To make sure you get the best disability insurance policy it’s essential to fully understand what’s included in your policy. In this chapter, we’ll cover the different riders and benefits along with the basic definitions that you need to see in your policy to make sure it’s a good policy for you.
These different definitions will not only help you to understand your policy, but they will also help ensure that you understand what to look for within your policy and make sure you are getting the most out of your policy.
Maximum Benefit Periods
When to Purchase
How Much Coverage You Need
The most important thing you need to do is look at your definition of disability, which we covered in chapter two. So if you haven’t read that, go check it out!
So after making sure your policy is really own-occupation, there are other features you should look for in your policy, as a doctor.
The most important features we recommend reviewing for the most comprehensive policy are the Elimination period and the Benefit period.
All long-term disability insurance policies have an elimination or waiting period to receive the benefit. The most common elimination period is 90 days, but it can range from about 60 days to 365 days.
This waiting period means that you must be disabled for the specified length of time before the policy will begin paying your benefit.
If you choose a shorter elimination period, it will increase the cost of the policy. This feature on your policy is a personal choice and is different for everyone. But if you’re more open to some risk, choosing a longer elimination period is one way to save some money on your premiums.
If you choose a longer elimination period, make sure that you’ve got enough in your emergency savings fund to cover your expenses until your benefits kick in!
Most disability insurance policies have a maximum benefit period which is set when you get your policy, and it’s measured either in years or until you reach a certain age.
You can choose benefit periods from two to 10 years, or set the benefit period to expire at age 65, 67, or 70. Longer benefit periods are more expensive.
Most policies are set up with a maximum benefit period of age 65 so that your benefit income ends around the same time that other programs (like Social Security) increase assistance to the retired and disabled.
It’s important to get a max benefit period that you feel comfortable with. While many accidents are recoverable within a shorter amount of time, 90% of disabilities for doctors are caused by a chronic illness rather than injury.
Another common discount is the “Limitation of Benefits for Mental/Nervous and Substance Abuse Disorders” (MNSA). This is a no-cost rider. Essentially, it provides benefits for up to 24 months for mental, nervous, and substance abuse claims. Up to 10% discount available.
It’s standard for carriers to cover MNSA related disabilities for a maximum benefit period of 24 months. The discount comes into play because you also have the option of paying more to get rid of the maximum benefit period, covering any mental/nervous disorders for the lifetime of your policy. Our agents rarely recommend going that route, as the majority of those with MNSA disability claims recover in less than 24 months.
Depending on your occupation class, you may be required to have this rider. Furthermore, if you live in California, Florida, Louisiana, or Nevada, this rider is mandatory. You can perceive the “mandatory” part of the equation in two different ways. You can look at it as a requirement to receive a discount of 10% off, and/or you’re never allowed the option to increase your premiums for life coverage of MNSA disabilities.
Buying a disability insurance policy is confusing because there are many options you have to choose from when it comes to benefits and riders. Each policy is different because of your customization options. We understand that you don’t have time to learn each option in order to choose what is best for you, which is why we translate the insurance jargon and help to solidify the right benefits and riders for your specific situation.
If buying a disability insurance policy was as simple as checking an own-occupation box along with selecting your benefit and elimination periods, then picking your policy would be pretty easy (as long as you make sure you really understand the language—sometimes it can be really hard to know if the policy is really doing what you want it to!).
There are many other riders or coverage add-ons, however, that are important to consider as well. Riders are optional benefits that you can choose to add to your policy, and some are very helpful and highly recommended for doctors.
Others cost too much for the benefit they add and should be avoided by most physicians. In this guide, we’re only going to focus on the four riders that are most helpful to medical professionals.
To get the full benefit from an own-occupation disability insurance policy, you can’t be able to perform the material and substantial duties of your occupation or specialty.
However, what happens if you are able to perform these duties but you are simply unable to perform them for as long or as much?
In these cases, you will most likely lose significant income but will not meet the definition of disability in your policy since you are still able to perform your duties or procedures.
An example of this would be a urologist who has some type of cardiac event that makes him more easily fatigued. He would still be able to perform all of his duties/procedures but may experience a reduction in the number of procedures or hours he can work.
This often results in a partial loss of income which would not be recovered without a residual or partial disability rider.
This rider allows you to receive a percentage of the benefit equal to the percentage of income you have lost from the partial disability.
It’s very important to note that statistically, more physicians receive benefit from residual/partial disability riders than from the base total disability benefit.
