carriers don’t change their rates then you should wait. The reality is you don’t know when a health issue comes up, you don’t know when the carriers change the rates but you do know when you have a birthday so think about those 3 issues and it will help you make a decision. Most of my clients end up buying a small policy now to lock in the rates, health, and structure of the policy then upon finishing they exercise the future purchase options to increase to larger policy. If we can help further let me know.
Kelley,
How long is your health guaranteed? That is how long you should wait to purchase disability insurance.
Most clients who purchase during there fourth year of medical school fill out their application after they match… but some will do it earlier. While each client is different and unique, the process of learning and applying for disability insurance is straightforward.
Kelley, from one doctor to another, who did purchase his first disability insurance policy one week into his intern year… and then was disabled 11 years later… it is completely worth the security of knowing you have locked in a portion of your career income AND you’ve selected a policy that will grow to cover a large percentage of your future income!
My second-career after medicine consists of teaching medical students, residents and young attending physicians about income protection and basic financial literacy. Please feel free to reach out with any additional questions,
~Chris
It’s only necessary if you become disabled. Your choice how long you want to run that risk.
Hi. I purchased a disability insurance policy more than 10 years ago with own occupation disability. I recall purchasing the future income increase protection. I see a statement from 2010 saying: “These Optional Benefits are also included: Future Increase Additional Purchase.” I had work-related injuries and am now unable to work. I saw earlier in these comments that disability insurance is good to have even if you forget you have it. I guess that’s what happened to me. I only would glance at my bank statements occasionally and knew that the premiums kept going up. After my injury, I remembered it. The payments had been coming out of my bank account directly. I certainly never had anyone call me up and ask if I wanted to remove the future income increase protection. I would never have done that. They even asked me for my last few tax filings which they said was so they could pay the higher amount. When I saw what they gave, I was shocked. The most recent statement says “These Optional Benefits are also included: No Optional Benefits Included.” I feel duped. As a physician, I was much too busy over the years to keep checking to make sure they were keeping my policy in force. I was making sure there was money for them to withdraw from my bank account. I feel so cheated now that I’m hearing of people getting 10-15k and more. I cannot think that what they gave me is in any way based on my income. Is it a common scenario that the income protection drops off if you don’t stay on their backs?
Something does not smell right on this….
As for a few of your questions, future increase protection is certainly an optional benefit but it is also something you have to agree to buy when the option comes up, typically the offer is 1 time per year. If you don’t say yes, sign off on the increase and pay the higher premium then your benefit typically stays static. As for fact you only glanced at a bank statement every so often but the rate kept going up, it was probably a Graded premium.
If it was an individual policy then either the policy was bought on a ‘graded’ premium (increasing) where it may have seemed the benefit would be going up but actually the rate was going up based on each policy anniversary. If you had an ‘annual increase rider’ on that policy it automatically moved the benefit up by 1-5% thus the cost was going up since you were buying more coverage.
Depending on the design of the increase options if you don’t comply with turning in the income documentation or you don’t agree (sign off and write a check) to the benefit increase the carrier will drop that from your policy. If The carrier states you are eligible for threshold of coverage and must maintain that amount of coverage in order to keep the Optional Benefit then yes, that option will be removed from your policy by the carrier for non-compliance.
There is a Schwartz Law firm that advertises on here, talk to them, I have a feeling that there is more to the story than meets the eye but they should be able to shed some light on it for you.
Wow! I guess I’m out of luck. I think business, finance, and insurance issues should be required teaching in med school and residency, and if they don’t want to devote 1 week to those issues, at least a few days should be devoted to them. As physicians, we sometimes tend to only think of our patients and not ourselves. I sure wonder why when I became disabled, the company requested several past tax filings reportedly so that they could use my highest income when they had no intention of considering my income at all and already knew how much they were going to give me. I’ll look into the Schwartz Law firm, but it seems that as a young future professional, although I thought I was doing something good and proactive early-on, it was all for nothing. Hopefully my story serves as a cautionary tale to others. Thanks.
Hayley,
Agree with Scott above. You need to consult an attorney, one whom specializes in Contracts, Disability Law and ERISA Law. I went through some awful years following my disability including 6 years of fighting with Lincoln for the right to know what occurs to my benefits should I earn even $1… that’s right, one single dollar. And I lost that right to know in Court. I spend my time and energy teaching young residents, medical students and new attending physicians about proper income protection and disability insurance. Furthermore, I work with disabled physicians as much as I can so that they do not go through the process alone.
Reach out anytime to me, even if it is just to scream at the unfairness of it all, but hire an attorney first to assist you in navigating what has happened with your carrier and your policy specifically.
~Chris
If you didn’t have the income to get your max benefit, you wouldn’t have even gotten that.
Not sure what you’re referring to, but if you never exercised the Future Purchase Option, your benefit wouldn’t have increased automatically. That’s not the way it works.
You need to make sure you read and understand the contracts you sign. Being busy, unfortunately, is not a valid excuse as you’ve discovered.
I guess it would be cool if you could exercise a future purchase option AFTER becoming disabled, but that’s just not the way the contracts are written (for good reason.)