When it comes to protecting your future, especially as a physician, disability insurance is essential. Your ability to practice medicine is your most valuable asset, and safeguarding that income in case of illness or injury is crucial. Here are 14 key facts about disability insurance every doctor should know.
1. It Protects Your Income
Disability insurance replaces a portion of your income if you are unable to work due to an illness or injury. For physicians, this can be a lifesaver, ensuring financial stability if an unexpected event limits your ability to practice.
2. There Are Two Main Types
The two primary types of disability insurance are short-term and long-term. Short-term disability typically covers a portion of your income for a few months, while long-term disability can last years, or even until retirement.
3. Specialized Policies for Doctors
Doctors, especially specialists, often need unique disability policies that reflect the high-income nature of their profession. These policies, often referred to as “own-occupation” or “true own-occupation,” ensure that you receive benefits if you can’t perform the specific duties of your medical specialty.
4. Your Medical Specialty Affects Your Premiums
The risk level associated with your specialty will impact your premium. For instance, a surgeon or anesthesiologist might pay more for disability coverage than a psychiatrist or dermatologist due to the physical demands of the job.
5. Tax Treatment of Benefits
The taxation of your disability insurance benefits depends on who pays the premiums. If you pay with post-tax dollars, the benefits are tax-free. However, if your employer pays the premiums, benefits may be taxed.
6. Group Disability Insurance May Not Be Enough
While group disability insurance through your employer can offer some coverage, it’s often not enough for high-income professionals like doctors. Supplemental policies can help fill the gap and offer more robust protection.
7. You Need Enough Coverage to Replace Your Income
Experts recommend that physicians have disability insurance that covers at least 60-70% of their current income. Given the potential for long-term disability, ensuring you have adequate coverage is critical for maintaining your lifestyle.
8. Disability Insurance Policies Vary Widely
Not all disability insurance policies are created equal. The fine print matters, and elements like the definition of disability, benefit duration, and exclusions can vary significantly between policies.
9. Residual Disability Riders Can Be Critical
Residual disability riders provide benefits if you’re partially disabled and can still work in some capacity but suffer a loss of income. This rider is particularly important for doctors who may be able to work part-time but earn less than they did prior to a disability.
10. Cost-of-Living Adjustments (COLA) Protect Against Inflation
COLA riders adjust your benefits over time to keep up with inflation. Given that a long-term disability could last decades, a COLA rider can help ensure your benefits maintain their value.
11. Mental Health Coverage Varies
Mental health disabilities such as depression, anxiety, or burnout are common among physicians, but not all policies cover these conditions adequately. Make sure your disability policy includes sufficient coverage for mental health conditions.
12. Disability Insurance Is Typically Harder to Get Later in Life
The younger and healthier you are, the easier it is to qualify for disability insurance. As you age or develop health issues, your premiums can rise, and insurers may exclude certain conditions from coverage.
13. Most Disabilities Are Not Due to Accidents
Many people assume disability insurance is primarily for accidents, but most disabilities are caused by illnesses such as cancer, cardiovascular conditions, or musculoskeletal disorders. This is particularly relevant for physicians, who may face high-stress, physically demanding, or mentally exhausting work environments.
14. Long-Term Disabilities Can Last Years, or Even a Lifetime
It’s important to consider the potential length of a disability when purchasing insurance. Many disabilities last more than a year, and long-term disabilities can even span the rest of your working life. Be sure to select a policy with benefits that last long enough to cover this possibility.