This rider is a must have on your policy.
Also known as Benefit Purchase/Benefit Update Rider
Since long-term disability insurance is made to protect your after-tax income, it normally has a maximum benefit equal to between 50-60% of your gross (pre-tax) income.
This means that as your income goes up over time, you will need to increase your benefit in order to protect the maximum amount of your salary possible.
The only problem is that if you apply for a new policy in order to increase your coverage, you will have to go through a physical, new set of labs, and full medical underwriting.
If this is several years from the date of the first policy, your health may have changed to the point that the increased coverage may be much more expensive or you won’t be able to increase your coverage at all.
A future purchase option lets you keep the option to increase your benefit without having to worry about going through the process of getting a whole new policy.
It allows you to increase your coverage, based on your increased income, without going through any medical underwriting. It basically guarantees you the right to increase your coverage regardless of what happens to your health over time.
This also helps physicians who are still in training and can’t afford a policy that will cover your entire income at that point in time. This rider allows you to increase your benefit without any questions about your health or personal hobbies.
One thing to remember is that in most cases you can only increase your policy through one of these riders until age 55 even though your policy may last beyond that age.
This rider is a must for a doctor unless you have maxed out your policy or are later in your career where you will not need as much income protection.
This rider is often a good option for residents, fellows, or new physicians who are carrying student loan debt.
This rider gives you additional coverage in addition to your base policy benefit in order to make student loan debt payments while you are collecting your benefit.
We consider this an optional rider to choose as a physician.
Another rider that can be important for physicians to have is the catastrophic disability rider. This rider provides additional benefit to your base benefit should you become catastrophically disabled.
The definition of a catastrophic disability is the inability to perform two or more of the Activities of Daily Living (ADLs).
If you are disabled to this extent, your increased cost of living (due to things like added healthcare expenses) may use a large portion or all of your base benefit, leaving you with very little or nothing to live off of.
For example, in the 1st year following paraplegia, total living expenses for disabled individuals average $69,000. That is why, even though this rider is seldom used, it should be seriously considered if you want a policy that provides complete peace of mind.
This is nice to have as a rider, but not a must for everyone.
The COLA rider will help to adjust the benefit amount to keep it updated with inflation.
If your benefit stays the same year after year while prices in the economy go up, you actually lose purchasing power over time.
In the unfortunate event that you have to rely on the policy for income over a long period of time, you may find the original benefit purchases much less than it originally could.
The solution is to have a cost of living rider which increases your income from the policy each year that you are on the benefit in order to help your income keep up with inflation.
For many physicians over the age of 50, this rider may not make sense. For physicians under the age of 50, however, this is an important part of any long-term disability insurance policy.
Before a disability, physicians keep ahead of inflation by advancing their career and receiving salary increases and bonuses. If you are disabled, you lose that ability and instead will now be relying on your disability insurance policy as the main source of income for you. Without this rider, this income will be level and won’t keep up with inflation.
This rider is a must-have if you are early in your career as a doctor.
In the case of a disability, this rider will assist in funding your retirement. It makes the insurance company put funds aside into some sort of retirement savings, while they will also continue to pay your monthly benefit.
This rider will help to replace your employer's contribution to your retirement. However, these riders are generally expensive. Due to the high prices, insurance-based investing products are often not the best option to save for retirement.
This rider is one that we would consider an optional rider.
A non-cancelable rider makes sure that the disability insurance companies can’t raise your premiums as long as you are paying them.
This ensures that your premiums will be locked in and can really help save you money. Sometimes the non-cancelable rider is included within your policy. However, if it is not included you can add it on as a rider.
The non-cancelable rider also works with the guaranteed renewable rider to make sure your policy isn’t subject to sudden changes.
For a doctor, this is a must-have rider.
The guaranteed renewable rider prevents the disability insurance companies from changing your policy terms (like the benefit amount) or canceling the policy itself, as long as you continue with your payments.
These terms are included in most disability insurance policies. If it’s not, you can add it on as a rider if it’s not already written into the policy.
This rider is a must on your policy.
The best disability insurance policy is different for each person, but there are some essential definitions and riders that make sure the policy truly protects your income. Understanding each of these riders, benefits, and definitions will make sure that you’re getting the best disability policy for you. If you are ready to get started with the best disability insurance policy for you, fill out a quote request! Now that you know what to look for in a policy, the next chapter will talk about which companies provide the best disability insurance policies specifically for doctors.