A physician’s world is full of unpredictable situations. You can easily become disabled and fail to work in the industry you rigorously trained for in medical school. With an individual physician disability insurance plan you protect your greatest asset which is your ability to earn a paycheck.

What Is A Disability Insurance Policy?

A disability insurance policy is an agreement with an insurance company to pay a monthly benefit when you become disabled. Having a disability insurance policy is one of the most efficient ways to protect a significant portion of your income. Disability insurance is a benefit that is paid out to you tax-free.

Why Do Doctors Need Disability Insurance?

It’s common to find doctors paying for a life insurance policy but forgetting to consider disability insurance coverage for those unforeseen situations. Physician disability insurance is crucial because this is a profession that has a greater statistical possibility of suffering severe disability or other medical conditions that paralyze your working capability. The right individual policy will cover your specific occupation in case you are unable to perform those duties. As stated by the social security administration, 1 in 4 of current 20 year olds will become disabled at some point in their career.

How Does Disability Insurance Work?

There are several ways you can design disability insurance. Most importantly, for physicians we ensure that their medical specialty is covered so, you can expect to get disability benefits for injuries that prevent you from working in your specialty. This type of policy will continue to pay monthly benefits even if you can work in another profession. The amount you receive and how long the benefits will last depend on general policy guidelines, underwriting and ultimately how the policy is designed. Since benefits come out tax-free, premiums are not tax-deductible.

What Are the Three Types Of Disability Insurance?

You earn a disability income based on the specific type of insurance coverage you have. The main types included:

Short-Term vs. Long-Term Disability

Like any health insurance, you can choose an insurance policy that serves you for, say, five years or extends to a lifetime. A long-term disability is mostly individual-based and has a longer payment waiting period. As a physician, it’s advisable to choose long-term disability to protect your income for longer period of time and short-term for temporary injuries, pregnancies, etc.

Short-Term Disability Insurance

Short-term pays insurance benefits for workers who experience temporary injuries and sicknesses. It’s a non-cancelable plan that is typically provided via an employer group plan. Although, it’s rare to find an individual plan, it is most advisable to pick the group coverage due to the high cost of premiums. The typical waiting period is 7 days and it pays benefits for up to 6 months.

Long-Term Disability Insurance

Long-term disability insurance is a benefit period of coverage for injuries and illnesses that prevents you from working for an extended period. It is the best disability insurance if you are looking to protect your income for a significant period of time. The benefits end once you have recovered. The typical waiting period is 90 days and it pays a monthly benefit until age 65.   

What Does Disability Insurance Cover?

A disability insurance policy covers all injuries and illnesses that limit you from performing expected tasks of your medical specialty. Apart from severe disabilities, this insurance can cover arthritis, back pain, cancer, depression, diabetes, stroke, and heart disease, among others. We recommend physicians having enough disability benefits to cover their living expenses and retirement savings.

What Constitutes A Disability?

According to most disability insurance companies, an insured is totally disabled if, due to a sickness or injury, the insured is not able to perform the material and substantial duties of his or her regular occupation. Before purchasing any disability plan it is important to review the definition of disability to make sure your appropriately covered.

Own-Occupation, Specialty-Specific

Every single physician should have the own occupation rider on their disability policy. There are different specialties in the medical field and it’s important to have coverage for your specific occupation. Depending on the insurance company, you will have coverages for dentists, surgeons, radiologists, internists, and much more. For all physicians, we highly recommend own occupation, specialty-specific coverage, which will pay you when you become disabled.  

What Is Own-Occupation?

Own-occupation disability insurance covers your regular or own occupation up to the age of 65. Depending on the insurance company, you can continue to collect monthly benefits even if you are working in another career, as long as if you are disabled from your own specialty. So, if a surgeon develops a musculoskeletal condition and can’t perform surgery, but becomes a successful Real Estate Broker, they will continue to get the monthly benefits from the insurance company.

Transitional Own-Occupation

This is a renewable policy where the insurance company will pay the benefits if you can’t work in another occupation and start earning in a new career. However, your gross new income cannot exceed what you earned originally. Your disability benefits automatically offset a high income in your new occupation to balance your new income and nothing more than what you earned in the medical field.

Modified Own-Occupation

This is another own-occupation definition of disability where a person receives benefits in their own occupation when facing total disability. However, the benefits cease when the person wants to earn in another occupation. It is important to know if your policy offers own-occupation over modified own-occupation.

Any Occupation

This type of disability insurance is most commonly offered through employer-sponsored group plans. It covers long-term disability for low-cost, where one is considered totally disabled and they cannot work in any occupation. It is the least beneficial coverage not covering your specific occupation.

Why You Need A Own-Occupation, Specialty-Specific Policy?

Medical professionals are encouraged to purchase true own-occupation because it’s the only definition of disability insurance that allows them to work in another field while continuing to collect monthly benefits. Whether it’s for full or partial benefit, it’s the most efficient way to cover your income during those rainy days. Besides, it’s quite easy to apply.

