When you’re in the healthcare profession, it’s easy to feel secure knowing you have disability coverage through your employer. After all, you may have seen disability coverage listed as part of your benefits package and figured, “I’m covered if anything happens.” However, while employer-sponsored disability insurance is a great start, relying on it alone can leave you exposed to potential financial risk. Here’s why you shouldn’t just rely on your employer-sponsored disability plan and why having an individual policy can be essential.
1. Limited Coverage Amounts
Employer-sponsored disability plans often cover only a portion of your income, typically around 50% to 60%. For high-income earners like physicians and dentists, this amount might not be sufficient to maintain your standard of living, especially when considering the high costs of mortgage payments, student loans, and other financial obligations.
Why Individual Coverage Matters:
Individual policies allow you to customize your coverage to protect a larger portion of your income, typically up to 70% to 80%. This means you can tailor the policy to your unique financial needs, ensuring you won’t face a significant income gap if you’re unable to work due to a disability.
2. Employer-Sponsored Plans Are Often Taxable
One factor often overlooked with employer-sponsored disability insurance is taxation. If your employer is paying the premiums for the plan, any benefits you receive will be considered taxable income. This can reduce your disability benefits by a considerable amount when you need it most.
Why Individual Coverage Matters:
If you pay for your own individual disability insurance policy, the benefits you receive are typically tax-free. This can significantly increase the actual income you receive during a period of disability, giving you a stronger financial safety net.
3. Lack of True Own-Occupation Coverage
A crucial factor for healthcare professionals is whether a disability plan includes “own-occupation” coverage, which allows you to receive benefits if you can no longer perform your specific occupation, even if you’re capable of working in another job. Many employer-sponsored plans don’t offer true own-occupation coverage, which could mean you wouldn’t receive benefits if you’re able to work in a different capacity.
Why Individual Coverage Matters:
Individual policies often allow you to include true own-occupation protection, so if you’re a surgeon, for example, you would still receive benefits if you could no longer perform surgeries—even if you could work in another role within the medical field.
4. Coverage Tied to Employment
One of the biggest risks of relying solely on employer-sponsored disability insurance is that it’s tied to your job. If you switch jobs or are laid off, your coverage typically ends. Even if you remain with the same employer, they might change or reduce the benefits over time.
Why Individual Coverage Matters:
An individual policy stays with you regardless of your employment situation. If you change jobs, you won’t lose your coverage, and your benefits won’t depend on an employer’s policy changes. This stability can be invaluable in ensuring long-term protection.
5. Less Flexibility and Fewer Customization Options
Employer-sponsored plans often have limited customization options, which means you may not be able to add riders or benefits that could enhance your coverage, such as cost-of-living adjustments or partial disability coverage. This can limit the effectiveness of your policy if you experience a partial or long-term disability.
Why Individual Coverage Matters:
With an individual disability insurance policy, you have the flexibility to add riders that can better protect you. For instance, a cost-of-living adjustment rider ensures that your benefits keep up with inflation, while a residual disability rider provides benefits if you’re partially disabled and experiencing a reduction in income.
6. Potential for Policy Cancellations or Changes
Employers are free to modify or even cancel the group policy at any time, meaning your benefits could be reduced or removed without your input. Given the unpredictability of the economy, it’s not uncommon for companies to reassess their benefits packages and make cuts to reduce costs.
Why Individual Coverage Matters:
An individual disability insurance policy is under your control. As long as you pay your premiums, the policy remains active, and the terms can’t be changed or canceled by anyone else. This consistency provides peace of mind, knowing that your coverage will stay in place when you need it.
7. Limited Benefits for High Earners
Employer-sponsored plans often impose benefit caps, which can be particularly limiting for high earners. Even if a plan offers to cover 60% of your salary, it might max out at a certain amount, which can leave healthcare professionals underinsured.
Why Individual Coverage Matters:
Individual policies can offer higher benefit limits or allow you to supplement your employer’s plan so that you have adequate income replacement. This way, you’ll have the financial support you need to maintain your lifestyle, even if you’re unable to work.
Conclusion: Take Control of Your Financial Security
While employer-sponsored disability insurance is a valuable benefit, it’s often not enough on its own to fully protect healthcare professionals from income loss due to a disability. An individual disability insurance policy gives you more control, better coverage, and flexibility to customize protection based on your needs.
As a physician, dentist, or other healthcare professional, you’ve invested a tremendous amount in your career, and your income is one of your most valuable assets. Take the step to ensure that asset is fully protected by securing an individual disability insurance policy.
