Disability insurance is a crucial part of your financial plan as a physician. It safeguards your ability to earn an income, which is often your most valuable asset. But understanding the core coverage of your disability policy is essential to ensuring that it protects you the way you need it to. Here’s what you should know.
Disability definitions vary significantly between policies and can impact your benefits if you ever need to file a claim. There are three main types of definitions:
In this case, you’re considered disabled if you cannot perform the duties of any job for which you are reasonably suited by training, education, or experience. This is the most restrictive definition.
This is the most favorable definition for physicians. It means you’re considered disabled if you cannot perform the duties of your specific medical specialty—even if you are able to work in a different profession. For example, if you were a surgeon but could no longer perform surgery, an Own Occupation policy would still consider you disabled, even if you could consult or teach in a medical capacity.
Some policies use a combination of the two. For example, an Own Occupation definition might apply during the first two years of disability, and then shift to an Any Occupation definition thereafter. Understanding this progression is important, as it impacts your benefits and eligibility.
Why It Matters: For physicians, an Own Occupation policy is critical to ensuring that you maintain benefits if you can’t work in your specialty, even if you take on other roles within the medical field or healthcare.
Even within Own Occupation policies, it's crucial to check how working in another role impacts your benefits. Some policies allow you to earn income from other professions without affecting your disability benefits, while others may reduce your payout or even disqualify you if you choose to work in a different field.
Why It Matters: As a physician, you may be able to transition to roles like medical consulting, teaching, or telemedicine if you experience a disability. It’s important to know how those roles could affect your benefits, so you’re not caught off guard when the time comes.
Not all disabilities are total. Many conditions may limit your ability to work but don’t completely prevent you from doing so. This is where residual or partial disability benefits come in.
Residual Disability: This benefit covers partial loss of income if you’re still able to work but at a reduced capacity.
Minimum Loss Requirement: Policies differ on the minimum percentage of income loss required to trigger partial benefits. Some policies may only require a loss of income, while others may require you to show a loss of time or duties as well.
Why It Matters: For many physicians, a disability doesn’t mean an end to all work but rather a reduction in capacity. Having the ability to collect partial benefits ensures that you’re financially supported, even if you’re not completely disabled.
As your career progresses and your income increases, so should your disability coverage. Fortunately, many policies offer a Future Insurability Option (FIO), which allows you to increase your coverage without needing to undergo additional medical underwriting.
Why It Matters: For residents and early-career physicians, your income will likely increase as you move through your career. Securing the ability to increase your coverage now means you’ll have adequate protection as your income grows—without the need to requalify based on your health.
If you work for an institution that offers disability insurance, it’s important to understand how group coverage compares to private policies. While group plans can be a good starting point, they often come with limitations:
Group Plans may have less favorable definitions of disability and may limit the amount of coverage you can purchase as an individual.
Private Plans offer more flexibility and customization options, including riders for partial disability, future increases, and specialized definitions like Own Occupation.
Why It Matters: If you start with a private disability insurance plan before transitioning into a group plan, you maintain the ability to have higher overall coverage, ensuring better financial protection if you ever become disabled.
Understanding your disability insurance coverage is key to ensuring that you are fully protected if the unexpected happens. A solid policy can provide financial peace of mind and stability, ensuring that your ability to earn a living is safeguarded, no matter what.