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!
Hayley: I am happy to look at and evaluate your situation, and advise you as to what options, if any, you have.
Evan
Hi. I’m interested in speaking with you. Would I just respond to your ad on here and put in the info requested for consult in the ad?
Hayley: You can reach out to Lisa Keller at 212-608-5445 or 800-745-1755. She will gather information from you for my review and then we can set up a call. Thanks. Evan.
The sickening thing is that to sell me the policy, the agent came out to my medical school where I lived on campus. I’ve had the same e-mail and phone number for years, but the agent who later took over my account couldn’t at least call me on the phone to make sure I kept up with this very important product? I went back and checked my e-mail and spam folders and all I saw from them besides the recent e-mails after my accident, were some surveys and some responses to my request for forgotten login information. There were no yearly e-mails by which I could think they had been trying to contact me. They had access to autodebit my bank account for the ever-increasing premiums, but they couldn’t find me to obtain permission to continue this very important addition to my policy that they saw I originally had. I mean, if I bought the coverage initially, why on earth would I intentionally get rid of it? If I were a criminal, I would certainly be found and fast. The addition should have to be expressly discontinued in writing to protect the insured. In other words we should have to opt out instead of opt in. I guess you could say I’m a little bitter.
Hayley,
You should take the time to reach out to Evan Schwartz as Scott has suggested. While there may be ultimately little to do about your situation, I implore you to follow through with an attorney and make sure of what your options are, if any. This is critical for your own mental and emotional health in the years to come… critical. I simply cannot stress this point to you enough. You need to KNOW you did everything possible for YOUR FUTURE even if the news is disastrous because, quite literally, the ball was dropped by the agents.
Your ‘frustrations’ about the agent that sold you the policy versus the agent that took over your account and barely followed up is a very common theme in financial representation. The ‘agent’ is paid most of the commission(s) in the first year or two of selling a product and after that, residual income is very little… thus the time and energy the subsequent agent put into follow up is commensurate with this renumeration structure. This structure is to the advantage of the carrier who, if you fail to make payments, loses nothing because there is no contract AND in fact, the carrier has a financial advantage if you reapply by charging you more for your age and health (in most cases) for the same benefit.
The reason I began my company is to educate medical students and residents, first and foremost, then advise doctors as to the best plan and products for their income protection and lastly to advocate through the years that they follow up and follow through because that is how I treated my patients… that is the only way I know how to treat clients. Should my clients become disabled, they are never alone in the process of being a claimant… like I was.
Again, very sad to hear your story and I feel frustration for you. I cannot tell you the number of physicians who discover what disability insurance they actually have (or do not have) after they are injured or are diagnosed with an illness.
~Chris
There’s not much incentive in a commission based structure to service past clients.
No, there’s not and that is sad. I was at a hospital today and ran into some old friends from when I was in practice. One took me aside, almost got emotional at how angry he was and clearly, still is, because years ago he had been misled by a salesperson about disability insurance and now felt ‘boxed’ in. In his specific case, sadly, I know what will happen already when I review things and I know there will be little to do about it at present.
I now am getting calls from financial representatives wanting to do the best for their clients. They have recognized the ‘game’ that certain company-specific salespeople play with individual disability insurance. While they want to be the ‘complete package’ for their clients, especially their physician clients, they know the education piece for doctors is missing when it comes to disability insurance and that general mistrust is at an all time high between the sales-games financial companies & their representatives and physicians.
For the medical students or young residents reading this blog. Really read it. You are absolutely worth it guys and girls… really, I mean it, YOU are worth it. White Coat Investor has some tremendous information available and the blogs for YOU to ask away… literally any question about how to set up your financial lives and how to think about different aspects of different financial scenarios.
You may be wondering why you are introduced to the material you see in your own residencies? Your residency leadership and directors can actually get in hot water for inviting in solid financial advice from trusted sources because there is so much ridiculousness in the financial-advice world. One of the reasons I began doing what I do after I became disabled… doctors teaching doctors… simple, straight-forward, just like I taught medicine for years to medical students and residents. Only now I teach income protection.
Doctors, you are going to do great things for a great number of people with your chosen career in this life. Please remember to take the time to protect yourself first, then use all you know to assist others. There is a reason one places their oxygen mask on first… and then helps their children or other passengers in a flight situation.
Dr. Christopher Yerington
I have a Principal DI plan, that I purchased while an emergency medicine resident, that has the regular occupation rider (HH 757) added on for own-occupation, speciality-specific coverage (the specific wording of this rider is pasted below for reference). However, I have switched from emergency medicine residency to surgery residency, and I am trying to figure out if my plan is “specialty-specific” to emergency medicine, when I obtained it, or if it applies to whatever speciality is my occupation when I would become disabled (hopefully not). I cannot find really anything out there about this unique situation (having a policy and changing specialties). Do I need to completely switch policies, update Principal regarding my speciality change, or am I covered by the regular occupation rider for whatever specialty you are in at the time you became disabled?
Regular Occupation Rider HH 7575 : This defines TOTAL DISABILITY as, secondary to injury or illness, I am:
1) Unable to perform the substantial and material duties of Your Occupation and ar note Working in Your Occupation; and
2) You are Working in another occupation; and
3) You satisfy the requirements of the Claim Information section of the policy.
Cam,
First, you have a very good policy with a great carrier, Principal. Don’t re-shop your independent disability insurance policy just yet. You are not the first resident to change specialties after applying for and obtaining great independent disability insurance. In general, your Principal policy will apply to YOUR OCCUPATION at the time of a disability claim… this applies to fellowship training and switching of specialties.
Once you complete your surgical residency and are Board Certified as a General Surgeon, then the “substantial and material duties of Your Occupation” will relate to the practice of General Surgery. If you further sub-specialize in say, Vascular Surgery, then upon completion of that fellowship and additional Board Certification, the “substantial and material duties of Your Occupation” will relate to the practice of General Surgery and Vascular Surgery, if substantially and materially different… which in the case of Vascular vs. General Surgery, they are not much different.
If it will make you feel better, I would be glad to personally review your specific policy and make sure you are in good shape.
~Chris
There is nothing you need to do, as you noted the definition is based on what ‘you are doing at the time of claim’. Now you may want to check rates based on Surgery vs. EM as there is a price difference with some carriers.
What are the basic questions I need to be asking about a DI policy? My wife is a pediatrician and I am a stay at home dad. Sadly she doesn’t have DI but we know we need to get her a policy, just not sure what all we need to know before contacting an agent. Thanks in advance for all your help!
Josh,
The basics EVERY physician should know about disability insurance:
1) Get the best private policy you can, given your health and age.
2) Place Guaranteed Insurability and Future Purchase Option riders on the policy.
3) Female colleagues, if at all possible, get your private disability insurance before you are pregnant for the first time. Otherwise, future pregnancy-related claims may not be covered.
4) Consider a COLA rider (Cost Of Living Increase) rider.
5) If your specialty has a patient population that will leave and go to another provider if you are out of work for 12–18 months (this will include 30% of physicians over their careers) or longer than 18 months (this will be 1 in 5 of you, or 20% of physicians during their career), you may also want a Residual rider to bridge the gap while you return to work and rebuild your patient population.
6) Should your practice area have a higher psychological disability claims rate, such as anesthesiology, some companies offer riders that may be important when looking at your career in its entirety.
7) If possible, attempt to purchase your private disability insurance from an independent broker. Company-specific agents unfortunately have a built-in conflict of interest when proposing disability solutions to physicians. However, if you go with one of the top three companies you will most likely be in good shape.
8) Lastly but importantly, pay your private disability insurance with post-tax dollars! (Again, pay your private disability insurance premiums in post-tax dollars out of your personal checking account) This means that the benefit will be paid to you in post-tax dollars and you will not have to worry about a changing federal tax rate in the future.
Josh, this is what I do now as a disabled physician, I teach and advise doctors to understand how to protect their incomes. Reach out anytime, I’d be happy to walk you & your wife through the process.
