Disability Insurance for Doctors

Disability insurance is a safety net product that Cunningham Group recommends every doctor purchase. Because you and your family’s livelihood is attached to your acquired knowledge and the physical ability to apply that knowledge, the right disability insurance product is critical to safeguarding your future.

More so than in most any other career, doctors are required to invest considerable time and money into training for their profession. According to a 2010 Graduate Questionnaire by the Association of American Medical Colleges (AAMC), at the time of graduation, medical school graduates carry on average around $147,000 in educational debt, and most graduates defer repaying this debt until after they complete their three-year residency. During this deferment, interest accrues on student loans, increasing the doctor’s total indebtedness prior to beginning repayment. And this trend is only going to grow more severe, as the AAMC predicts that—by 2033—medical school students may have to take on as much as $750,000 in education-related debt.

Consider that according to the Social Security Administration, 30 percent of people who are 40 years old will become disabled before they reach 65 years of age. A doctor who is making $250,000 annually and becomes permanently disabled at age 45 will lose $5 million in future income. The right long-term disability insurance policy can offer income protection, providing cash to meet expenses such as mortgage payments, utilities and—in many cases—medical school student loan payments if you are unable to continue in your specialty.

Disability insurance can be purchased at any time, but we strongly recommend that a physician begin protecting his or her present and future income during residency. By starting a disability policy at this point in your career, you guarantee lower costs because disability insurance rates are guaranteed based on your starting age until 65 years of old.

There are disability insurance products specific to medical residents and interns. Because a resident’s income will be considerably higher when they go into practice, these products often carry special, higher limits of disability coverage. A resident’s premium and benefits will also be locked-in until retirement. And because your income will be limited as a resident, many insurers offer what is considered a graded-premium disability insurance policy, which has the same benefits as level-premium policies but the premium starts much lower and increases each year. You can change this type of policy later to one with guaranteed-level premiums, but starting with a graded-premium disability policy is a great way to guarantee your insurability and get the most coverage at the lowest cost.

Even if your employer or professional association offers group disability insurance, we recommend purchasing an additional individual disability insurance policy. Group policies generally include restricted benefits, and individual disability insurance carries a much more comprehensive level of income protection.

When shopping for an individual physician disability insurance policy, there are five important attributes to consider.

1. The insuring company’s financial strength is the most important consideration. The issuing company should carry a strong financial rating from an independent rating service, such as A.M. Best, Moody’s Corp. or Fitch Ratings. You are insuring your financial future, so it is critical that the issuing company be financially secure now and into the future.
2. The disability insurance policy should have an “Own Occupation” definition of disability. An own-occupation definition of disability is the inability to perform the material and substantial duties of your profession. Ideally, the policy should define your occupation not only as a physician but further define your occupation as your specialty.
3. The disability insurance policy should have a residual (partial disability) definition properly assigned. A strong policy will define how a claim is paid during the physician’s recovery and when there is still a residual disability after a doctor returns to their profession on a partial basis. We recommend a disability insurance policy that covers loss of income during recovery versus one that defines residual disability as “time and duties.” A time and duties defined policy will only pay for lost income during the disability and the first three months the physician is back to work, while an income definition of disability would pay pro rata payments to the physician until he or she has gotten back to 80 percent of pre-disability income.
4. The disability insurance policy should be non-cancellable, which means that the insurer cannot cancel your policy, increase your premiums or change the provisions so long as you pay your premiums on time.
5. The disability insurance policy should provide for a Cost Of Living Adjustment (COLA), which provides for an annual adjustment in base benefits each year of a long-term claim in order to keep pace with increases in cost of living.

Because you have invested considerable time and money into acquiring the skills necessary to practice your specialty, it is vital to protect that investment. A broker with experience catering to the healthcare community can help you find the right policy at the right terms to safeguard your future.

If you are looking to save money, you can request your free disability insurance quote now via our Contact Us form..