Disability Insurance

Disability Income insurance is designed to replace a portion of your monthly income if you are unable to work due to an illness or injury. The monthly benefit from disability insurance can help cover expenses, maintain your standard of living, and provide financial stability until you return to work. Your income is the foundation of your entire financial plan.  You should be sure that it is protected. Think of disability insurance as income protection – something that keeps your larger financial plan intact, regardless of your ability to work.

Is the Policy Non-Cancelable and Guaranteed Renewable?
A non-cancelable and guaranteed renewable policy provides considerable security since the insurance company can not raise your premium, change the benefits, or cancel the policy as long as you pay the premiums. A policy that is only "guaranteed renewable" can increase premiums under certain circumstances.

What is the Definition of Disability
When you buy disability coverage, you are essentially buying the insurance company's definition of disability. There are two basic definitions that include "own occupation" and "any occupation," disability.

Own Occupation - This refers to the occupation or medical specialty you were working in just prior to your disability. If your "own occupation" is protected, the policy will not require you to work in another occupation and your benefits will not be coordinated with any other earned income. This is sometimes referred to as "regular occupation" or "your occupation."

There are two variations of Own Occupation.
With a Modified Own-Occupation definition of Total Disability, you would typically be eligible for total disability benefits when you are unable to perform the material and substantial duties of your occupation solely due to injury or sickness and you are not gainfully employed.
A True Own-Occupation definition of Total Disability makes it possible for you to work in another occupation/medical specialty and still be eligible for total disability benefits. Typically, you would be considered totally disabled if, solely due to injury or sickness, you are unable to perform the material and substantial duties of your occupation/medical specialty. With a “True” Own Occupation definition, if you have the energy, interest, and motivation to pursue another occupation, while totally disabled in your occupation, you may do so and still be eligible for your total disability benefits. As a physician, it is important to make sure your policy considers you disabled if you cannot perform the substantial and material duties of your true own occupation.

Any Occupation - Some policies will not pay full benefits if you can perform "any" occupation you are suited to, based on your education, training and experience. This definition tends to be very restrictive and is often found in group disability contracts. 

Level Premium -  Most carriers offer a level premium policy so that the rate does not increase as you get older or if any discounts no longer apply.  There are also options for a "graded" premium policy that starts out with slightly lower rates which then increase throughout your policy period.

Elimination Period - The elimination period is the number of days you must be disabled before policy benefits become payable. Options are 60 days, 90 days, 180 days, and 365 days. The longer the elimination period, the lower the premium. The most common elimination period is 90 days.  Some policies require those days to be consecutive, while other policies allow you to accumulate them over a specified period of time.

Maximum Benefit Period - This is the maximum amount of time for which benefits are paid for any one period of disability. Typical options include age 65, age 67, and age 70. The longer the benefit period, the higher the premium. 

Residual Disability Rider - Not all disabilities are “total”. You may suffer a partial (or residual) disability that limits your ability to work and results in decreased income. The residual benefit protects you by providing partial coverage if you have a loss of time or duties in your true own occupation. If you are sick or injured and have a loss of income but still working in the same occupation, you would be eligible to receive a benefit equal to the percentage of your lost income. For example - if you have a disability policy with a $10,000 monthly benefit and suffer a disability that results in a 50% loss of income, you would be eligible for $5,000 of monthly benefit. The residual rider is important - without it, a person diagnosed with Parkinson’s or Multiple Sclerosis could see their income drop substantially and not receive any disability benefit from their policy until they were totally disabled.

Guaranteed Increase Option Rider - A guaranteed increase option allows the owner of a disability insurance policy to increase their benefit amount in the future with no medical underwriting. This is useful for a person who expects their income to increase and wants a guaranteed option to obtain more coverage. This rider is especially important for residents, fellows, and physicians who have recently started in practice.  

Cost of Living Adjustment Rider (COLA) - The cost of living adjustment rider (COLA), increases your monthly disability benefit each year you are receiving benefits to keep pace with inflation. The increase is either a fixed amount such as 3% or is based on the change in the consumer price index. The benefit to you is that your standard of living will not decrease during a long-term disability.