Chris
You don’t need to know anything before contacting one of these independent agents:
https://www.whitecoatinvestor.com/websites-2/insurance/
They get paid a nice commission to sell you a policy and they should earn that by educating you about disability insurance.
Chris’s list is nice, although I’d nitpick at it. Let’s use his list:
# 1 Best may not be the policy with the widest coverage. Value has a place here. A slightly worse policy at half the price may be the best policy for you.
# 2 An attending doesn’t need a FPO rider. She should just buy as much coverage as she needs right now. Your need for DI is never higher than at the start of your career. A resident or similar doc expecting much higher income and spending in a few years should buy an FPO rider.
# 3 Women also usually want a unisex policy. DI is cheaper for men then women, so men should get gender specific and women she get unisex.
# 4 A COLA rider is worthwhile for any doc in the first half of their career. If you’re buying a policy at 55….not so much. It only pays to age 65/67. I’d just use those dollars to buy a larger policy.
# 5 I think everyone ought to have a residual disability rider. It protects against partial disability, which is quite common.
# 6 This can be a tough decision. Depending on specialty and state, some policies limit psych claims to 2 years and others go all the way to age 65/67. No right answer here, but if you become severely bipolar like an attorney cousin of mine, I can tell you which one you’d rather have.
# 7 I agree an independent agent is critical.
# 8 You generally don’t have a choice with an individual policy. It’s group policies that are sometimes bought by your employer with pre-tax dollars. But if I had the choice, I might consider paying with pre-tax dollars. The tax deduction would be nice, it’s guaranteed (and disability is not) and if I were disabled, I’d be in a much lower tax bracket.
This post may help you learn more: https://www.whitecoatinvestor.com/what-you-need-to-know-about-disability-insurance/
Good luck! The main thing is to just go get it. Any disability insurance is better than none.
Josh,
The basic questions I would suggest are:
What are the definitions and which is the right one for ‘us’ especially based on her specialty?
What type of premium structure do you want, fixed, projected, or increasing?
Are there any discounts at her employment?
What are the premium savings for an extended waiting period?
My theory is keep it simple, keep it skinny, buy what you need to run your lifestyle, and option what you might want down the road.
My husband and I bought disability insurance through a financial advisor several years ago while in residency. At that time they advised us to buy two policies from two different companies (Ameritas and Principal). The reasoning at that time was that our income was low at that time so we could start out with a little from each company, but as our income increased, we could increase the policies and having two would allow us to have an overall higher maximum than we could get with only one policy. We have since used the future purchase option and have increased our coverage for only one policy, while the other policy is increasing annually through the cost of living rider.
Has anyone ever heard of this as a strategy? Is this a good idea or should we just cancel one and keep only one policy. Our current insurance agent hasn’t ever heard of doing this and couldn’t really understand the reasoning because he said that the companies communicate with each other and the maximum with two policies would really be that different than the max we could get with just one policy. I should also mention that we do not plan on maxing out on both policies. Thanks
Sure. You often CAN get a higher overall limit with two polices than with one. Sounds like you need a second opinion.
COLA riders don’t kick in until you’re disabled though.
Liz,
Do not cancel the one policy yet for either of you.
The strategy you describe is often termed ‘stacking’ and currently allows the protection of up to $30k-37k/month (depending on carriers). The strategy is often employed by higher earning physicians. Some doctors privately want to know that they have true own-occupation protection for their career incomes and do not want to rely on group disability insurance. There are a few other reasons to employ this strategy as well but those are done in concert with additional income protection techniques, again, for higher earners.
What you need is an independent insurance broker to review your income and policies and give you an opinion as to how to proceed. I was disabled in 2010 from anesthesiology. My private individual disability insurance (Principal) has functioned flawlessly. My group disability insurance policy began me down a 6 year legal battle into Federal Court. It was horrific and should never happen to a physician.
What I do now is educate, advise and advocate as a disability expert and for physicians and medical professionals. I also life-coach physician-physician and physician-professional couples as I am married to a doctor as well. I teach one-on-one (or in your case both of you) case-by-case physician-to-physician. I am a completely independent insurance broker (no ties to any specific insurance carriers) that reviews physicians and medical professionals income, disability policies and overall income protection strategies and gives an opinion as to how to proceed.
~Chris
You can buy the two contracts, the carriers do talk to each other (the 2nd carrier inquires about 1st carrier benefits to make sure you are within their issue limits at the time the policy is originally bought) but the bigger question, as you mentioned, is do you need the capacity of the two carrier capacity or would one be sufficient? The individual carrier issue limits with Ameritas was $15k and Principal was either $15k or $17k (depending on when they were bought) are those benefit limits sufficient? The cap (participation limit) between the 2 of them would have been Ameritas $25k and Principal was $30k. The real ‘con’ for doing 2 contracts (unless you need more capacity than any one carrier can provide) is you have two companies to file a claim with, go through that process and maintain communication with during a claim process so why have 2 if one will fill your needs?
Hope that helps.
I question the timing of purchasing an Own Occupation policy as a resident.
Most start at 5k per month, that’s $60k per yr. That doesn’t come close to the “future earnings” that is the primary goal.
If your goal is to put in place the “guaranteed insurabilty” and the “student loanrider” , would it make sense to buy in the last year of residency? When you get your contract, boost your coverage to the desired, usually 60% of income or $25k per month. The residency coverage would not be as good but you would avoid the exam and have it in place for the point in time you can afford it and have the income to pay it. At that point its a choice of stacking etc. but you would have an exam anyways. A 5-6 year premium on an own occupation policy is a serious hit for a resident to insure that amount of compensation.
Once you have your contract, can you up the coverage?
Keep in mind, the goal was to most easily insure the attending pay bump.
Tim,
You can certainly wait or buy early, either is probably fine to do. The advantages to buying early is there is less time for things to have gone wrong with you from a health standpoint and you are younger so it costs a touch less. The con is…you have to pay for it. One option you typically have is buying a small policy ($1k-$2k) load it with options to $20k and typically pay around $20 per month per $1,000 of monthly benefit, that might solve the problem of costs. Keep in mind the carriers don’t hand this stuff out so if you want $20k per month that will take an income in the range of $600,000 to qualify for it. The comment of ‘60%’ that falls in the ‘group’ category where they then tax the benefit and it comes with offsets where the carrier gets to hold back part of that distribution, the individual policies are tax free and have no benefit reductions capacity for other benefits.
Why would you say waiting is fine? If that’s the case, then not buying at all is fine. It isn’t fine. Residents become disabled all the time. Just because you can’t get $250K in coverage doesn’t mean $60K is worthless. The first $60K is probably the most valuable. Plus it’s cheaper, Plus it locks in the ability to buy more (if you pay for a FPO rider).
I hear your passion and being that I was disabled from 1990-1993, I really understand it. Should everyone have coverage, probably yes but statistically will they be fine to wait a year, probably (as I had stated) yes, is there a possibility that they won’t be OK to wait a year, yes. I certainly wish I would have had something other than workman’s comp back in 1990 but I was 20 and did not know better. The fact is we see pretty much every week how a disability policy kicks in and literally changes our clients lives when they went from being a productive working individual to no longer being able to work due to an illness or injury. It is important but hey some people don’t wear helmets when they ride motorcycles either….
Tim,
I advise every resident to purchase their individual disability insurance (IDI) policy their intern year from a great carrier. Your health is absolutely guaranteed for how long? Exactly, it is not guaranteed any longer than this moment in time you are reading this comment on WCI. That is the big ‘pro’ of acquiring IDI as early as you can, you are as healthy as you will ever be. Scott pointed out the ‘con’ is paying for it over those few years before to are an attending physician.
Non-Cancelable/Guaranteed Renewable: Optimally you want BOTH of these provisions.
Non-Cancelable Policy means nothing about the policy can change:
– The coverage stays the same
– The premium the same
– Group policies will NOT have this provision
Guaranteed Renewable Policy means the policy language will never change HOWEVER the premium can change:
– The coverage stays the same
– The premium CAN CHANGE. (The company evaluates its book of business periodically and can choose to increase premiums or decrease premiums [never has occurred] on categories of policies based on any number of factors: State Issued, Date Issued, Age at Issuance, Type of Policy, Etc.)
