Insurance is an important component of your overall financial plan and disability insurance for physicians is key to securing your financial future. Understanding these basics of physician disability income insurance may help you make informed decisions about the type and amount of coverage you may need at this stage in your career.
No one can predict when a disabling injury or illness might occur, so It’s important that as a physician you maintain the right amount of disability insurance. Buying when you are young and just starting out makes sense. You shoulder significant risk in the amount of education debt you may be carrying, and a disability of any magnitude could quickly result in financial hardship. Also, the younger you are when you buy your disability income insurance, the more affordable the premiums will be. Building an income protection plan with disability insurance is not a one-time event. Instead, you should review the plans you have on a periodic basis—especially as your income changes—to make sure your coverage meets the growing demands of your career.
Every disability insurance plan has its own definition of disability that an insured must meet to qualify for benefits. The most common definitions are “own-occupation” and “any-occupation”.
A policy with an “own-occupation” definition of disability will pay benefits if you are unable to work in your own medical specialty due to a covered illness or injury, even if you are able to work in another field of medicine.
Under a policy that includes an “any-occupation” definition of disability you only qualify for benefits if you are unable to work in any occupation for which you are suited based on your education, training and/or experience. Often under these policies, if you can work at another job, no matter the level of expertise or compensation, you would not receive benefits.
When buying disability insurance, a physician must pay close attention to the definition of disability. Look for disability coverage designed for physicians that provides specialty specific protection.
There are several distinctions to understand about the type of disability insurance you will encounter during your career—group disability insurance, association group disability insurance, and individual disability insurance. The key to building a solid income protection strategy of physician disability insurance is to understand that these types of insurance are not mutually exclusive—it’s not one or the other. A strong insurance portfolio layers different types of disability income insurance in order to provide you with the broadest protection possible. An insurance specialist, knowledgeable about physician disability income insurance can help you find coverage that best meets your needs.
If you are an employed physician, the group disability insurance you likely will have as part of your employee benefits program offers a baseline of coverage. Employer group disability insurance is typically reasonably priced and offers benefits that are often one-size-fits-all. In most cases, this type of disability insurance won’t offer you the level of income protection you may need, leaving a portion of your income unprotected. Supplementing your employer-provided disability income insurance may help to fill in any gaps in coverage.
Individual disability insurance, often referred to as IDI, offers level premiums that are guaranteed over the life of the policy. These policies are often non-cancellable as long as the premium payments continue to be made. Individual disability policies are very attractive to physicians, but the policies are usually expensive at younger ages.
Association group insurance is offered through a group, like a medical association or specialty society. These policies typically offer less expensive premiums and are an attractive option for physicians looking for quality coverage at at rates that are typically less expensive than individual disability insurance. Premiums for an association group policy are usually stepped—less expensive in the early years of the policy and increasing at specific age bands. This type of disability income insurance appeals to budget-conscious physicians.
You may want to consider pairing different disability insurance together. In some cases, this approach can help you secure even more coverage – while keeping your overall premium payment lower.
As you shop for disability insurance it’s important that you weigh the costs and benefits of different policies over the course of your career to find the best coverage that meets your financial needs. Again, an insurance specialist knowledgeable of physician disability insurance needs can help you build an insurance portfolio in line with your career stage and personal financial goals and circumstances.
Premium rates for disability insurance are based on a variety of factors such as age, gender, monthly benefit, optional riders, occupational classification, and policy provisions. Keep in mind, the younger you are when you buy your coverage, the lower the insurance premiums.
As you shop for disability insurance, you’ll have two options when it comes to premiums, level or stepped. Level premiums stay the same throughout the life of the policy. Stepped premiums rise at certain intervals, typically 5-year age bands. Level premiums may seem an attractive option by setting a fixed expense for you, but there are some important considerations that may make a stepped premium a better option at this early stage in your career.
When establishing insurance premiums, an insurer considers the costs and risk of insuring policyholders and then sets the premium accordingly. Those costs and risks are greater with advancing age. With level premium insurance those higher costs, typically collected at older ages, are spread out across the life of the policy, which means an insured will be paying inflated premiums at the younger ages. It also means that an insured would need to own the policy until the maximum coverage age to get the full value of selecting level premium disability insurance.
Disability insurance with stepped premiums charges rates based on age bands. These rates reflect the actual risk of each age group. Stepped premiums result in lower premiums for younger physicians that increase overtime. Having lower costs early in your career allows you to secure quality disability income protection while you may be paying off medical student loans and building your practice.
A qualified insurance specialist can help you sort through the differences between level and stepped premium disability insurance to help you find coverage that meets your needs.
This is an exciting time in your medical career. The transition from training to practice like the other transitions in life are your moment to take stock and lay the groundwork for a successful career in medicine. Along with any professional development plan you might have to keep your career on track, you should consider creating a personal financial development strategy to help keep your financial goals on target. Insurance should be foundational to your overall financial strategy with physician disability income insurance as the cornerstone. Seek out a trusted resource to help you build out a portfolio of quality insurance protection to help safeguard your financial future.
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