Purchasing disability insurance during medical residency is a smart idea for young physicians. Obtaining coverage during training allows one to benefit from better health, lower premiums and less financial documentation. Most of the top insurance carriers providing high quality coverage for physicians today have special limit programs that allow residents and fellows to obtain disability insurance based on their level of training rather than their current income. This is advantageous for young physicians but only if the planning is done properly.
As a medical resident or fellow, you are likely to be in practice for over 30+ years, and likely will also maintain your disability income coverage that long as well. It is therefore critical to be certain that the policy you purchase provides high quality income protection. Below are three questions that young physicians should ask before purchasing a Disability insurance policy.
1. Can the provisions or price of my disability insurance policy change in the future?
The response to this question can be answered by reviewing the renewability provision of a disability insurance policy. As a young physician, it is best to obtain a policy who’s provisions and pricing cannot be changed in the future. In order to achieve this goal, medical residents must obtain a disability insurance policy that is non-cancellable and guaranteed renewable. This will guarantee that the insurance carrier, from which the policy is purchased, cannot cancel the policy, increase the premiums or change the provisions so long as the premiums are paid on time.
2. How is total disability defined in my policy
The definition of total disability is one of the most important provisions for young physicians to review when purchasing disability insurance. This is the provision that dictates the circumstances in which an insurance carrier will consider a person as totally disabled at the time of claim. In today’s market, there are two primary versions of this provision that young physicians should focus on.
Often referred to as modified own-occupation, this definition considers a person totally disabled if solely due to injury or illness, he/she is unable to perform the material duties of his/her occupation and must not be gainfully employed.
The second and more reputable definition, known as true own-occupation, considers a person totally disabled if solely due to injury or illness, he/she is unable to perform the material duties of his/her occupation, even if he/she is employed in a different occupation.
As noted, the true own-occupation definition of total disability does not forbid a person from being gainfully employed in a different occupation, while on claim. For a highly educated and skilled professional, like a physician, this can be a critical provision.
In reviewing this provision, young physicians should be sure to also inquire as to the period for which this definition is applicable. Few insurance carriers will offer a true own-occupation definition of total disability with medical specialty language for the full benefit period. For medical residents and young physicians, it is advisable to obtain only a policy that will provide this definition for the full benefit period.
3. Does this policy include the necessary riders for my circumstances and future?
There are many optional policy riders that can be included in one’s disability insurance contract. Policy riders are enhancements that aid in protecting against some additional level of risk associated with experiencing a long-term disability. Young physicians that consider purchasing coverage during medical residency should be aware of three specific riders to include in their policy.
Residual disability benefits: This policy rider provides a benefit for partial disability, where an injury or illness directly causes a 15-20% or greater loss of income. This could be the result of working less hours, being unable to complete all occupational duties or simply the inability to work as efficiently throughout the day. Since an overwhelming number of long-term disability claims are the result of an illness and most illnesses do not appear and disappear overnight, it is likely that a disability claim will either start or end with a partial disability, hence making it a fairly important rider.
With respect to the nature of medical professions, it is imperative to be assured that the residual disability rider also include recovery benefits for the full benefit period. Recovery benefits are payable, following a period of total disability, when an insured returns to work full-time and still incurs a 15-20% or greater loss of income. Such may be the case for a physician or dentist in private practice, whose income is reduced significantly resulting from the loss in patient base throughout a period of total disability.
Future Increase Option: This rider provides medical residents with the option to increase their monthly benefit in the future, as their income increases. The true benefit of this rider is that no medical underwriting is required in order to exercise an increase option. At the time of increase, a person is simply required to provide financial documentation showing the increase in income that warrants a benefit increase, but not medical information. Being that an attending physician’s income is considerably greater than a that of a resident physician, exercising an increase is typically justifiable within the first few years as an attending.
Cost of Living Adjustment: This rider is intended to hedge the risk of inflation that one may incur during a long-term period of total disability. For every year that a person remains on disability claim, the policy benefit amount will be increased by a defined or variable interest rate at each policy anniversary. For a young physician whose career may extend 30+ years, the risk of inflation can be of great magnitude in a long-term disability claim, and is therefore wise to include in a policy. Benefit increases are handled very differently amongst the various insurance carriers offering disability insurance and should therefore be reviewed carefully with an experienced advisor.
Similar to the care and attention a medical student contributes to his/her studies and a resident physician contributes to his/her training, young physicians should apply a high level of care and attention to protecting their highly trained skill level and future earnings with a quality disability insurance policy. You can review more detailed information by visiting the Young Physicians Buyer’s Guide exclusively for physician disability insurance.