When applying for individual disability insurance, a person is generally eligible to obtain a benefit amount that is directly correlated to his/her current earned income at the time of application. For example, a business owner would qualify for benefits based on his/her total net-of-expense income, while a salaried employee would be eligible based on his/her W-2 income. For medical residents and fellows however, insurance companies offer Special Limit Programs which are designed for the unique needs of the medical professional. This article touches on the individual disability insurance benefit amounts for which physicians should expect to qualify, when applying for coverage during or shortly after training.
For medical residents and fellows, the amount of individual disability insurance benefit offered by most insurance carriers is based on Special Limit Programs that are exclusively available to new medical professionals. Physicians can expect to qualify for $5,000 of monthly benefit throughout residency, between $5,000 and $7,500 of monthly benefit throughout fellowship, and between $6,000 and $7,500 of monthly benefit (depending on medical specialty) during the six months prior to and up to twelve months after becoming an attending physician. These benefit levels are available without requiring financial underwriting, and are not impacted by actual earned income or any existing group disability insurance.
To put this in perspective, $5,000 of monthly benefit is the approximate amount of benefit offered to an individual earning $100,000, and $7,500 of monthly benefit is the approximate amount of benefit offered to someone earning $160,000. Insurance companies are aware of the significant increases in income that physicians realize during the transition from training to Attending physician status and therefore offer benefit amounts that are more suited for the expected income level of an Attending physician, than a resident or fellow.
Physicians who are within 60-90 days of starting a new employment arrangement that provides an income in excess of $160,000, may be benefited by applying for disability insurance under traditional financial underwriting in order to qualify for larger monthly benefit levels. For example, an attending physician earning $300,000, who is not provided with group disability insurance, may qualify for approximately $13,500 of individual monthly benefit if financially underwritten. This is considerably greater than that for which the same attending physician would qualify under a Special Limit Program which is between $6,000-7,500 (depending on medical specialty).
It is important to note that even a physician who IS provided group disability insurance may still be best served applying under Special Limit Programs since group disability insurance is not accounted for under these programs. For example, an attending physician earning $300,000 who is provided with a taxable group disability insurance benefit equal to 60% of income ($15,000 monthly), may only qualify for approximately $5,000 of individual disability insurance if financially underwritten. By applying under the Special Limit Programs however, the same physician would be eligible for $6,000-$7,500 (depending on medical specialty), since the group coverage is not considered. This strategy would be most beneficial for physicians who are looking to secure a larger amount of individual disability insurance, which is generally more comprehensive and includes an own-occupation definition of total disability.