– Group policies will NOT have this provision
While the “Student Loan Riders” are options that can come with IDI policies, the actual insurance to pay your student debts off, if disabled, costs very little each month (about $20/month in most cases for $2,000/month in coverage). This can be purchased separately or in concert with an IDI policy. Everyone’s loans, income and circumstances are a little different and there are a number of options to explore in handling debt repayment that work in concert depending on the specific doctor.
The most easy manner to absolutely ensure the attending ‘pay bump’ is to have a Non-Cancelable/Guaranteed Renewable IDI policy in-force that has Future Insurability Options up to a maximum limit (usually $16k/month – $20k/month depending on carrier and policy).
While the MOST IMPORTANT item in an IDI policy is the language used to define:
ANY OCCUPATION: Insurance pays you a disability benefit if you are unable to work at a job in any field.
OWN OCCUPATION: You will receive benefits if you cannot perform the duties of your own occupation even if you earn money in another field. Even if you earn more than you did in your own occupation.
The NEXT MOST IMPORTANT provision in your Disability Insurance Policy is the Future Purchase Option or Guaranteed Insurability.
– This rider allows you to buy additional coverage down the road without having to provide medical evidence of insurability. The insurance company cannot ask you any questions about your health. It Guarantees you the right to increase your coverage as your income increase. Many physicians can guarantee ALL of the coverage they will ever need during their career while in their residency.
– The primary reason you purchase disability insurance as a resident: By being younger and healthier at the time of purchase you never have to answer a health question again or explain hobbies and activities outside of your career.
Once you have your IDI policy (the contract) in place Future Purchase Option or Guaranteed Insurability comes in (2) flavors:
1) Benefit Update – this is an every so many years benefit update that allows the coverage to climb over time with your income. Pro – you can buy a small initial policy (less cost during residency) Con – You have the use each and every Benefit Update until you max the policy or you lose the subsequent Benefit Updates (that can be painful in a busy physician’s life)
2) Future Increase Option (FIO) – this generally requires you to purchase 1:3 up front. Hence your example of buying $5k/month benefit, in order to get a FIO for up to $20k/month. Pro – you’ve locked in the ability to go to $20k/month which for 75% of practicing physicians for the years 2020-2055 will be adequate. Con – you have to pay for it during residency.
Stacking – the utilization of (2) IDI policies for high income earning physicians. For 25% of doctors practicing between the years 2020-2055 they may choose this as an income protection strategy within a larger income protection plan for their career and their life. If you are headed into a speciality where your base salary will be above $500k/year at the beginning of your career AND will rise much higher during those first 5-7 years of practice, then it is one of many strategies you may want to consider.
Tim, after practicing anesthesia for 11 years and suddenly becoming disabled, I learned more about disability insurance than anyone else I knew. Today, I teach medical students, residents and young physicians how to properly protect their physician income and assist them in setting themselves up in life. Reach out anytime, I’d be glad to assist you.
~Chris
Sure, that works great as long as you don’t get disabled during residency or don’t become uninsurable. If either of those occurs, you’re far better off buying a policy with a future purchase option as an intern, which is what I recommend. If you are still insurable at the end of residency, then you have a choice to do the future purchase option or just get an additional policy and save the FPO for later if wanted/needed.
You are 100% correct!
One may become disabled or become non-insurable.
Two, most residents do have a disability plan. Far , far inferior to a separate own occ plan with the riders.
Your current position is about $60k per year.
Disability comes in many different forms. Permanent disabilty falls into the catastrophic range usually. What can you afford on the residents pay?
Just as a “beater” can serve transportation needs, the group policy can be used as a DI version. You can upgrade. The question is how one spends the money. There is a risk of course. My point was what is the risk? My supposition is simply that more residents withdraw or are dismissed that drops from disability claims. It’s not naked without coverage, you have a “beater policy”. You NEED to upgrade for sure when the Big Bump comes. The smart way to do it is as soon as you have more certainty on the horizon. Your are paying for a $60K benefit. Does a school teacher or carpenter need their own policy, own occupation and does that mean group disablity plans are worthless? It’s the compensation “bump” that is the “game changer”, its worth the funds to insure it and do it intelligently. Funds in residency are tight. Carrying six years of a “beater” and a “really nice policy” for the same $60k will cut something else out. There are risks, but the reward is only worth $60k until one becomes an attending. You 100% right, if you collect during residency its sad and the $60k will mean alot.
Tim,
One of the reasons WCI recommends buying a own occupation policy with a future increase option while being an intern is because disability insurance is not quite like a beater automobile for 3-5 years during residency.
Sure, we would rather be in a Mercedes than a Scion if we were involved in an automobile wreck… but disability insurance is an income protection vehicle you, your future family and kids and your remaining life are all simultaneously driving in when WHAM… you lose the remainder of your career earning capacity… and the only time you might get to buy it is today, as young and as healthy as you are. Think about kids, a wife, a home, a life and plans made and strived for… that is what I had at age 40 when my career was ended by the loss of use of my left hand.
The ‘cost’ seems to be your focus. You need to open your mind to your own future. Every additional dollar I paid in premiums from Intern Year through 1st Attending check, that entire amount was not even the daily bounce in my retirement accounts at age 40. Point is, cost is very relative. The “Tim at 40” is going to thank the “Tim of Today” for doing the proper thing for all the future Tim’s and is not going to spend one moment worrying about the loss opportunity cost of the money spent on proper independent disability insurance.
Owning transportation is NOT about doing the right thing by yourself and those you love and will love.
Owning outstanding true own-occupation independent disability insurance that is both non-cancellable and guaranteed renewability with a future increase option to cover most if not all of your expected attending salary IS about doing the right thing by and for yourself, your future self(s), those you love now and will love through time.
Every single intern and resident I have sold a disability policy to has found the money in their budget once they understand that a physician’s income protection begins with a great disability policy. Tim, if anything happens, you do not get a do over on this one financial item. After having great DI, I teach and advise on basic financial literacy, including life insurance, debt management and world-class savings habits. I want every resident to have an amazing financial foundation to their life.
Individual Disability Insurance is really the first financial-life planning vehicle that you, the future attending doctor you will become shortly, is purchasing. Picture yourself graduated, an attending, contract in hand, new job starting tomorrow July 1… what would that guy obtain?
Best of Luck! Reach out anytime and I’d be happy to assist you in doing this correctly the first time.
~Chris
Chris, you sure spend a lot of time on here promoting your business for someone who has never bought an ad from us. That’s technically not required to leave comments on the blog, but some might consider it poor form to repeatedly take advantage of a resource created by someone else to build your own business without even a token “thank you” purchase or contribution to the WCI scholarship. I count 28 comments so far and you solicit business in each one of them.
Kind of like the guy who goes into Starbucks to use the wifi but brings his own coffee.
Obviously we’re running a for-profit business just like you are. It makes it a lot harder to sell ads when people coming here to get information about disability insurance go to someone that doesn’t buy ads. If you’re ever interested in buying an ad, you can reach out to Cindy at cindy (at) whitecoatinvestor.com. I do require applications for insurance agents and financial advisors. The agent one can be found at the bottom of this page: https://www.whitecoatinvestor.com/websites-2/insurance/
Dr Jim,
First, I want to thank you very much for the separate section to have on Disability insurance that you have.
Second, I greatly appreciate your honest comments, reliance on experts, and most of all, the touch of humility you show.
Third, my knowledge was only gained from your site and Larry Keller. I talked with others, and found Larry’s knowledge and service outstanding.
The in’s and out’s of DI are complicated.
I bought and paid for my daughters policy and renewed it. I am “cheap”, she needs it and has her last year of her second fellowship .
Fourth, I am a Dad. Very protective. I looked up where you trained and residency. Jeff Miller does not advertise here. I know Jeff and when his financial blog highlights you, I know it’s a reliable source. I only reference his site when it specifically has an article that applies to a topic.
