Everything You’ll Ever Need To Know About Disability Insurance for Doctors (Plus Some)

The one thing that confuses doctors the most when it comes to disability insurance is, “How does a policy actually pay me?” The key here is to find a disability insurance contract that will pay you if you cannot work in your specific occupation/specialty, EVEN IF you can work doing something else.

This is no easy task because clever marketing can confuse the true definition within a contract.

Currently, there are only a handful of companies that offer this specific type of definition. Here are the current “Big 6”: Guardian, Ameritas, The Standard, Mass Mutual, Principal, and Ohio National.

Guardian_2020_logo.png Ameritas_2020.png  The_Standard.gif Mass_mutual_2020.png  Principal.png  logo-ohio-financial.png

What I can tell you is this: All of these companies will pay a doctor if they become disabled and are no longer able to work in their specialty… even if they can work doing something else.

For example, you may be working as family medicine doctor or dentist, but now you’re not able to see patients competently anymore due to an injury or illness—but let’s say you can go back to the hospital or school and teach, or you can work a job from home, regardless of how much money you’re making doing something else these companies will still pay you your FULL disability benefit.

Here is the process I use when I look at disability contracts:

1. How they define disability
2. Partial and recovery benefits (or residual/recovery benefits)
3. Future increase option or future purchase option
4. Cost of living adjustment (or inflation protection)
5. Other considerations

1. How they define disability

This is absolutely the most important thing to understand.

If you hear someone say the terms like “Specialty Specific” or “Patented Medical Own Occupation”—some of these terms can be used as a marketing tactic and not actually be what you’re looking for.

To make it easy on you, all of the companies that I listed above are companies that you are looking for: they will pay you if you cannot work in your specific occupation/specialty, EVEN IF you can work doing something else.

If you see anything that states “AND not working in another occupation,” that means if you’re disabled from your specialty but then decide you want to maybe teach, do research, or work doing something else—the company does not have to pay you your full benefit. Try to avoid this if possible.

I’ve heard this from other doctors who thought they were buying a policy that was medical-specific.

They said the insurance agent told them, “Yes, this will cover you if you can’t work in your specific specialty.” But what they failed to leave out is it may NOT cover you if you decide to work and do something else outside of your specialty, or if it does it will only cover you partially. So just be very aware of that.

Another question I often get is, “Why buy it early in training if my specialty might change over time?” They don’t write your occupation/specialty on the contract because that can change over time. It comes down to what your duties are at the time of the claim.

If you bought it as an internist but became specialized as a cardiologist or a dental student and now you are in orthodontics, you may receive better rates as an internist and dental student than you would as a cardiologist or orthodontist.

However, you are covered based on the duties you perform at the time you file for a claim which is a nice benefit.

Throughout this article, I’ll stick to the six most popular companies for ease of comparison. Below are some examples of definitions from sample contracts (these could be different for you depending on your state or the version of the product you buy):

Here is a sample contract from one of the companies:

[Total Disability or Totally Disabled means that, solely due to sickness or injury, you are not able to perform the material and substantial duties of your occupation.]

Your occupation means the occupation or occupations that you were engaged in, based on the duties you were performing for wage or profit, at the time disability began. If you are not employed at the time of disability, your occupation means any occupation you are able to perform based on your education, training and experience.

If you are a physician or dentist and have limited your duties to the performance of the usual and customary functions of a specific, professional recognized medical or dental specialty, we will consider that specialty your occupation. 

As you can see, it doesn’t have anything in the contract that states “IF you are working in another occupation, you won’t be paid.”

Below, is an example from a company that is not a part of the “Big Six.” But as you can see the company says “Medical Own Occupation”—so as a doctor, you’re thinking this sounds good.

The Medical Own Occupation Option replaces the definition of Total Disability or Totally Disabled contained in Section 1 of this Policy with the following:

Total Disability or Totally Disabled. The words “Total Disability” or “Totally Disabled” mean the Insured is unable to perform the substantial and material duties of the Regular Occupation.

So far, it sounds good. But in another section of the contract here is what it states:

The Benefit Payable for Total Disability is:

  • the Disability Income Full Benefit, if the Insured is Totally Disabled and not Gainfully Employed; or
  • the Calculated Benefit, if the Insured is Totally Disabled and working in an occupation other than the Regular Occupation.

