As a graduating resident doctor, the number of decisions that you are forced to make can be overwhelming. To add to the list of issues, you’ve probably been recommended to obtain a personal disability insurance policy and have no clue of where to even start. This article provides a brief outline to help young doctors find the best disability insurance policy for their unique situation.
For starters, you should understand that disability insurance is simply a type of insurance coverage that pays you a monthly benefit if an injury or illness prevents you from working. For anyone who depends on their income, disability insurance is the most effective way of insuring the financial risk of becoming unable to earn an income, as the result of an injury or illness. As a graduating resident doctor, you should focus on obtaining a long-term disability insurance policy that protects your ability to practice in your medical specialty.
As a young doctor who is likely to maintain this coverage for nearly thirty years, you should obtain a policy that is Non-Cancellable and Guaranteed Renewable. This feature restricts the insurance company from altering the plan or increasing your premiums in the future, provided premiums are paid timely. For most young doctors, a typical disability insurance policy should include a 90-day elimination period (period of time when benefits are not yet payable) and a benefit period (period of time for which benefits may be paid for any single period of disability) that pays to age 65 or longer.
In some situations, a complex medical history may prevent an applicant from qualifying for a “to age 65” benefit period, but any young doctor who does qualify should select this benefit period. For a young doctor who is in a financial position to support an elimination period greater than ninety days, a 180-day elimination period could be an effective way of lowering cost, without reducing the quality of coverage.
Perhaps the most important provision for highly specialized professionals, like doctors, is the definition of total disability. The most favorable definition for doctors is the True Own-Occupation provision. This means that the insurance company will consider you totally disabled and will pay benefits if you are unable to perform the material and substantial duties of your medical specialty, due to injury or sickness, even if you decide to work in a different medical specialty or field.
According to the Council for Disability Awareness (2014), approximately 90% of disability claims are caused by illness rather than accidents. Since an illness does not typically prevent a person from working from one day to the next, it is important that your disability policy include benefits for partial disability and not just total disability. Partial benefits should be accessible regardless of whether a total disability is suffered, they should be payable for the full policy benefit period, and they should be accessible after recovering from a total disability so long as there is still a 15% or greater loss of income, due to injury or sickness, even if you have returned to work full-time.
As a graduating resident doctor, your income has significant room for growth and in order to guarantee the ability to update and increase your disability benefits in the future, you need to include a Future Increase Option rider, commonly referred to as FIO. There is a cost associated with this rider, but it will allow you to increase benefits by financially qualifying in the future without requiring additional medical screening*. It secures your ability to medically qualify for additional coverage, even if your health deteriorates.
Cost of Living Adjustments are most important for young doctors, since there is a greater number of expected working years. The COLA (Cost of Living Adjustment) rider increases your disability benefit throughout a long-term disability claim, in order to adjust for increases in the cost of living**.
So long as you’ve included the key provisions mentioned above in your policy, and you obtain coverage through a financially stable insurance carrier, you are likely to end up with a high quality policy. There are a number of insurance carriers today that provide comprehensive and high quality disability insurance for doctors. Following the advice provided can assist graduating resident doctors in obtaining one of the most favorable disability insurance policies available.
* Restrictions and limitations apply. While medical information is not required when exercising a future increase option, applications to exercise an increase option will be financially underwritten taking into consideration both the applicant’s then current income, as well as all disability insurance which is then in force, or for which the insured has applied or is eligible to receive.
** This benefit is not necessarily protection against increases in the cost of living.