Many residents fail to recognize the importance of a properly written disability contract. Ironic considering, that you are gambling with $10 Million Dollars of future earnings. You have sacrificed personally and financially to get where you are today. It would be catastrophic if it were all lost due to a lack of planning or interest on your part.
Unfortunately finding the correct policy has become very difficult due to a number of different factors.
- Very few companies offer the Specialty Specific “Own Occupation Protection” needed to protect you in your medical specialty.
- Unscrupulous employees of insurance companies sell less than adequate policies to physicians for commissions and to fill their quotas. Simply put, you need to do your homework if you want peace of mind.
But what is disability insurance and what are the benefits that should be included in a properly designed policy for medical professionals?
- Disability Insurance: At its most basic definition is a contract that provides life support when you are unable to support yourself. In other words it provides monthly checks when an injury or serious illness prevents you from working.
- Specialty Specific/Own Occupation clause: This is the first clause that should be in all medical professionals policies. It should read that if you are unable to work in your Medical Specialty because of a covered Disability, then you would be considered totally disabled. This should be true even if you establish a new occupation and are earning more than your old specialty income. Please note: Currently there are many different definitions of Own Occupation being sold today, all of which claiming to be the best definition.
- Partial Disability Benefit/Residual Benefits: While there is a greater chance for a medical specialist to become totally disabled then a white collar employee, there is an even greater chance of becoming partial disabled. This means that you are still able to work in your specialty on a limited basis because of a covered Disability and experiencing a 20% loss of earnings. This rider allows for compensation if you are partially disabled. You would receive a portion of the total disability benefit. The percentage of the benefit you would receive would equal the percentage of lost earnings you are experiencing.
- Inflation Protection Rider: In the event you are not independently wealthy, you may wish to consider a Cost of Living Benefit rider. This benefit would increase your benefit for a prolonged residual or total disability lasting 365 days or greater.
- Future Purchase Option/Guarantee of Insurability Rider : It protects your ability to purchase more protection in the future regardless of your current health. This benefit is vital to protect your future earnings.
- Non Cancelable Guarantee Renewable: Means, the policy cannot be changed or cancelled and premiums are guaranteed never to increase. In other words you own the policy and no-one can take it away or change it.
- Elimination Period: This is considered a time deductible and is standard for all disability contracts. An elimination period is the number of days that a Disability must elapse before the policy starts owing you money. A 90 day elimination period is most commonly chosen and priced considerably less than 30 or 60 day elimination periods.
- Benefit Period: Is maximum payout period the company will pay you for a covered Disability. Most Doctors choose to receive benefits until age 65. Other benefit periods include age 67, 70 and Lifetime payouts.
Now that you know what should be in a properly written contract you need to know what to avoid.
- Group/association policies: Even though they are cheaper they are no substitute for properly designed protection. Beware, if you do decide to buy group/association protection, you will get what you pay for. These policies provide very little protection when you need it the most, at claim time in addition the quality of definitions needed by Physicians are just not included in this variety of contracts.
- Avoid being SOLD: You must do your homework when purchasing this vital protection. Something as important as $10 million should be given the attention it deserves. To assist you with this endeavor I suggest find a specialist who is independent and cannot be influenced by company politics or shareholders whims. They will be able to guide you through this daunting task while educating you along the way.
As a Physician your ability to earn an income is your most valuable asset. Choosing the right disability policy might become the most important purchase you ever make. It can mean the difference between financial security and bankruptcy.
