Is It Time for A Disability Insurance Checkup?
Most doctors accept that they need disability insurance. They’ve invested heavily in their career, so it makes sense to protect their paycheck the same way they’d protect any other highly valuable asset. What doctors might not realize is that paycheck protection isn’t a one-and-done purchase. In fact, an annual checkup is recommended.
As your career advances, you might need higher limits and even new coverage types. As a result, letting your policy renew year after year might not be enough. You need to conduct a disability insurance review.
There Are Many Types of Disability Insurance Policies
If you’re not an insurance professional, you might assume that one long-term disability insurance policy is pretty much the same as another, and as long as you have coverage, you’re good. Not true. Yes, having some coverage is better than having no coverage, but there are some pretty significant differences between different types of policies.
- Policy types: First, you have group disability insurance versus individual disability insurance. Group policies are typically tied to employment, and while this can simplify the underwriting requirements, these benefits aren’t typically portable if you change jobs or start your own practice, and they may not offer the coverage types and benefit amounts you need. Individual disability insurance can provide customized coverage that meets your specific needs.
- Policy details: For medical professionals, one of the most important issues is whether your disability insurance policy uses an own-occupation or any-occupation definition of disability. If it uses an any-occupation definition, you won’t be able to claim benefits if an injury or illness prevents you from working as a medical professional but does not prevent you from working in other industries – even if those industries pay much less.
In contrast, own-occupation policies payout if the policyholder is unable to work in the occupation they’ve trained for. For physicians who have invested heavily in their training and career, own-occupation coverage is the gold standard.
Beyond disability definitions, there are many other things to consider. What is the monthly benefit cap? How long is the elimination period, which is the amount of time you have to wait before you can qualify for benefits? Also, what is the benefit period? This will determine whether you can collect benefits until you reach retirement age, or just for a couple of years.
And these things just the tip of the iceberg. There are also various riders to consider, including student loan riders that could help you pay off your medical school debt.
Your Income Protection Needs To Evolve Over Time
Once you get all of your disability insurance needs figured out and have a policy in place, you might think you’re good to go. After all, when it comes to insurance – whether it’s auto insurance, health insurance or disability insurance – many people just let their policies renew every year without reviewing their coverage. But that can be a big mistake.
As your needs change, you may need to update your protection levels. You may even need to buy an entirely new type of policy. That’s right – one policy might not be sufficient as your career grows and you have both yourself and your own practice to think about.
If you haven’t reviewed your disability insurance policy in while, there’s no time like the present.
Six Questions to Ask
1. Has Your Income Gone Up?
As your career advances, it’s normal to earn more money. From one year to the next, these raises might seem relatively small – maybe too small to warrant a change in disability insurance coverage – but after a while, they can add up. If you haven’t updated your disability insurance coverage in several years, there’s a good chance that the benefit amounts no longer provide sufficient coverage. As a result, if an illness or injury prevents you from working and you have to live on your disability insurance payouts, you might be looking at a drastic reduction in monthly income.
The good news is that getting additional coverage can be easy. If you have a policy with the future purchase option rider, you can increase your benefit amount as your income increases – without the need for medical underwriting.
2. Have You Changed Employers?
Many employees get group disability insurance coverage through their work. Some of these employees may supplement their coverage with individual disability insurance, while others may depend solely on their group coverage. Either way, changing employers can have a big impact on the group benefits available to you. It can also impact your salary and other details that could affect your individual disability insurance coverage. If you’ve changed employers recently, it’s a good reason to review your coverage.
3. Have You Started Your Own Practice?
Starting your own practice can be very rewarding. It’s also a lot of responsibility. If an illness or injury prevents you from working, it’s no longer just your own income on the line. The success of your practice may also be put in jeopardy.
Business overhead expense (BOE) insurance offer important protection. Like other types of disability insurance, BOE pays out if the insured is unable to work because of an injury or illness, but the funds are used to cover business overhead expenses, such as rent, utilities, accounting fees and certain other common costs associated with operating a business. BOE policies typically provide benefit periods of 12 to 24 months, giving you time to recover or make other arrangements for your practice.
4. Have You Taken on a Partner?
Many doctors take on a partner when they open up a practice. This can be a great way of limiting the amount of time and money that you have to invest, but it can also lead to complications if one of the partners becomes disabled and can no longer work.
A disability buy-sell insurance policy can provide funds to buy out the disabled partner’s share in the practice. This can create a mutually beneficial, pre-arranged solution for an otherwise difficult situation.
This is also a good time to reassess your individual disability insurance coverage. If you have at least three people in need of disability insurance, you might be able to save money on coverage with a multi-life disability insurance discount. This can be an affordable way for you and your partners to obtain coverage.
5. Have You Taken out a Bank Loan?
Starting a practice can be expensive. You’ll need money for the office, utilities, equipment, furniture, payroll and more. If you don’t have the cash on hand, you’ll need a loan. You might not think this is a big deal. After all, you’ll be bringing in good money soon. But if a disability stops you from working, paying off that debt can become a problem fast. Bank loan disability insurance is designed for this exact situation.
6. Have You Hired New Employees?
Your employees will want disability insurance, too. Guaranteed standard issue disability insurance is a great option for groups of five or more employees. Because the underwriting requirements are minimal, even people with pre-existing conditions can qualify for coverage.
Do You Have the Right Protections in Place?
The most important question of all can also be the hardest question to answer: Do you have the right disability insurance?
Having some disability insurance is better than having none, but that doesn’t mean you should settle for less-than-ideal coverage. Little coverage details might not seem important now, but if you ever have to file a claim, those differences in terms can have a significant impact on what happens next.
As a medical professional, you know that getting a second opinion can be a smart move when it comes to diagnoses. The same is true for insurance coverage. To make sure you really and truly do have the right disability insurance, you might need another pair of eyes. A disability insurance expert can help you review your coverage to see if there are any coverage gaps or new needs that aren’t being met.
Daniel C. Steenerson, CLU, ChFC, RHU, is the president of Disability Insurance Services, headquartered in San Diego, Calif. Disability Insurance Services is a leading provider of income protection products and services for physicians, medical practices and Graduate Medical Education programs. To learn more visit diservices.com.