Sunday, April 25, 2010

Things you need to know about disability insurance

This is a guest article by Donald Brown D.O.

Things you need to know about disability insurance

Your need for disability insurance is greater than your need for life insurance. Most people have no problem purchasing life insurance yet they hesitate to purchase disability insurance. Physicians like anyone else are not invincible. 43% of all people age 40 will experience a long-term disability event before age 65 (JHA Disability Fact Book, 2006)

Without a disability plan in place, will you be able to maintain your standard of living if you are not working? Can your family survive on one income when most families struggle with two people employed? How long before your savings are decimated?

Student loans are a concern for physicians who are just starting out. These loans are not discharged in the event of bankruptcy. Paying them off or expiring are two ways to eliminate them. You are responsible for them even if you are disabled. states on their web site that loans may be "discharged" if you are disabled. They continue to state that even if you qualify for social security disability (extremely difficult to qualify for) you may not qualify for "discharge", and it will take a minimum of three years due to Federal Regulations, during which time you are still responsible for the debt.

Which way to go GROUP OR INDIVIDUAL?

The benefits of an individual policy are you own it and can take it with you if you change jobs. Pure "own occupation" to age 65 is available if you wish to purchase it. Paying the premiums results in benefits that are tax-free. Earned income (as defined by the IRS) is covered including commissions, bonus and profit sharing. If your individual policy is in place before joining a group, you may participate in the group plan. However, if you have group coverage first, you may be limited in purchasing an individual policy.

A group policy is a nice supplement to an individual policy. While you cannot double dip, i.e. make more on disability than working, most group policies insure at 60% of salary, and if paid by the employer, the benefit becomes taxable to the recipient. This results in a significant loss of income. You cannot take a group policy with you if you change employers and COBRA laws do not apply. The definition of disability and time frame are limited. Most group policies have significant policy changes after two years of benefits. There is a reason the premiums are cheaper.

What Riders do I need?

A rider is a way to modify coverage on an insurance policy. Insurance companies offer many riders to supplement a policy. Some examples are:

COLA- (cost of living)- Valuable if inflation is feared in the future. Your benefit amount is not indexed to inflation without this rider. Given our present economic environment, I recommend this for everyone.
Non-cancelable- As long as premiums are paid, the company cannot cancel and the benefits and rates are locked in place. This is as opposed to "guaranteed renewable” or " conditionally renewable” both of which have restrictions.

Future increase option- your benefits do not increase automatically as your income advances. This allows you to increase your benefit regardless of health changes.

Return of premium rider- if you do not use the policy you will receive your premiums back when cancelling the policy. In my opinion, you are better off taking the difference in premium and either reducing debt, saving or investing the monies.

Other concerns?

Definition of disability - the best is "own occupation". This is as opposed to "any occupation" that you are suited to based on education, training and or experience. Also, some policies may state own occupation for a specific time period and then change to "any occupation". You want" own occupation" to age 65, if you are a pediatric neurosurgeon or CEO, will you be able to perform at any occupation after a disability claim?
How are premiums based? Age, gender (women are more expensive because of perceived risk), the benefit amount including benefit period and medical specialty or occupation.

What is a good company? A company must be fiscally sound. Ratings can be found at, and Purchase on the Internet or use an agent. If you feel comfortable researching and reviewing and can monitor the policy as life changes than the Internet may be right for you. An agent gives you someone to discuss options with, explain benefits and riders and follow up with you as life changes. You do not want to purchase a 3000$ /month benefit when starting an internship and never increase the benefit or find you did not purchase properly when you need it in the future. Without updating the benefit you would only receive $3000, perhaps with undesirable restrictions in coverage.

No one expects to become disabled; however, having the proper policy in place before a disabling event may prevent bankruptcy.

by Donald Brown D.O.

Dr. Brown retired from a successful anesthesia practice where he also managed the business aspect of a group medical practice. After retirement, with a certificate in Financial planning from Grand Valley State University, he joined Principal Financial Group as an investment advisor representative. He has a strong background in investments (including options) as well as employer and employee benefits including the proper utilization of various insurance policies. Presently he has left Principal Financial Group to start his own consultation service.


  1. I stumbled upon your site and think this is a wonderful resource. I work for an insurance broker that is always helping young physicians understand the world of medical malpractice insurance and disability insurance. Our take on disability is right on par with Dr. Brown. We know that doctors have dedicated themselves to helping others and while doing this, they rack up some hefty student loans. To protect them and their education, we stress that young doctors should apply for disability insurance at the earliest possible time.

    The caveat about doctor disability insurance is that a physical is required, and of course, the younger you are, the better your health is. Once you have the initial physical, you never have to again....unless you switch agents, which with disability insurance, is not usual.

    For the most part we deal with doctor malpractice insurance, but we have started reaching out to young doctors because some of the specifics are not taught in medical school.

    If any doctors have questions or concerns, they can head over to our doctor malpractice insurance website:
    fill out our form, indicate you want info on disability, and a veteran doctor insurance specialist will help you.

    Erik Leander
    --Helping Physicians with their insurance needs since 1947--

  2. Speaking as someone who has a father (age 61) who became permanently disabled last year, I would say that I believe your statistics. My dad has heart problems compounded by diabetes and obesity. Our doctor doesn't need to worry about upping her california medical malpractice insurance because of us, though, we know the risks involved with his conditions.

  3. Health insurance is one of the most important insurances that an individual must possess. We can never tell when are we going to have a disease or not. Even the healthiest person on earth can have a disease too. So, as early as possible, apply for a health insurance for this will benefit you in the future.


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