By Phil West, WCI Contributor
There’s a phenomenon in the American economy known as the “pink tax,” in which consumer pricing scales higher for women and women’s products. According to Bankrate, the “pink tax”—which would more aptly be called “pink pricing”—“costs the average woman over $1,300 a year and impacts all aspects of daily life from shopping to dry cleaning.” Higher pricing for women also applies to a particularly important insurance investment for any worker but particularly for physicians: disability insurance.
While it might seem unfair that disability insurance for women costs more than disability insurance for men, it’s still worth having should the unexpected happen. Let's talk more about it.
Why Do You Need Disability Insurance?
First of all, it’s worth knowing why you’d want to invest in disability insurance. Disability insurance is a form of insurance that gives you an income to live on if you become so disabled that you can no longer work. There are policies available covering both short-term disability claims (3-12 months) and long-term disabilities (typically until you can return to work or until you reach age 65-67), but your mileage may vary depending on the quality of the policy.
One in seven doctors will need disability insurance at some point in their careers—and they're not the only ones. According to the Council for Disability Awareness, “One in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age.” In any given year, “around 5% of working Americans will experience a short-term disability (six months or less) due to illness, injury, or pregnancy,” with most being non-occupational in nature.
The site goes on to note, “A 2019 study of consumer bankruptcy filings found that 77.8% of debtors cited income loss as a contributor to their bankruptcy. This included 44.3% specifically citing medically-related work loss as a contributor.”
In short, disabilities that keep you from working are more common than you might think, and if you don’t prepare for that possibility with disability insurance, you might regret it. At the very least, it could delay your path to financial freedom.
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How Much Disability Insurance Should You Buy?
How Much Does Disability Insurance Cost?
While you might qualify for disability through Social Security, not everyone does, and you shouldn’t count on it to entirely replace your income. Unlike cheaper insurance policies like term life and umbrella policies, physician disability insurance is expensive (although not quite as expensive as your malpractice insurance). The reason it costs so much is because it actually gets used. The likelihood of you acquiring a long-term disability during your working years is approximately seven times as high as your risk of dying in those years. A typical policy bought by a healthy doctor in their 20s or 30s will cost something between 2%-6% of the benefit. If your monthly benefit is $10,000, expect to spend $200-$600 per month for that. However, what you need and what you’ll have to pay can depend on several factors, including whether you have an employer that offers disability insurance or subsidizes it as a benefit.
You can also opt for supplemental disability insurance, covering gaps between what an employer might provide and what you feel you need to meet your expenses. There’s even mortgage disability insurance, which you may be able to obtain from your mortgage lender to guarantee you’ll have a roof over your head.
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People Aren’t Buying Disability Insurance, But They Should
Why Does Disability Insurance Cost More for Women?
There are actuarially-based reasons that disability insurance costs more for women than for men. As WCI covered in a prior article, “The cost differential is based on carrier data and claims histories (proprietary information) that show that, across all fields, women leave the workforce more often than men due to injury and/or illness.” On the flip side of that, “Women get a little break on the life insurance side, as men tend to die younger and more often by suicide, making coverage for men more pricey.” If you’re tackling both disability and life insurance in your mix, as you should, it could come out in the wash, depending on the policies you’re purchasing.
But there are other potential pitfalls relating to women’s health and the ability to obtain strong disability coverage that includes various conditions involving breasts, ovaries, fallopian tubes, and cervixes that are exclusive to women.
What’s more, the Council for Disability Awareness notes that the No. 1 reason for a short-term disability claim is pregnancy, making up 22.3% of all cases.
Women are also much more likely than men to develop a disability that prevents them from being able to work with ailments like arthritis, rheumatism, heart disease, cancer, mental health issues, diabetes, and nervous system disorders topping the list.
So, while there might not be a good reason that a deodorant stick with a flower on the package costs more than one without it, there’s a numbers-based case for why disability insurance costs for women are what they are.
But, especially given the role that pregnancy has in disability claims, it’s not something you want to wait to buy until you’re older. Disability can hit at any time, either from an accident, an unexpected diagnosis, or an unexpected complication from a planned pregnancy. As the maxim goes, it’s better to be safe than sorry, especially when it concerns your income and the potential loss of it due to an unexpected disability.
Have more questions about insurance and what kind of policies would be the best for you? Hire a WCI-vetted professional to help you sort it out.
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