Many people we speak with ask us why they should purchase their own disability insurance when their employer already offers a general group plan for all the employees. There are many reasons why doctors and dentists, especially, should own their own individual disability policies. Here are some of the most important reasons:
1. Group plans are normally not ‘own occupation’ contracts.
While we encourage all employers to provide at least some kind of disability insurance for all their workers, regardless of industry, doctors normally need a very different kind of policy than those in group plans that are commonly offered by employers – even in the health care industry. This is because doctors have a lot of debt going into the profession, and their earnings as doctors are far higher than what they can expect to earn doing nearly anything else.
This is why doctors need an own occupation disability insurance policy to adequately protect their earnings potential against illness or injuries that prevent them from working as physicians. Anything that will knock you out of showing up to work and doing your job is going to knock you into a big pay cut, too.
But group disability plans are almost never true ‘own occupation’ plans. If you’re an orthopedic or emergency physician and you need to be pretty active, but you get sick or hurt and you have to switch to a lower-paying specialty, a privately-owned own occupation policy will protect you. A group disability policy issued through your employer probably will not.
2. Rates are better for those in good health.
Individually-issued disability insurance is medically underwritten. That means that you must qualify as an individual for coverage by showing you are in good health and comparatively unlikely to be filing a claim in the future. Group plans, on the other hand, are normally issued with no underwriting or with simplified underwriting. If you qualify for good rates as an individual, it’s because you are less likely than the general population to file a claim – and the insurer can set premiums accordingly.
With a group plan, however, the insurer must assume that some people in the pool will not be in the best of health. This affects their claims assumptions. They must therefore set premiums higher to compensate them for the increased risk, reduce benefits available under the plan, or some combination of the two.
3. You can choose your own riders.
Group long term disability plans usually won’t even make a cost-of-living adjustment (COLA) rider. But these are routinely available with privately purchased individual disability insurance policies.
4. Group plans are not portable.
Ever want to leave your employer? Your personal policy comes with you. This is a big issue for those who want to go into private practice midcareer. You may have everything going for you, but by the time you get to the middle of your career, you may not be able to qualify for disability coverage at any price. Gain too much weight or develop an illness of some kind, or throw out your back on the slopes and you will have to pay higher prices or not be able to get covered at all. This has derailed many a dream of private practice.
5. Group plans may have more exclusions.
Group plans are not designed to provide optimum tailored coverage for the insured. You aren’t the customer. The employer’s the customer. As such, the plans are tailored to appeal to the employer, not to you, the physician, or any other employee. That usually means they’re designed to show the lowest premium. As such, these disability policies are more likely to exclude important causes of disability, such as mental illness or substance abuse.
6. Lower taxes.
Benefits on employer-paid plans are taxable. But if you own your own disability insurance policy and you pay the premiums yourself, benefits are tax-free.
Disability insurance is a vital part of most medical professionals’ financial plans. At DoctorDisability.com, we specialize in the unique considerations and factors specific to doctors, dentists and other similarly-situated professionals. Indeed, for the last 15 years, we’ve focused on doctors and dentists almost exclusively.
If you have yet to purchase your own disability insurance policy, just for you, call us today at 866-899-7318. Or click here and fill out our brief questionaire and you’ll be on your way in minutes.