Fifth, I noticed on your scholarship page, Larry Keller contributed big. In addition to the ads, he provided content. As a fairness to those you list as providers, I don’t see you pushing specific vendors.
Sixth. I hope Chris seriously considers contributing with content, advertising, and the scholarship too.
By the way, the reference’s to sites and providers is helpful. I personally feel that contributing is one thing but customer acquisition in comments at some point turns into advertising.
Hi WCI (and others who may have thoughts):
I’ve been offered policies from the big companies and the main difference I see between them breaks down between Guardian’s definition’s of own occupation and the others (I’ll use Standard’s language because it is the policy I am most interested in):
Standard’s language: “Under this rider, you are considered totally disabled if, due to injury or sickness, you can’t perform the substantial and material duties of your regular occupation even if you are engaged in another job or occupation for wage or profit. You must also be receiving regular medical care from one or more physician(s) appropriate for your injury or sickness. If you are a physician or dentist and have limited your regular occupation to a specialty recognized by the American Board of Medical Specialties or American Osteopathic Association Bureau of Osteopathic Specialists or American Dental Association, then that specialty will be deemed your regular occupation.”
Guardian: “Total Disability: You will be considered totally disabled if, solely due to injury or sickness,
you are not able to perform the material and substantial duties of your occupation, even if you are gainfully employed in another occupation. Working an average of more than 40 hours in a week, in itself, is not a material and substantial duty. Your occupation means the occupation(s) in which you are gainfully employed during the 12 months prior to the time you become disabled. Your occupation does not mean a specific job title, designation, industry, or job with a certain employer. If your occupation is limited to a Medical Doctor or Doctor of Osteopathy and more than 50% of income is earned from hands-on patient care, we will consider you to be totally disabled even if you are gainfully employed in your practice or another occupation so long as, solely due to injury or sickness, you are not able to provide hands-on patient care. Hands-on Patient Care means meeting with a patient in a clinical setting for the purposes of providing medical advice, evaluation, diagnosis, or treatment, that you regularly and personally provide, during the 12 months prior to your disability. If your occupation is limited to a Medical Doctor or Doctor of Osteopathy and more than 50% of income is earned from performing surgical procedures, we will consider you to be totally disabled even if you are gainfully employed in your practice or another occupation so long as, solely due to Injury or sickness, you are not able to perform surgical procedures.”
Is there any reason to pay extra for the Guardian Policy for their own-occupation language regarding “hands-on” patient care?
Also, is a 3% COLA rider enough? Or, is it worthwhile to spend extra for the 6% COLA rider?
Thanks.
– Adam
I don’t think there’s a right answer. Both are very strong definitions. The likelihood of one paying and the other not is very low.
I think a young doc buying a policy ought to buy a COLA rider of some type. I don’t think there’s a wrong answer here. 3% for less money is good because it’s cheaper. 6% for more money is good because it offers more coverage. Obviously, if you get disabled and inflation is higher than 3%, you’ll wish you’d bought the more expensive policy. If you don’t get disabled or inflation stays low after you do, you’ll be glad you bought the cheaper one. Neither will protect you from hyperinflation.
Adam,
Both Standard’s and Guardian’s own-occupation definitions are strong. We have clients on claim with both of these policy’s language and there has been no problem with benefit payments from either company, both are excellent.
Many procedural-based physicians in our practice choose the Guardian language because they can often remain ‘hands-on’ while they can no longer operate instrumentation. If 50% or more of your income is derived from procedures, then you may want to consider Guardian. However, in reality, based on actual claims in a population of more than 3,000 physician policies over 40+ years no procedural-based physician on claim with Standard has had any difficulty receiving benefits.
Definitely get COLA 3%, You can pay for 6% but statistically you will finish your career without disability and will have just paid more for the policy over time.
If your income will climb over the next 8-15 years of practice then make sure you have some Future Increase Option (FIO) available.
Also, make sure your policy is Non-Cancelable meaning nothing about the policy can change. The coverage stays the same AND the premium the same.
Disability Insurance is one of the cornerstones of a physician’s income protection plan. Adam, make sure you are working with an independent non-carrier specific insurance broker.
Best of luck,
Chris
Adam,
After 25 years in this business one thing I have found is that the carriers will occasionally throw words into these contracts to make them appear better than the next company. The reality is they all perform essentially the same at claim time when you have a true own specialty definition of disability (not just definition of occupation). I am not typically the biggest fan of cola since mathematically it takes about 10-12 years on claim for it to have been the right choice but if it makes you feel more comfortable then by all means buy it. Just make sure you are getting the best cost per dollar of coverage for options and design features you want.
I couldn’t help but notice that no one seems to have offered their take on the pros and cons of disability insurance for medical students (like me). My school just sent me an email “strongly recommending” that I sign up for one of 6 potential policies. A sample of one of the options is a policy at $41/ month for a weaker definition of disability (no mental illness coverage) for a payout of only up to 12 months at $1000/ month should the student become unable to attend classes or rotations. The other selling point is a health-status-blind chance to buy more coverage out of medical school. The policies seem pretty limited in scope and time, but relatively inexpensive. Any thoughts?
If you can buy a real policy and have the money, maybe. But a crummy policy? I probably wouldn’t bother. $1000 a month for 12 months isn’t going to fix a catastrophe.
The reason the carrier choice is limited is due to the fact there is no employement at the moment and not everyone that starts med school finishes and becomes a MD/DO thus there is not a clear occupation for the carrier to follow. Once you are a MS 4 or even a 3 we can get coverage but because you are not yet IN residency the occupational class is placed at the lowest of any doctor class thus the cost is the highest. When we have these situations for our clients we will write case, assuming the client wants the coverage, but then once in residency we will re-classify the occupation thus lowering the rate. As for designs I am with WCI, at $1k of benefit and 12 month benefit period along with $41 monthly premium, no way. That should have a cost of about $10. We never have a benefit limitation soley due to being a MS so kind of expect about $20 for a $1k benefit as a MS but with benefits to age 65. If we can help further let me know.
GoalsDoc,
WCI and Scott are both correct. The target data for you to place on your calendar in Match Day. At that point you have an upcoming employment contract, a starting date, an anticipated salary AND you are still YOUNG and HEALTHY as you are ever going to be. Find and deal with an independent insurance broker who works with physicians and medical professionals.
If you have further questions; let’s ask them here on the forum because WCI medical student readers like you read these discussions. If you have specific medical history, you should not discuss that per se on a public discussion board. As a disabled physician myself, if you have private medical concerns, I’d be happy to have a one-on-one doc-to-doc phone conference.
~Chris
As a psychiatrist, I am having difficulty understanding why I need own occupation coverage. If I cannot practice as a psychiatrist for any reason [tbi, cognitive issues , als, dementia, chronic pain], I certainly will not be able to work in any capacity. If I do become a quadriplegic, I will still be able to practice psychiatry. I’ve seen it. Many of you have devoted much more time to this than I have, so please help me understand why I should consider own occupation coverage.
Dr. Lubin,
I personally don’t think your specialty typically needs a true own specialty policy for exactly the reasons you just mentioned. The reality is if you become so disabled you can’t do the typical (not always) duties of a psychiatrist then you probably don’t have the capacity to do much else. I almost always suggest all of my primary care (psy, peds, IM, and FP) physician clients look at a solid Own Occupation Not Engaged contract because then you still get to decide if you are going to work post disability or not and you will then save 12-20% in premium depending on the carrier you purchase from. Most contracts will still pay you 100% of your benefit with the Own Occupation Not Engaged definition if you are earning less than 20% post a disability of what you were earning prior to the disability so if one wants to do something productive but not earn a ton then they still can and it probably won’t affect your policy benefit payout.
You will want to be very careful of is any policy that states that after a period of time (24, 36, or 60 months) you will be ‘REQUIRED’ to go perform ANY job the carrier thinks you should based on Education, Training, ‘OR’ Experience, just to many possibilities for the carriers to say go be X. Just yesterday I looked at one for a client that said he will be required to do ANY job the insurance company thinks is ‘Reasonable’ for him. My opinion that is to wide open, reasonable to you is one thing reasonable to some insurance company is whole other. Don’t do these types of contracts, keep control of what your future holds, don’t buy a policy that controls your future employment.
