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Disability insurance is foundational income protection insurance. When an accident or illness leaves you unable to work for months at a time, disability benefits can help you take care of your financial responsibilities, reducing the need to liquidate investments, drain your savings, or forcing your family to make difficult sacrifices.

Who should have disability insurance?

The short answer is everyone who earns income. But it is particularly important for physicians, who typically complete residency around age 30, reducing your years of active earning life. In addition to the immediate setbacks, a disability can take away irreplaceable years of earning potential. (The average disability claim is paid over three years.[1])

Many physicians also enter professional life with substantial student loan debt. The average loan balance for a medical school graduate is now $200,000.[2][1] Kiplinger, “Are You Underestimating Your Need for Disability Insurance, September 2020 [2] Source: American Association of Medical Colleges, Physician Education Debt, and the Cost to Attend Medical School 2020 Update

But how much disability insurance do you need?

There is no single answer to that question. Your need depends on your personal situation. This is definitely something to discuss with your financial advisors and an insurance specialist, but the questionnaire below may help you get started.

[1] Kiplinger, “Are You Underestimating Your Need for Disability Insurance, September 2020
[1] Source: American Association of Medical Colleges, Physician Education Debt, and the Cost to Attend Medical School 2020 Update

Income Replacement Worksheet: Let’s Run the Numbers…

Monthly Expenses/ Personal
Housing (rent, mortgage, maintenance fees) $__________
Utilities (phone, water, electric, internet) $__________
Insurance (auto, home, health, life) $__________
Transportation (car payments, auto maintenance,
train/bus passes, gas) $__________
Childcare, Afterschool Care $__________
Education (college, private school, pre-paid tuition plans) $__________
Food, Clothing $__________
Alimony Payments, Child Support, Structured Settlement $__________
Debt Payments (student loans, credit cards, business loans) $__________

(If applicable) Monthly Practice Expense Responsibility
(Include your share of salaries, office space, insurance, etc.) $__________

A. Total Expenses: $__________

Monthly Income if you’re disabled (after taxes)
Other Wages (spouse, live-in relative) $__________
Rent, Royalties, Trust Payments $__________
Alimony, Child Support, Structured Settlement $__________
Investment Income $__________
Individual or Employer Disability Plan $__________
If applicable, potential income from practice $__________
Other $__________
B. Total Income: $__________

C. Estimated Monthly Shortfall or Disposable Income (A – B )_ _ $__________

B. Total Income: $__________

C. Estimated Monthly Shortfall or Disposable Income (A – B )_ _ $__________

For most, a disability that takes away your normal income creates a fairly sizeable shortfall. And if you have placed a “0” after “Individual or Employer Disability Plan”, your financial health is at risk. But even when you have disability insurance from your employer or practice, it is very possible that you need more. Be sure you are aware of possible limitations with your existing individual or employer coverage:

  • What percentage of your salary or income does it cover? The typical range is 50-60%.
  • How long is the benefit period?
  • Do you pay the premium or is it paid by your employer or practice? If the employer or practice pays the premium, the benefit is subject to federal taxes and may be taxable by the state as well. Be sure to check your tax advisor about how this would affect you.
  • Could your existing disability coverage require you to accept any work you could handle, even if it is not medical practice and pays much less? Or will it pay until you are able to again work in your specialty?

The next steps

By completing the worksheet above, you have taken an important first step toward identifying any gaps in your current disability protection and establishing your need to supplement with additional disability protection today. But also think about the future. Are you planning to increase your family size, or take on the financial responsibility for the care of aging parents? Is your benefit package likely to change? Are you considering professional moves? What would inflation do to your budget?

Take potential changes like these into account as you review your disability insurance needs. Then consult an insurance professional who thoroughly understands physicians’ insurance needs.

One final note: Review your coverage periodically. Your family’s financial needs and your income may change as time goes by, and you should make sure your disability insurance keeps pace.

Important Dates For Medicare Enrollment

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