Designing a policy for you
Disability insurance serves as a financial safety net, providing a monthly benefit if an illness or injury prevents you from working. Understanding the various policy features and optional riders available can help you secure a policy that suits your needs and budget.
The Basics of Disability Insurance
Disability insurance policies are quite complex and include many moving parts that impact the cost of a policy and quality of coverage. Thankfully, it’s much simpler than being a doctor and even a basic understanding of the policy structure and optional features available can go a long way. The summary below provides an introduction to the primary concepts physicians should know when considering private disability insurance.
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Non-Cancelable & Guaranteed Renewable
When you purchase a non-cancelable and guaranteed renewable disability insurance policy, it means that the insurance company cannot cancel your policy, increase your premiums, or change your policy provisions until the policy expires – except for nonpayment of premiums.
Elimination Period
The elimination period is the number of days that must pass after a disability begins and before benefits start to accrue. With most private policies, this period can be satisfied by a partial and/or total disability and does not require consecutive days of disability. Most companies offer 60-, 90-, 180-, and 365-day elimination periods, but the 90-day option is most commonly selected.
Benefit Period
The benefit period is the maximum period of time for which an insurance company will pay benefits for a continuous disability from the same cause. Once the benefit period is exhausted, benefits will terminate. Most insurance companies offer benefit periods extending 2-years, 5-years, 10-years, until you reach age 65, or until you reach age 67, but the most commonly selected option is benefits to age 65.
“Own Occupation” Total Disability
We believe that the True Own-Occupation definition of total disability is the most favorable definition available to physicians today. Some insurers include this definition within their base policy, while others require it to be added as an optional rider. The Own-Occupation rider enhances your policy to provide total disability benefits when “an injury or sickness prevents you from performing the material and substantial duties of your occupation, even if you are able and choose to work in a different occupation”.
Partial Disability Benefit
The partial disability benefit, which is sometimes also called residual disability benefit, provides benefits while you are still working in your occupation but experience a loss of income as the result of an injury or sickness. Without this benefit, you would need to be totally disabled to qualify for benefits from a policy. We consider this one of the most important features for consumers to include in their disability insurance policies. You can learn more about this feature here.
Benefit Increase Option
The Benefit Increase Option rider allows you to increase your coverage amount in the future without requiring updated medical information at the time of increase. Benefit increases must still be justified financially based on your income and any other disability insurance you have, but the rider makes it easier to adjust your coverage by avoiding medical screening. This is particularly beneficial for individuals expecting significant increases in income throughout their career. You can learn more about this feature here.
Cost of Living Adjustment Rider (COLA)
The COLA rider is intended to help maintain the purchasing power of your monthly disability benefit during a long term disability claim. To help reduce the risk of inflation, this optional rider enhances your policy so that benefits are increased each year that you remain continuously disabled. You can learn more about the Cost Of Living Adjustment rider here.
Automatic Benefit Enhancement (ABE)
The ABE rider is available with most carriers at no additional cost and increases your monthly benefit by a designated percentage each of the first 5-6 policy anniversaries. Your premium will also increase each year as a result of the increased benefit. Annual benefit increases are intended to happen automatically while allowing you to opt-out in any year.
Catastrophic Disability
This rider allows you to receive an additional benefit if you are catastrophically disabled – meaning an injury or sickness leaves you cognitively impaired, irrecoverably disabled, or unable to perform two or more of the Activities of Daily Living without human assistance. We do not typically include this feature on the initial quotes we send new clients but are always happy to discuss this option with those who are interested.