If we can help further just let me know.
James,
If you are just starting out your medical career-life you are facing a big decision that affects all the “you’s” in your future. Psychologically, it affects the ‘you’ of today the most, right now – mostly when you consider the ‘cost’ of disability insurance because you are not able to fully comprehend the ‘benefit’ of disability insurance. That’s not a deficit of intelligence… it is a deficit of perspective for graduating residents. As a disabled doctor, it is an experience I would rather not have, but I do and I teach from that perspective. When you are 40, 50, even 60 years old, your choice(s) about disability insurance now will either leave doors open and resources available in those futures for all the ‘you’s’ or not. 1 in 3, that’s your chance of a disability.
I agree with Scott much of time on WCI, on this one, I disagree. Especially in Psychiatry, especially for the practice timeframe of 2020-2055. You’re speciality is unique in a bunch of ways and will, frankly, be transformative of health and wellness in the 21st Century in the United States. While you may not foresee injury or illnesses that would prevent you from practicing board certified, medical-malpractice-insured psychiatry… I can think of one scenario after another from a history of working with 100’s and even 1,000’s of physician stories when it come to disability.
“If I cannot practice as a psychiatrist for any reason [tbi, cognitive issues , als, dementia, chronic pain], I certainly will not be able to work in any capacity. If I do become a quadriplegic, I will still be able to practice psychiatry. I’ve seen it.” You wrote.
You have made correct assumptions about your own occupation but an incorrect assumption about ‘work in any capacity’ because your future, specifically 2020-2055, holds a bunch of changes coming to the world. If any of those things you mentioned really happened, it will not matter… most policies should function adequately, you may not even know whether your policy is paying you or not depending on the severity of your disability. There are a lot of things in the realm of injury and illness just short of those horrific items to also disabile you from your legal, insured practice and income.
Own Occupation Not Engaged is certainly one manner make you ‘feel better’ and save you 10-20% on premium payments over great true own-occupation policies – Scott is correct on that savings. If financial savings outweighs all other decision making, find an independent disability insurance broker and get a good Own Occupation Not Engaged policy.
I advise against this for highly cognitive specialities, such as psychiatry, and the generalists practices, in general, looking forward at the practice of medicine 2020-2055. I work with these generalists and a few more cognitive-involved physicians who are currently facing going on disability claim for ‘forced’ reasons… some fight it, some hire attorneys but in the end – the ones that thought about the unknown-unknowns of becoming disabled when they purchased those right-out-of-residency policies; their policies pay them NO MATTER WHAT they do or earn, period.
If I were young, maybe just graduated residency in 2016, or even last year in 2018… and knew what I know, lived what I have lived and are still living against my own group disability carrier for the right to be purposeful and live again… well, personally, having lived as a disabled physician – I would do a few things differently. That is what I teach one-on-one, doctor-to-doctor.
The one thing you must avoid, especially as a psychiatrist, is the ANY OCCUPATION language in an independent disability insurance policy – Scott explained this well above. Make sure your policy’s OWN-OCCUPATION PERIOD language is to Age 65, 67, or 70 (whatever the life of the policy you choose) – if you graduate (2015-2020) I would chose Age 67 given the trends in health, aging, longevity, etc and your age of qualifying for gov’t programs.
Must haves as a Psychiatrist: 1) NON-CANCELLABLE and GUARANTEED RENEWABLE [policy cannot be cancelled, premium price cannot change] 2) FUTURE INCREASE OPTIONS [because you are definitely going to make more in your field in 15 years than you are making today] and absolutely, 3) FULL life-of-policy MENTAL/NERVOUS BENEFIT [most cap out at 2-years only… Emer. Med, Anes, PSychiatry all need Full Mental/Nervous coverage in their private individual disability insurance policy.
Reach out anytime with questions or issues on this subject. Best of Luck!
~Chris
I disagree that non-cancellable is a must have for reasons discussed here:
https://www.whitecoatinvestor.com/is-noncancelable-really-worth-it/
I also disagree that FIOs are mandatory for an attending. Your NEED for DI should be going down throughout your career as your nest egg grows, not up.
I don’t think I could buy more than a 2 year mental/nervous policy back when I bought mine. That was the only option. It beats a kick in the teeth but I agree that one is probably worth shelling out for. None of us are immune to mental illness.
This is a gray area that for some crazy reason I only hear about from psychiatrists and never from nephrologists or pediatricians or family practitioners or internists.
It’s far more important to have SOMETHING in place when it comes to disability insurance than exactly what the something is. Obviously in this case and in some ways, you get what you pay for. A stronger definition costs more money and in some situations, more benefit. But that benefit is clearly worth more to an ophthalmologist than a psychiatrist.
“1 in 3, that’s your chance of a disability.”
I would appreciate any statistics on this.
If 33% crosses all occupations and income levels for permanent disability, that would seem to exceed any type of need other types of insurance.
That’s over twice as high as any statistic I’ve ever heard on it. I agree it needs a source before it should be believed. I’ve heard 1 in 7 before and that only from the industry itself. Last reputable study I saw suggested that 12.8% of Americans are currently disabled from working, but you and I know that many of those folks were never really capable of substantial work like the sort people who buy disability insurance do.
WCI,
I’m familiar with the 12.8% number with regard to one-year-or-more of disability (includes blue and white collar, all employment, I believe). Yes, I know that many of those folks were never really capable of substantial work over a lifetime in the first place. Not docs, though, not specific to our audience.
For doctors I’ve seen: “More than One Year” from 1 in 14 to 1 in 17 depending on the carrier and that looks right compared to actual data on the 9,500+ actual insured lives I have access to… Long Term Permanent… the numbers go down to roughly 1 in 49 for “More than Seven Years.” Under One-Year… could be 1 in 7 overall for doctors but even that could be inflationary if pregnancy-related delayed returns to work are considered ‘disabilities’ claimed or unclaimed.
A doctor being out seven months after an automobile accident with multiple plus pelvis fractures would not even be in the 12.8% statistic. Rebuilding your practices aside, a seven month lapse in income can be simply devastating for a physician’s’ family, their practice, their partners and themselves.
Should they have had six month in savings? Damn straight they should have and proper advocacy for that type of protection and savings taught by doctors to doctors, on leading platforms, such as WCI has increased awareness of fiscal issues among doctors. I see this trend of doctor-led education for physician-fiscal issues accelerating into the 2020’s and beyond and growing virtually for the rising Millenials at a very good pace.
~Chris
I want to hear more data from your database. What do you have? Disability by specialty? Disability lengths? etc.
So 1/3 is inaccurate? Please provide source.
“Hearing” doesn’t usually increase reliability.
Thank you. A lot of talk about accidents doesn’t help either.
This is personal, my disability robbed me of my career in 2010 when I lost the good use of my left hand, and my group carrier robbed me of my life after I was disabled. Pushing me to the point of contemplating suicide in 2016. I worked many hours to understand why?
I spend my time teaching other doctors to avoid the few mistakes I made financially – the single biggest one of all was not knowing I had the choice (from my practice group) to purchase an individual DI policy instead of just taking the offered group policy because only the older guys selected to do this because they had made the deal with the carrier’s representative and understood the group carrier needed enough lives to insure… so us younger docs did not have a choice offered to us.
Many doctors simply do not understand what their group disability policy really gives them in the event of a disability.
