Every disability insurance policy is unique, and the specific contractual provisions used will determine how well you and your family are protected.
- Individual disability insurance provides physicians with the most comprehensive level of income protection available. Since applicants are medically screened and the insurance companies can be selective to whom they offer coverage, the benefits provided are much more favorable.
- Group/Association disability insurance can be offered by an employer or professional association and generally includes more restrictive benefits which may not be specific to your medical specialty.
Ideally, physicians should have some level of individual coverage regardless of whether or not they are provided group insurance through an employer. A quality individual policy provides additional protection and is portable should employment change in the future.
Important Policy Features for Physicians
Definition of Total Disability: Since insurance carriers use varying definitions of total disability, it is important to understand the differences. The most favorable definition for physicians is own-occupation, which means the insurance company will pay benefits if you are unable to work in your own specific occupation, even if you decide to work in another capacity.
Non-Cancellable: A non-cancellable disability insurance policy will guarantee that the insurance company cannot cancel your policy, increase your premiums or change the provisions so long as the premiums are paid on time.
Elimination Period: This is the waiting period between the time an insured becomes disabled and when benefits begin. The elimination period is decided by the applicant and can vary from 30-days up to 2-years after the date of disability.
Benefit Period: The benefit period explains the duration of time for which benefits may be paid on any single period of disability. Most companies offer 2-year, 5-year, to age 65, to age 67 and to age 70, with very few companies offering a lifetime benefit.
Base Monthly Benefit: This is the benefit amount that is payable each month an insured qualifies as totally disabled, following the elimination period. Base monthly benefits are payable regardless of the receipt of social security or other government benefits.
Residual Disability Benefit: A comprehensive policy for physicians must include a favorable benefit for partial disabilities, often referred to as residual disability. This provision should provide partial benefits when a loss of income is caused by injury or illness, without first requiring a total disability. Simple is better in this case a partial loss of income should warrant a partial benefit.
Future Increase Option: The Future Increase Option allows physicians to adjust their coverage to keep pace with increases in income, without requiring additional medical screening. This provision is available as an optional rider and is especially important for physicians in residency or those who expect a significant increase in income in the future.
Cost Of Living Adjustment (COLA): The COLA rider provides for an annual adjustment in base benefits each year of a continuous long-term claim. The intention is to keep pace with increases in cost of living.
Mental/Nervous Benefit Limitations: Many insurance carriers offering disability insurance to physicians have implemented a 24-month benefit limitation for disabilities related to mental/nervous conditions. It is best, if possible, to avoid any sort of benefit limitation.