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Debunking Typical Disability Insurance Myths

By: Kendra Henderson
Physician Insurance Specialist

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I believe, unequivocally, that the disability insurance offered by AMA Insurance Agency, Inc., is a good choice for any physician or physician group, at any stage of their career.

Yes, I am employed by AMA Insurance, but that gives me a firsthand perspective. I have seen, time and again, how the insurance we offer helps physicians hold on to the financial security they have worked so hard to achieve. I also want to emphasize that I am employed by AMA Insurance—on a salary, not on commission. My job is to help physicians and their families get the financial protection they deserve in the easiest, most sensible, and most economical way.

Disability insurance is one of the most important ways, but physicians often have misconceptions about it. The actual facts debunk these common myths about disability insurance in general.

Myth #1: “I don’t need my own disability insurance. It’s part of my employer’s benefits package.”

There are a few problems with this. First, it is likely that your employer-provided disability insurance coverage will only cover a portion of your base income—60% is typical.

Second, the words “base income” are important, especially if your take-home includes overtime, performance bonuses, shift differentials, etc. Furthermore, any paid benefit will be subject to tax , if the premiums for that coverage are paid with pre-tax dollars. Also, consider what will happen if you leave an employer or practice. Most employer-provided disability insurance is not portable.

There is another issue that is of special concern to highly trained physicians. Employer-sponsored disability plans generally cover employees at many levels and may not offer the specialty specific coverage that physicians require.  A physician is best served by coverage with an “own-occupation” or “own-specialty” definition of disability. The plan would pay benefits when the claimant was unable to perform the regular duties of his or her own occupation. Without this specific definition of disability, a plan might not pay benefits to an orthopedic surgeon as long as he or she could perform other activities typically done by a physician.

Disability insurance offered by AMA Insurance is a good choice, because it provides that “own-specialty” provision, in both the AMA-sponsored plans as well as the employer-group coverage we offer.

Myth #2: “I doubt that I will ever be disabled.”

In fact, there is an approximately 1 in 4 chance that you will be disabled at some point during your working years.1 The disability might be caused by an accident, but around 90% of long-term disabilities are the result of disease or illness.2 The average length of a disability claim? Close to three years!1  Three years of severely reduced income would likely compromise your most cherished financial goals—a secure retirement, college educations for your children or the creation of an estate to pass on to the people and causes that mean the most to you.

Myth #3: “Social Security or Workers’ Compensation will cover me.”

That could be true, but the benefits are likely to be slow in coming, and they often do not come close to replacing the income you have lost. In addition, Social Security uses a strict definition of disability and pays only for total disability.  No benefits are payable for partial disability or for short-term disability.  It is more realistic to think of Social Security as one possible source of disability income, rather than the primary source. Workers’ Compensation might cover you IF—and this is a big IF—you are injured on the job. But, as we pointed out earlier, the overwhelming majority of disabilities are disease and illness related.

Myth #4: “Disability insurance is too expensive.”

Insurance costs are based on risk, and as was pointed out earlier, there is a very real risk that a disability will occur, and that it will continue for years, rather than months. Those factors are reflected in the premiums. However, there are ways to achieve reasonable premiums, even if you are not yet in your prime earning years.

One good way to maximize disability insurance affordability is to take advantage of the bargaining power of groups like the AMA. There are people out there who will try to sell you on the idea that an individual policy is the only way to go, but be aware that it is also likely to be an expensive way. One reason that the disability insurance offered by AMA Insurance is a good choice is that we are able to offer rates that reflect the strength of America’s physicians. And while we offer highly competitive rates to all physicians, AMA members also receive special member discounts, further moderating the cost.  In addition, we offer affordable employer-group plans which, when paired with personal disability coverage, can help drive down overall costs while maintaining appropriate coverage amounts.

Myth #5: Level rates are a must.

No. While it is true that level rates work for some physicians, there is a large group that benefit from stepped rates. Let’s say you are a resident, not yet at peak earning power, and perhaps burdened with student loan debt and the costs of a growing family.

Because you are relatively young, you are also relatively low risk. Stepped rates recognize this and sync your rates with that risk. While level rates have the advantage of predictability, stepped rates have the advantage of greater affordability at a time when you are just getting started.

Myth #6: “True own-specialty” is the only way to go.

Okay, an “own-specialty” provision in disability insurance is a must for physicians. It means that your disability insurance will pay benefits as long as you are unable to perform the normal activities of your specialty—any of them. But there are different “own-specialty” definitions.

One, “true own-specialty” pays benefits, even if you continue to earn income related to, but not the practice of, your specialty—for example, teaching neurosurgery rather than performing it. So, you could end up with a monthly income that exceeded your pre-disability amount.  However, this option can be expensive.

A slightly different provision would pay partial benefits if you returned to work in another specialty. Yes, this option limits the benefit, but it’s also less expensive than a “true own-specialty” definition.  AMA Insurance offers both options. Which works for you?

That is a decision only you can make, based on a careful analysis of your needs and situation. My colleagues and I have helped hundreds of physicians like you identify the right balance between cost and coverages. We can get in touch with you at your preferred time when you use this handy appointment scheduler. Or you can call 888-627-5902, toll-free, of course.

Kendra Henderson is a Physician Insurance Specialist at AMA Insurance. She specializes in disability and life insurance and works with physicians and their families at every career stage. Kendra is licensed to sell insurance in all 50 states.

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