Beginning early in their careers, physicians are commonly coached on the importance of purchasing an individual disability insurance policy during or shortly after training. Unfortunately, not all individual policies are created equal, which is why we recommend physicians follow certain guidelines to help avoid purchasing inadequate income protection. Below is a list of DOs and DON’Ts for physicians to consider when purchasing an individual disability insurance policy.
Right now is a great time for physicians in the market for individual disability insurance. There are a number of insurance carriers offering comprehensive and competitively priced coverage. For this reason, it is critical to review multiple options in order to make the most educated decision possible. Be sure to carefully consider the policy features and provisions being offered before looking at pricing.
With individual disability insurance, you generally get what you pay for. However, some companies are more competitively priced than others for particular medical specialties – without carefully reviewing multiple options, you may end up overpaying for comparable coverage.
The most consumer friendly definition of total disability available today is the True Own-Occupation definition. This definition states that the insurance company will consider you totally disabled if you become unable to perform the material and substantial duties of your occupation, even if you are working in a different occupation. There are plenty of companies offering this type of coverage to physicians today, but beware as some companies market their policies as Own–Occupation, even though they do not offer a true Own-Occupation definition of total disability.
Medical residents are in a unique situation, where certain features and optional policy riders could significantly enhance the value of a disability insurance policy. Resident physicians should ask their agent to review the optional policy riders so that they too can review, compare and make assessments of which features are the most important and favorably worded.
Although your agent may be honest and genuine, there could be things that even he/she does not know about each disability insurance policy. Asking to see a specimen policy is not insulting and can help you better understand the benefit that a given policy truly provides. It should also be acceptable for you to ask for multiple proposals so that you can make the comparisons yourself. Even if your agent tells you that he has reviewed multiple policies and can equally sell any of them, you should be provided the opportunity of reviewing those proposals yourself to decide whether quality recommendations are being made.
In every contract there will be a disclosure indicating that fraud can be a basis for disputing and refusing claims without a statute of limitations. That means that even if you’ve had your policy for 20 years before needing to file a claim, the insurance company can still deny your claim if fraud was committed at the time of the application. Rather than paying for a false sense of security and lying in order to get coverage, it is best to address each question honestly.
Disability insurance is generally seen as an expensive type of insurance for physicians to purchase during training. This is partially because medical residents and fellows are eligible to purchase a larger benefit than would typically be warranted for their income level. For example, a resident physician currently earning $50,000 annually may be eligible for as much as $5,000 of monthly benefit, the equivalent amount generally offered to someone earning $100,000. While this is clearly beneficial in a claim scenario, it also requires a larger ratio of cash flow to be attributed to the premiums. It is certainly worth considering the largest benefit available, but do not forget to keep cash flow in your calculation.
Michael L. Relvas, the owner of this website, is a Certified Financial Planner™ and specializes in assisting physicians nationwide with their income protection. For more information, contact us at 800-817-4522 or submit a quote request.