A physician’s most important asset is their ability to earn an income. A loss of income can have devastating consequences particularly for resident physicians who may have limited savings and carry significant debt. Without an adequate level of disability income insurance protection, you may quickly feel the financial hardship of a disabling accident or illness.
The need for physician disability insurance is clear—understanding the distinctions between different disability plans may not be. Knowing the finer points when buying disability coverage may make a difference in how well your physician income is protected.
When buying disability insurance, a physician must pay close attention to the definition of disability. Look for coverage that provides specialty specific protection. A plan with an “own-specialty” definition of disability pays benefits if you cannot perform the work of your medical specialty. A definition of disability that is generic to occupation, like many found in employer provided coverage, might deny benefits if you are physically able to work in another area of medicine. Knowing the difference is vital.
Physician disability insurance provided by an employer is likely paid for with pre-tax dollars. This means that the disability benefits you might receive under that plan would be subject to both federal and state income tax. The result, your monthly disability benefit could turn out to be significantly lower, depending on your federal and state tax bracket.
In contrast, benefits received from coverage you bought and paid for with after-tax dollars are generally not considered taxable income. Supplementing your employer sponsored disability insurance with additional disability coverage designed specifically for resident physicians may help fill in the gap in benefits. You should consult your tax advisor.
The employer provided disability income protection you receive during your residency training will end when you finish your residency. Disability insurance you buy and pay for yourself is yours and will remain with you as you move through your career. Maintaining your own disability income insurance as a supplement to your employer provided coverage serves as an extra layer of protection filling in any gaps in coverage.
Several factors impact how much disability coverage you should have, but the key driver for most physicians is salary. As a resident physician you need to look for disability insurance that is designed for a resident physician. With a resident physician disability insurance plan, insurance carriers allow for certain underwriting concessions that ease financial underwriting and may offer a monthly benefit that is significantly higher than you otherwise might qualify for given your current income.
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