Getting good data about this industry, specific to doctors, is next to impossible. Here’s the type of public stuff out there that much of the written pieces cite:
Very often cited. Clearly biased and inflationary due to funding from the Insurance Industry:
Council for Disability Awareness. Chances of disability. July 3, 2013. http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp
Good table, old data but public information: Disability Insurance Quotes. The chances of becoming disabled. Disability Insurance Quotes. https://www.disabilityquotes.com/disability-insurance/stats.cfm#D
This one is interesting as it is surveyed based and Unum sponsored it… generating reliable statistics publically is difficult because anything uncovered statistically that does not assist in the selling of coverage is buried completely. FRom these types of ‘studies’ you get – “Fewer than 5% of disabling accidents and illnesses are work-related. The other 95% are not, meaning worker’s compensation doesn’t cover them. Approximately 90% of long-term disabilities are caused by illnesses rather than accidents.” That’s from – Consumer Federation of America; Unum. Employer-sponsored disability insurance: the beneficiary’s perspective. Unum. September 2013. http://forms.unum.com/StreamPDF.aspx?strURL=/FMS_122301-1.pdf&strAudience=StreamByNumber
Even if you look at information generated inside the ‘medical world’ such as:
American Academy of Family Physicians Insurance Program. Disability insurance myths that lead to financial mistakes. July 11, 2017. http://www.aafpins.com/2017/07/disability-insurance-myths-lead-financial-mistakes/
It’s a mess.
The same references are used over and over. So, about 17-18 months ago, I said this is crazy! I’m a scientist! Let’s do some retrospective work, how hard can it be? I asked many sources – if I could “using metadata-only” try to come up with a rate for doctors “Actually going on-claim for disabilities.” The potential data pool was over 9,500 insured policy holders over 35+ years – the majority of which is not electronic and all the files of actual claimants, which require permission from the insured for me (not an agent of record) to look at and so multiple NDAs, cover-your-ass language letters and then I generated some… numbers. I saw the problems with generating simple accurate numbers for this data. Clients who changed policies or left these brokers over the years and subsequently got disabled could not be accurately counted. Some pooling had to be done for time’s sake – because none of this work generated any income.
I wanted to know, most of all, for myself, how many doctors just get permanently disabled from their careers and the result was 1 in 49 between ages 30-50 have their career end by disability. But some things were not counted… for instance, a covered doctor 25 years ago, who lost the use of both hands, had their career ended and went of claim for total disability for six years. I thought, well, what happened in year #7… did they go back to work? Doing something else, got off claim, no… they were settled out by the carrier AND dropped from the records because they were off-claim. Initially, I was looking at going on-claim to being off-claim as data for 1 year, 2 years, 7 years, permanent… but unless I walked every single record, understood each story, on every single claim and categorized it all correctly… my data would be well, crap.
So, I got the bright idea to simply ask the carriers… I mean, they would have to know, right? They do but they are so utterly squirrely about this it like those books or movies where people have talked to the NSA. Can I get official data? I asked. “No, absolutely not.” I’m occasionally unforgivingly stubborn and I pushed my own carrier that I am on claim with to the limit and was met by someone high enough up that it was explained that actual data would be harmful to the industry because it would be so confusing as to be unhelpful – he didn’t have to say it, but the reason is that the data would hurts sales by confusing potential customers completely and would baffle brokers. Humans can only understand complexity to a certain level ‘outside’ an area of expertise.
I gave up after a couple 100 hours… I now understood the difficulty in the task. I understood why it was practically useless but from what I did mostly complete, then best-guessed and made educated-assumptions to at least have something I could ‘feel’ okay about.
Science gave in to Reality and pressure from others, eventually. And then there were lawyers, too.
Doctors with Private Individual Disability Insurance: (Had to go on-claim)
1 in 12 will be out “about or up to one-year” at some point in their careers from age 30 to 60 years olds. The rate rises for ages 50-60… not even distribution. Older = More disability. (Okay data)
1 in 14 to 1 in 19 will be out “about or up to two years,” again 30 to 60 year olds. The rate rises for ages 50-60 also, not even distribution. Older = More disability. (Worst data set)
1 in 49 will be out permanently or greater than seven years, like me, during ages 30 to 50 year olds and for age range it was far more evenly distributed than the other two pools. (Best data)
Are these accurate… to a point within a small pool over a long period of time. Are they publishable… not at all… however, since [and I must state this] – “Any conclusions based on [the] data analyzed for the purpose of calculated disability rates from actual disabled physicians and dentists are the opinion and the opinion only of Dr. Christopher Yerington; not representative of any broker, carrier or insured group of individuals” I can state those three specific broad numbers for 1, 2 and more than 7 years but must absolutely disclose that this is my opinion. Lawyers read: THIS IS MY OPINION.
Perhaps a much smarter researcher than myself will figure out, one day, how to get accurate numbers that will be more meaningful about actual physicians going on actual claims and how they return to work or not. Northwestern Mutual has huge numbers of data on doctors and disability and could easily publish meaningful statistics… would those numbers, in all likelihood, be confusing? Sadly, yes.
Why? Well, the whole industry has evolved over the decades, they’ve changed the policies, they;ve gotten the pricing wrong, they’ve merged or sold ‘disability’ books to one another… the ‘real’ data is likely lost in the shuffle of time, evolution of the industry and frankly, retrospective data 1980-2015 may not correlate with actual practicing doctors from 2020-2055. If you think you are frustrated with this… you have no idea.
The one stat I did the best work on from the data pool(s) (because I was most interested – it was personal) was permanently disabled sometime from age 30-50. That number is about 2%, I got 1 in 49, which is in-line with some of the carrier numbers I’ve seen over the past 2-3 years in understanding my own disability.
When you die, it doesn’t really matter to you any longer if you had the ‘right’ life insurance policy, you are dead. Humans understand death well (most of them) and so many of us purchase life insurance and so few of us die, it has become so cheap it is a commodity. WCI investor I am disagree on Term vs. Whole a bit in that he firmly believes 100% Term is the best cost vs. benefit for Life Insurance – and he is correct… if cost and benefit are the only two considerations, 100% Term is 100% correct. (Great explanations on this site.) Hell, for 85% of doctors, 100% Term is going to be the best, most-right choice for Life Insurance… but not always. If there is something else to weigh in the decision then it can get more complicated.
When you are disabled, permanently, pieces of who you were die. Your life changes. Your relationships all change. Your friends change. Your family ‘sees’ you differently. You are squarely to blame for the ‘right’ or ‘wrong’ of your disability insurance product. You then get to live the absolute misery of your decisions and watch, day by day, how your family plays the new set of cards dealt to it by your disability. Humans do not understand disability because the experience of being disabled is so vastly different from person to person. The experience of being dead, on the other hand, is the same, universally, for all history. Few purchase Disability Insurance compared to Life Insurance and some good percent, be it 7%, 10% or even 25-30% of us then experience some degree of disability… so it is not cheap and unlikely to become a commodity.
The ‘group’ of physicians is self-selected, highly motivated, intelligent, compassionate, tenacious, dedicated hard-working and service-oriented (for the most part) and their general knowledge far exceeds the general public. They ‘lose’ 10-years of life training. 85% of them incur the average price of a home in America worth of educational debts to do this. In short, they are a ‘unique’ pool.
Could the rate of doctor disability be as high as 3 in 10 or 1 in 3… it could… but it is likely less than this – I personally believe it to be about 7-8% for being out one-year (totally disabled). Less than one-year, partial disabilities, way higher than 7-8%, is it 30%, 33%… I do not believe so from what I have learned.
I do know that for the coming 21st century’s doctor career (2020-2055) Proper Income Protection is a absolute must-have. Quality Independent Disability Insurance is one of the cornerstones of the foundation of Income Protection for the American Doctor.
~Chris
All I can say is that I disagree with Chris on many fronts with his last post. Many primary care physicians get over sold on language in policies that never come to benefit them from them If they have a claim time. I always try to balance Probabilities vs. Possibilities when building/suggesting features for each client.
When an agent is as passionate as Chris appears to be in his post then I typically suggest to the prospective client that they should ask that agent to refer over to them 3-5 current clients (that is not many), currently on claim, who (in your case) are psychiatrists, have a true own specialty definition of disability and are employed in some post disability occupation that the income earned from that new occupation would have negatively impacted the payment capacity of the Not Engaged clause (you have to earn greater than 20% of your pre-disability earning to negatively affect the policy). Once you have those discussions with those clients currently on claim, with post disability earnings greater than 20% of the pre-disability earnings then you can decide for yourself in your specialty what is really ‘mandatory, strongly suggested, encouraged, or advised against” options/features.
