Disability Insurance Offers Physicians Protection for Their Greatest Asset

The practice of purchasing adequate insurance for protection against major perils—e.g., homeowners, auto, or life insurance—is a longstanding risk management approach for prudent individuals who recognize the value of insuring against the potential for risk. In that sense, the ante is upped for physicians, whose income comes along with a very expensive price tag for four years of undergraduate school followed by four years of medical school, then another three to as many as eight years dedicated to internship and residency, depending on the chosen area of specialty.

Consider that, according to the Bureau of Labor Statistics, in 2010 the median debt for medical school at the time of graduation was approximately $150,000 for physicians who attended public institutions, $180,000 for those who attended private institutions, and $160,000 combined. What’s more, physicians, just like any other category of employee, are more likely to be disabled than they are to die during the course of their career. Thus, disability income insurance offers physicians a way to practice risk management for their greatest asset, which is their ability to earn an income; as a by-product, physicians are also protecting the substantial dollar investment they have made in the education that laid the foundation for their career.

In the event an accident or illness results in the physician’s inability to perform his or her job (as defined by the policy), disability income insurance offers protection from the resulting loss of income by providing a portion of that lost income. Typical group plans that an employer or hospital may provide might offer replacement for 40% to 60% of one’s salary and frequently limit benefit payments to two years. In contrast, individual disability policies are available that can extend the length of time benefits are paid, or increase the amount of salary replacement to as much as 70% to 80%. For physicians in particular, whose total median income in 2010 amounted to more than $200,000 annually for primary care physicians and approximately $356,000 for specialty physicians, the additional benefits provided by an individual disability income policy could mean the difference in preserving their standard of living while on disability, or facing home foreclosure or other financial disaster.

Policy features of interest

Because physicians work in highly specialized and/or highly compensated fields, the following policy features may be of particular value:

The policy feature called “own occupation” pays benefits if one is unable to perform the major duties of his or her own occupation or profession; for a physician whose field of interest may be limited to a certain area or specialty, this benefit may be of particular interest. Own occupation is often considered the disability definition of choice because the insured individual is considered totally disabled if he or she is unable to perform the material and substantial duties of his or her specific occupation, as opposed to being able to do any kind of work.

A residual benefits feature pays benefits that make up for the decline in income if the insured individual is not totally disabled, but unable to work on a full-time basis. This coverage, added as an additional feature to the disability policy, provides continued benefits proportionate to one’s reduction in income, in the event the individual returns to work on a less than full-time basis or for less money.

A future purchase feature provides the ability to increase the amount of disability coverage as income increases, regardless of whatever becomes of one’s health in the future. This coverage, also made as an addition to the basic disability policy, can be of great benefit to physicians and other high-earning professionals, enabling them to keep their disability coverage in line with their earning power.

Many factors affect ability to obtain coverage

Policies vary widely in terms of coverage options and definitions of a covered disability, the amount and length of benefits payable, waiting periods, and pricing. A physician’s eligibility for a policy will also depend on a variety of personal and professional factors such as his or her current state of health, health history, state of residence, as well as the medical specialty practiced and the duties therein. Insurance companies follow rigorous guidelines in accepting applications for disability insurance; with so many variables involved, it is best to consult with a professional insurance agent for guidance. He or she can perform a thorough analysis of the physician’s financial portfolio, and on that basis provide recommendations for a complete insurance program that includes a disability insurance policy with the optimum features and benefits.