Presumptive Total Disability

Any medical condition that is not obviously or easily presumed as total disability is called presumptive disability. Such conditions included blindness, total hearing loss, and loss of speech or limps. You can apply for individual disability insurance coverage under such a disability and get full benefits.   

Mental Disorders

An individual is said to have a mental disorder when they have a clinically significant disturbance in their cognition, emotional regulation, and behavioral well-being. It’s also a condition that would require disability insurance coverage since it could result from work-related stress such as physician burnout.

Cosmetic Surgery

According to some disability insurance providers, if the insurance is totally disabled due to cosmetic surgery, benefits will paid. Also, the elimination period must be satisfied in order to receive benefits for total disability due to cosmetic surgery.

Required Transplant Surgery

Medical insurance can cover medical expenses involved in organ transplant surgeries. This is a complicated procedure that can potentially lead to disability. The insurance does not cover pre-hospitalization and post-hospitalization, though. In some cases, the transplant must occur more than six months after the issue date of your policy.  

Substance Abuse

All insurance companies on the market have cover plans for mental health and substance abuse. Every insurance company is different on how they treat substance abuse, which is why we recommend reviewing coverages through different insurance companies like Ameritas, MassMutual, etc. The particular plan will determine the percentage of treatment covered and how much you will get benefits.

Disability Insurance Exclusions & Limitations

When applying for disability coverage, if you’re young and healthy you will have a streamlined underwriting process that will get you approved in a short period of time. In the cases of having preexisting medical conditions, the underwriter might exclude certain coverages on the plan. Within two years of having the policy you will be excluded from, self-inflicted actions, acts of war, rebellion, operating a vehicle under the influence, and criminal activities. Other limitations are categorized under preexisting conditions, nervous limitations, substance abuse limitations, and the other factors mentioned above.  

Residual Disability

A policyholder gets part of the total benefits indicated in the policy as a residual benefit. This means that if you have a loss of income due to a disability the insurance company will allow you to continue working part time while collecting a portion of your disability benefit. Depending on the company, residual is paid when you have a loss of 15% or more of income and if your income loss exceeds 75% they will pay you your full benefit amount.

Partial Disability vs. Residual Disability

In partial disability, an employee must have a total disability during the elimination period, while the residual disability does not require total disability during the elimination period. The AMA offers explicit guidelines on how employers and employees must deal with such coverages in group plans. 

Disability Insurance Riders for Physicians

There’s many ways you can design a disability insurance policy to make sure your needs are met. With additional premium, you can purchase these riders to enhance your policy. Please note, different companies call them by different names. Common riders include:

• Student loan coverage
• Own-Occupation
• Residual
• Non-cancelable
• Catastrophic disability
• Cost of living adjustment

A partial disability rider or residual, for instance, pays an employee who can still work part of the time.

How to Choose the Right Disability Insurance Company?

There are many disability insurance companies today to choose from. If you are looking to purchase disability insurance, consider the following five factors:

• Individual vs. Employer-sponsored Group Policy – In the case of a group policy, check the underwriting requirements as well as how close is the benefit to my pre-disability income. We recommend layering group coverage over your individual coverage since the group coverage isn’t portable.
• Definition of disability – how does the insurance company define disability?
• Own Occupation – how does the insurance company define own-occupation?
• Premiums – Am I taking advantage of the medical professional discount?
• COLA Rider (Cost of living) – reviewing what the annual benefit increases would be to keep up with inflation.

There are many factors to consider, including other policy benefits and collection time. Take time to read through a policy before moving forward with coverage.

Commonly Asked Questions By Physicians

What if the physician practitioner is not using SDI online?

If a physician is not using SDI online, it’s free and simple to setup. SDI online is available 24 hours a day and you can create an account in less than 10 minutes. We recommend using SDI online as it will save you money, secure and convenient to use.

Is Northwestern Mutual disability insurance own occupation?

No, Northwestern Mutual does not offer a true own-occupation policy to physicians. They offer a modified own-occupation coverage that allows you to collect benefits, as long as you are not engaged in another profession.

Is getting disability insurance worth it?

Yes, disability insurance should be part of your financial plan if you are a medical professional. The cost is nominal compared to your salary and the benefit you will receive if you become disabled. Purchasing a disability insurance policy protects you against unforeseen conditions that may make it impossible for you to do your normal daily activities and earn an income.  

How much does disability insurance cost?

The cost of a disability plan varies depending on benefits, age, gender, occupation, riders, and medical history. Expect to pay between one and three percent of your annual salary.  

Is disability insurance the same as life insurance?

No. While they both offer income replacement and can be purchased through an insurance agent, each has distinctive differences. Life insurance benefits your beneficiaries, like a guardian, when you die, whereas disability insurance pays you while still alive if you face a disability.

What are the benefits of SDI?

Streamline claims processing! State Disability Insurance includes both disability insurance and paid family leave benefits. There are certain qualifying criteria’s you have to go through for their disability insurance which is similar to an individual disability policy. Please note, 70% of applicants who apply are denied.