At the end of the day this is your policy not anyone else’s and what should be done is have ALL of the options put on the table, explained to you and then you need to choose what is best for you and your family.
Scott,
“At the end of the day this is your policy not anyone else’s and what should be done is have ALL of the options put on the table, explained to you and then you need to choose what is best for you and your family.” Scott at MD Financial Services
On that, we wholeheartedly agree! I am passionate about proper income protection for physicians and disability insurance is part of that foundation, as well as proper life insurance and having enough basic financial literacy to conduct your life’s expenses prudently such that you become a world class saver. This is critical for doctors in the 21st Century.
That prudence in expenses includes disability insurance cost as both Scott and WCI allude to… my passion comes those physician and medical professional clients on claim that suffer the altogether unnecessary indignities of the carrier’s process when the policy language is constructed such that the sold expectations and the realized reality differ to a large or even monstrous degree. From carrier specific financial representatives, Scott is so right, “primary care physicians get over sold on language in policies that never come to benefit them… If they have a claim” because their primary objective is commission. These medical groups often have some of the worst Group Disability Policies, too.
Residents, one great way to get first-hand disabled doctor information is to ask your Program Directors to get you the names of faculty or previous residents that have become disabled. Scott is VERY RIGHT about that… 3 to 5 conversations with disabled physicians in your field will forever change your perception of your ‘why’ on disability insurance. Work with an independent insurance broker and get an education first, then talk about policies… if the person you are talking to will not spend good quality time getting to know you and with you having you understand disability insurance as a physician before shoving quote(s) at you, get a second opinion.
Scott, maybe we should write something together on partial employment and earned income by disabled physicians on-claim that necessitates worrying about over 20% of pre-disability income… because I am convinced the number of physicians in this category from 2020-2055 will rise dramatically due to technology. When I speak with a 28-30 year old new doctors, I am looking forward at their career-life 2020-2055. Tele-presence, gig-economy, app-driven income, etc is all changing many earned-income possibilities. Already, many young doctors are immediately creating other streams of income related or closely related to medicine, their field and speciality. For the doctor who is just a doctor, only going be a doctor and only ever earn money from being a doctor, you are correct on the risk vs cost vs. benefit ratio on not-engaged… that’s not the doctor of the future I see.
~Chris
Sure,
Disability is defined as – any illness or injury preventing an individual from employment
Permanent Disability is defined as – any illness or injury preventing an individual from employment ever again in any occupation
I’ll address statistics, but the most important item about Independent Disability Insurance for Physicians is the language of the actual contract. Most pay 2-4% of there annual salary to ‘protect’ 50-70% of their income. That 2% difference is a huge deal to some people, to others, it the difference between nightmare, forever and moving on with your life, if disabled.
That’s your question, IF disabled?
From all sources, in total, in the general population, blue and white collar workers, Some Disability occurs at some time, for some period of time in a ridiculous available data range of 50-80% – and that is not even breaking that up to short-term disability and long-term disability… THIS DATA is useless for physicians.
It’s like telling people they have an 80% chance of being involved in a car accident. It’s actually higher than that, over the previous 50 years, something like 92% of Americans have been in a car when the car has hit something it was not supposed to hit. Dying from that event: 1 in 583 chance over your entire life. https://www.iii.org/fact-statistic/facts-statistics-mortality-risk Being disabled from that event: No data available. (Too many variables)
However, to understand disability statistics for physicians, one has to understand the language and the overall disability statistics in the USA. Start with something like: Disability and health in the United States, 2001-2005 Published Date: July 2008 Series: DHHS publication; no. (PHS) 2008-1035. This will give you overall statistics, demographics and classifications on all disability in the US Population. There are many sources available from our US Government on general disability and this is ‘best’ it can do, which is sad. However, it makes sense, disability is taboo, the why’s and how’s are often forced by statues and policy language into buckets that may or may not fit an individual… and people lie, cheat and steal, even against insurance companies… and those companies omit or obfuscate data, any data, that would somehow, someway, psychologically or emotionally reduce the chance that people buy disability insurance.
For Doctors, Dentists and highly-licensed highly-educated medical professionals, business and legal professionals… data is very much harder to come by. For my business and for personal edification out of fury and frustration, I have done much research and met with dozens of underwriters and business development individuals inside the big carriers in this business. Some under strict NDAs and others, more casually. My goal was and is to know, for sure, what I know in order to guide the next generation of doctors into avoiding the pain I had to deal with when I became a disabled physician. Getting ‘official’ data out of the major disability insurance carriers that insure physicians and dentist for is like pulling teeth without anesthesia! (No pun intended.) Yes, I’ve gotten a peek at the inside and I’ll give you my stats in a minute.
So where do the ‘public’ statistics come from on this stuff? These Big Carriers put together something called the Council for Disability Awareness. Barry Lundquist, interim president of the Council for Disability Awareness, was quoted: “In retrospect, we agree the N.S.C. stat may not be the best to represent the risk of income loss due to disability. However, we do stand behind the validity and appropriateness of our statistics, and the fact that the risk is significant and that workers simply don’t pay enough attention to the reality of disability.” https://www.nytimes.com/2010/02/06/your-money/life-and-disability-insurance/06money.html
That particular NYT article went on to say, “Numbers for white-collar workers are usually lower than for assembly line workers. If you have no chronic conditions, eat decent food and avoid cigarettes, your odds may drop to 10 percent, according to the “Personal Disability Quotient” quiz on the Web site of the Council for Disability Awareness.”
You’ll also read statistics about doctors returning to work at 5x the rate the general population returns to work after a disability. While true, the barriers can be considerable for working disabled doctors. Here’s one on that: As far as disabled physicians remaining in the workforce in America – Am J Phys Med Rehabil. 2005 Jan;84(1):5-11. “Physicians with disabilities and the physician workforce: a need to reassess our policies.” DeLisa JA1, Thomas P. and the NYT wrote about it here: https://www.nytimes.com/2017/07/11/upshot/doctors-with-disabilities-why-theyre-important.html
Why not publish the data – well, if maybe only 1 in 10 white collar workers (doctors) becomes disabled and they returned to work at 5 times the rate of normal workers… why would they buy disability insurance? It’s an expensive bet to place, very expensive. It’s expensive for many reasons, but mostly, great disability insurance is expensive because it is worth every penny if you are the individual on the page full of statistics.
I truly wish I could post an official graphic showing you the rates of physician disability – I am trying to get one put together for publication with MGIS – A large, and mostly good, group disability insurance carrier for doctors and dentists. When I do, I will be writing about it online.
The amalgamated statistics I draw from when speaking or writing on the subject are from all my research and contacts plus my major mentor’s (representing just under 10,000 insured physicians over 35+ years) life’s work are as follows:
3 of 10 or 1 in 3 physicians will have a disability that prevents them from working for up to one year sometime during their career. Actual data has been climbing in this category “Up to One Year” due to the fact that post-pregnancy time off of greater than three-months but less than one-year is sometimes counted for this statistic AND the number of female physicians has steadily increased over the past decades. Subtracting pregnancy-related ‘disability’ due to normal, non-ill, non-injured causes (where no disability claim is made) – is a difficult guesstimate – AT BEST. However, using best-guess for a few things… over and over again the rate is 3 of 10 or about 1 in 3 doctors. (30%-33%) is the semi-standardized number used on promotional and advertising materials. Okay, so that is “Up to One Year” AND this includes BOTH total-disability and partial-disability which makes the overall statistic mildly inflationary but the point is: Disability Happens. For your career life as a doctor, age 30-65 years old, you are 50 times more likely to suffer a disability, for some time, than you are at risk of death. Shockingly, or not shockingly, if you are into numbers, actuarial science and the insurance industry – great disability insurance will cost you 50 times more than life insurance.