As you can see here, it says the disability income full benefit, if the insured is totally disabled and not gainfully employed. Basically stating you will not receive full benefits if you are disabled but then decide to work doing something else outside of your specialty.

Again, just watch out for this and work with someone independent. I know I’m biased in that regard, but you get into trouble when you work with someone who only represents one company and their paycheck is dependent upon you buying that one company, regardless if it’s the best company/product in the marketplace.

2. Partial and recovery benefits (often referred to as residual/recovery benefits)

The second thing I want to make sure the company has is residual or partial benefits.

Residual benefits mean that if you become disabled but are still able to work on a partial basis in your occupation, you will receive a partial benefit.

A good example of this was a doctor client of mine who developed a heart condition when she was only in her mid-30s, and her doctor said she can’t work full-time anymore because it would cause too much strain on her heart.

Since she was now working part-time and making only 50% of what she used to, the disability company paid her 50% of her benefits to make up for the loss. So, you can be disabled and still working in your specialty and receive partial benefits dependent upon the loss of income and/or time.

3. Future increase option or future purchase option

The third thing I look for is the future increase option.

As a doctor, this is a nice benefit to try and secure early on in your career.

It is hard to qualify for this if there is any questionable health history, which is why I suggest applying early on in your training when you are the youngest and healthiest.

Here’s what it is and why it’s difficult to qualify for: The insurance company will only insure your income up to a certain limit. In dental school and residency/fellowship, you qualify for anywhere from $2,500 to $7,500/mo depending on what year you are in.

If you have the future increase option (if you qualify), whenever you are making more money you can increase your coverage up to a total of $15,000/mo to $20,000/mo depending on the company…with no medical questions or labs required.

There’s no question your chances of getting approved for the future increase option go down each year of training that goes by. It’s a grind.

If you take any pills like Adderall to get you through your exams that can be seen as a red flag. Especially if you prescribe them to yourself and don’t have any medical records to back it up.

It’s important to talk through your health history with your advisor so they can help you shop out the carriers that will be more favorable to any conditions you may have.

4. Cost of living adjustment (or inflation protection)

The fourth thing I look for is the cost of living adjustment or inflation protection.

The cost of living adjustment provides “purchasing power” protection in the case where a young doctor gets disabled for an extended period of time.

For example, if you get disabled and have $10,000/mo of benefit in your first year of practice, this will increase your monthly benefit each year to keep pace with inflation.

Inflation has averaged 2.4% since 1985, so by the time you reach the end of your career, if you don’t have inflation protection, your benefit is worth half of what it is today. Or in other words, what $10,000 buys you today will require $20,000 in 20+ years.

Other important features

When I first look at policies, I try to break things into simple to understand options. At the end of the day, if you’re buying one of the six companies and your policy has the features I mentioned above you really can’t go wrong.

You could pick the lowest cost one for your specialty and you’d be set up with a great plan, or you might look at some ancillary features that you find attractive and decide they are worth paying for. The key is to review the options and know what’s being offered.

Other features most companies will have:

  • Non-cancelable: The insurance company can never raise your rates once you’ve locked in your policy.
  • Guaranteed renewable: The insurance company can never cancel your contract (unless you don’t pay premiums).
  • Coverage period: You can choose either to age 65, 67, or 70 or a two-, five-, or 10-year benefit.
    • This is how long your disability policy will pay if you are disabled. Generally, I don’t suggest selecting anything less than 65.
  • Elimination period: The number of days you must wait before a benefit is paid while on a claim.
    • Generally, I suggest 90 days, especially while in training.
  • Mental/nervous and substance abuse benefit:
    • Some companies will provide this benefit all the way to age 65.
    • Others will limit the benefit to only 24 months.
    • This means that if you become disabled due to a mental health condition such as depression or anxiety or substance abuse, some companies will pay you for the entire benefit period or they will only pay you for 24 months. This limitation only applies to out-patient claims. If it’s in-patient, the limitation does not apply. It also does not apply to conditions such as dementia, a condition as a result of a stroke, head injury, viral infection, Alzheimer’s disease, Parkinson’s disease, and multiple sclerosis. Typically, the best way to understand what falls under a mental/nervous claim is to reference the ICD-10 codes F1-99 or review the APA Journal.
    • