Getting disability insurance can feel confusing to early-career physicians who haven’t had to deal with it before. You know you need it, but it is a lot to make sense of.

Elimination periods?

True own occupation?

Total vs. partial disability?

For some young doctors, might as well be a foreign language. Most early-career physicians know they need disability insurance, but feel daunted by the task. "How do I know I'm getting good coverage that fits my situation?" "How to I make sure I'm not getting ripped-off?" "How can I avoid buying more (or less) than I actually need?" 

So in this article, I'll clear up some of the most common questions we hear from physicians on the topic, and address the most common pitfalls about disability insurance. Here are 5 must-knows: 

‍MUST-KNOW #1: Disability insurance isn’t for every doctor (but is for most). 

Despite what you’ll hear from the local insurance salesperson trying to hit their sales quota: not every last physician needs disability insurance. And not every physician that should get disability insurance needs full salary coverage.

Remember: at the most basic level, disability insurance exists to help protect your finances in the event your income goes away due to illness or injury. So as your financial assets go up over time (savings, investments, etc), the need for disability insurance coverage goes down. With enough assets, you’re able to “self-insure” your income. In other words, you’ll be more capable of taking an income hit if you have $10M saved away than if you have $200k saved away.

If you have positive net-worth (which, to be fair, most physicians in-training do not... but we have seen it before) you may not need full income coverage. Or if you've already reached financial independence (typically mid/later-career physicians), you probably don’t need disability insurance. BUT unless one of these applies to you, as a general rule of thumb, getting disability insurance is a good idea. 

MUST-KNOW #2: There are HUGE benefits to getting insured while you're still in training. 

One of the biggest mistakes we see young physicians making: not getting disability insurance while they're in training. The advantages of getting insured while you’re still in training are substantial… and effectively go away the day you finish residency/fellowship. 

First, you'll pay less if you get insured while in training.  When you’re younger, you’re healthier. And when you’re healthier, insurers view you as less risky–and therefore charge you less. Plus, you could qualify for resident/fellow discounts–and discounts available through your institution–that you will not be eligible for once you’re done with training. When we walk residents through how the math shakes out on this, typically, the cost differential of getting insured now vs. waiting makes this a no-brainer. 

Second, you can get better coverage if you get insured while in training. This comes down to something we call "coverage amount arbitrage," which basically allows you to get a higher amount of quality coverage if you apply now than if you apply after training.

And third, in case that wasn’t enough, underwriting is wayyyy easier while you’re in residency.  

MUST-KNOW #3: Employer-provided disability insurance is usually insufficient. 

Most physician are fooled into thinking: "I already have disability insurance through my employer, so I’m covered." Most employers want to advertise that they provide disability insurance to their doctors– and they usually do, technically. 

But the issue is, employer coverage generally isn’t quality or sufficient coverage. It would be kind of like someone handing you a permeable raincoat before a storm: it’s a nice gesture, but isn’t going to do you any good. The reality is: many of these employer-provided policies won’t actually pay the doctor if they become disabled. This is because the definition of “disability”  is restrictive and/or not specialty-specific.

What's more, employer policies almost never cover a physician's entire salary. Generally, employer provided policies cover only about 50% of a physician's base income. 

If a physician is solely reliant on an employer provided policy, they will almost certainly be in for a rude awakening if they were to become disabled.

MUST-KNOW #4: The definition of “disability” really matters. 

We see it too often: some physicians own disability policies that likely will not actually pay them if they were to become disabled.

Ever been in a fender bender and thought your car insurance would cover the damage... only to find out–due to some definitional technicality in the 80 page insurance document–you’re on the hook for most/all of the repair?  Well, the same thing happens with disability insurance. And the biggest reason why can be found in the definition of “disability.”

In short, you want the policy that pays you if you can’t work as a doctor… not one that will only pay you if you can’t work any job. 

In Insurance-land, they refer to this distinction as “True Own Occupation” vs. “Any Occupation.” “Any Occupation” is the least advantageous definition of disability, while “True Own Occupation” is what you want to be looking for.

A physician who owns an “Any Occ” disability policy and could not work as a physician due to illness/injury would not be considered disabled as long as they were medically able to get another job outside of medicine. If you can’t practice medicine but can flip hamburgers, the insurance company would say you’re not disabled... and your policy wouldn’t pay you a dime. 

In the same example, “True Own Occupation” considers you disabled as long as you can’t work as a physician, even if you’re capable of working another job.

Let’s just call it what it is: this is the most feared and detested part of any kind of insurance–whether auto, home, health, disability, you pick it. You “have” insurance… but when it’s time to actually make a claim, the insurance company doesn't pay you due to some definitional technicality buried in the fine print! Speaking of...

MUST-KNOW #5: The fine print matters. 

As you probably understand by now: if your disability insurance company wants to weasel out of covering you fully, they'll do so in the fine print. 

Besides looking closely at the definition of “disability,” here are some things to have an eye out for in the fine print:

"Non-cancellable guaranteed" - Simply means your insurance company can't raise your premiums, or change the terms of your coverage. This is key to avoiding the ol’ bait-and-switch. 

"Partial disability" - Most disabilities are partial, not total. So you want to be fully covered in the event that you’re not completely disabled, but still unable to work.

"Cost of living adjustment" - A gallon of milk today will be more expensive 10 years from now than it is today. You need your insurance coverage to keep up.

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Ready to get disability insurance checked off your list? Schedule a call with us. We guide early-career physicians through the process of figuring out what they need and getting insured all the time! 

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Important Note: This blog post is intended to provide general information and should not be considered as professional advice nor investment advice. Please consult with a qualified financial or insurance professional for personalized guidance based on your specific circumstances.