Of those physicians who are disabled for “Up to One Year,” a percentage of them will remain disabled for “More Than Two Years” and a small percentage of the “More Than Two Years” will be disabled for “More Than Seven Years.” Being disabled for “More to Seven Years” in Medicine is career ending as your skills and knowledge are somewhat perishable. This is, of course, more true of procedural based medical practices than cognitive based medical practices. Reviewing actual lives covered vs. total permanent disability that is career-ending… for just under 10,000 lives insured over 35+ years the permanent disability rate is between 2% – 5% for physicians. Why the range? Well, because the life of a policy only goes to a certain age, like 65, 67 or 70 and disability claims increase with age, permanent disability rates increase with age and so that one-year, two-years, seven-years data gets funny after age 60.
Those physicians, like me, who suffer a career ending permanent disability end up being a small percent of the “3 of 10 Doctors” but the effects are devastating if you are on claim with a horrible uncaring company for decades as opposed to if you are on claim with a company that properly priced in paying you to age 65, or 67… or even 70 for your own-occupation. Who paid that difference in premium prices between good and bad policies? The insured did. This is where the old adage, you get what you pay for comes into play.
Looking forward to the practice years 2020-2055 for those doctors graduating right now 2015-2019… what disables people is changing, slowly. We, as a society and because of the very medical science we practice, are getting far better at treating physical injury and illness… to the point that the remaining nerve-based and psychological scars from life’s adverse events are slowly but surely taking their toll, even on doctors.
I hope that helped clarify it for you, reach out anytime if you have questions,
~Chris
TLDR: This comment might be longer than the post itself. You know you’ve written nearly 3000 words on this website today alone? You could write a book very quickly at this rate.
Correct my math:
Promotional disability is 1/3.
Short term disability is covered under different policies.
LT DI is between 2%-5%, per his analysis and extrapolation, with qualifying over 65 mumbling.
I thought he had access to proprietary claims data.
This is so confusing. How many phone calls will be needed? Total paying benefits/Total Policies ( preferably just physicians).
May I copy this and publish it as an ebook?
Side hustle! Please!
Tim, I’m working up to a book! (Apparently, on WCI today)
I wish it were a side hustle. I wish I was not disabled. I wish I could do cardiac and trauma anesthesia again, because I loved it.
I got personally screwed by a misconstructed unilateral group disability policy when my left median nerve stopped functioning secondary to a brachial plexopathy. Someone should have told me to give up and go die… oh that’s right, my carrier’s claims specialist did just that after I gave them the records for my hospitalization for suicidal ideation caused by having no understanding of a path forward in my work-life after medicine.
Going through that, did change me… I lost in Federal Court. I lost my sanity for a few months. I cannot beat my group carrier at the disability insurance shuffle as a claimant and ERISA Law really only protects the Insurance Company form the Insured… at least, in Court. ERISA as a guideline for insurance companies to behave responsibly is a good thing.
Can’t win… so I did what I think many doctors would do if they had a condition and there was no cure… I researched and learned all I could. I did meet some really great, talented independent brokers who were taken with the level of ‘care’ I had for my fellow physicians to get this right in there lives.
Proprietary claims data is just that, proprietary. I did some bench-research to arrive at something for myself and I’ve pushed, I’m still pushing, in fact, to get better data published for doctors to make informed decisions. Until then, I teach. Have I stepped on some toes to try to get answers, yep… but I am a better advocate for it… even with the scolding I’ve taken legally.
~Chris
Happy New Year, all. Having just reviewed all of this, I can only comment based on my experience handling long term disability claims and lawsuits (though I’ve done so for nearly 25 years), and having represented approximately 10 psychiatrists during that time. A decision whether to purchase true own occupation coverage is, like many purchases, a cost-benefit analysis. The road to your benefits is always easier when you own a policy with true, own occupation coverage and good residual disability benefits. That proved to be the case for a psychiatrist I represented recently with Parkinson’s Disease. There are so many conditions that can affect our health and our ability to perform our occupational duties. Moreover, people’s lives routinely change over their careers. I have represented so many individuals whose occupational duties have changed over time, or who have completely changed occupations entirely. Owning a policy with true own occupation and residual benefits proved to be a key element in me and my firm getting them or making sure they kept their benefits.
Evan.
Please be advised that that name of my law firm changed this week from Schwartz Law PC to Schwartz, Conroy & Hack, PC.
http://www.schlawpc.com.
Evan,
Cost-Benefit analysis for private individual disability insurance for physicians done in generalities will end up working, in general… by may not specifically work for a specific case of disability for a specific doctor. “The road to your benefits is always easier when you own a policy with true, own occupation coverage and good residual disability benefits.” – Evan Schwartz.
In re-reading this WCI Disability Insurance blog and my recent posts… the ‘goal’ of the discussion for every advisor and commentator is to have physicians financially safe and protected. That means something a little different for each client AND it means something learned a little differently by each advisor owing to their experiences.
I wrote a lot, even too much, this week on WCI… while sort of missing the point that my personal claims experience and my consultant work with attorneys on disability claims cases for physicians have, as Scott alluded, made me ‘passionate.’ I’ll even go as far as ‘jaded’ about the disability claims process. As a commentator on a blog, the focus, my focus, should be on the specific questions/comments posed and not the sweeping underpinnings of the physician disability insurance carrier world and why evidence-based data is not public.
Evan’s comment just reiterated my own ‘passionate’ views. I am a disabled doctor. I lived the experience and it was awful. Truly awful and I sincerely hope not one of you ever has to go through it. Educating medical students, residents and young attending physicians that the best protection they can get is true own occupation allows me some comfort knowing, some percentage of these doctors will lose their careers early AND receive a benefit, for the life of the policy regardless of income or activity if they cannot perform the substantial and material duties of their own occupation.
Sure, even those disabled doctors on true own occupation policies with zero restriction/limitation/ambiguous engaged/activity language still have to 1) be seen regularly by their own personal physician quarterbacking their illness or injuries care that underlies their career-ending disability and 2) comply with the disability carrier’s request for information, exams, or other compulsory events the continue the claim.
The rate of doctor disability is irrelevant to those who become disabled while dependent on their income and really irrelevant that disabled doctor’s spouse, children and extended responsibilities that they may still continue to have to practice groups, other businesses or financial activities related to the entrepreneurial American physician.
We, doctors, never unload all the medical information we know to a patient, only the most relevant and critical information for understanding and decision making. That is what I absolutely love about WCI! Information presented for doctors to make simple, knowledge-leveraged and personally-profitable decisions (mostly by reducing cost and liabilities) about their own financial futures. Pulled the WCI Book ([email protected]) off my office library shelf yesterday. I opened it to pages 60-61. The book is so often cited to me by resident physicians I knew right where this line was in it.. Page 60, Paragraph #2, first Line: “Early in residency, buy as large of a high-quality, speciality-specific, own-occupation, individual disability insurance policy as an agent is willing to sell you.” WCI.
Do that… and you will have acquired a huge foundational building block for the financial security and protection of your physician career life. Add inexpensive term life insurance when responsibility dictates, save, save, save and always look to reduce your liability exposures. That is the goal each advisor and commentator has for the new and young doctors reading this!
~Chris
Ob- Gyn resident here, Question, does anyone have an idea of what a solid independent disability insurance should cost for an ob-gyn resident in her 20s? I have a quote of ~$150/month but am nervous it is a steep price. Any ideas/ advice?
If you are healthy and we can get an unisex then about $25 per month per $1,000 of monthly benefit for a solid basic policy. If a unisex is not available where you work then count on $35-$40 per month per $1,000 of monthly benefit.
OB/Gyn Resident,
1) Acquiring excellent disability insurance as young as you can, as healthy as you can is a huge plus in disability insurance cost over your career lifetime.
2) Unisex pricing is still available in a couple of States like Ohio or Montana. Discounts may be available through various programs you may be connected to through your residency, hospital or State or National association(s).
3) As Scott stated, 2.5-4% of the benefit or $25 – $40 per $1000 of benefit is the price of quality individual disability insurance. Disability insurance is expensive because it is utilized.
~Chris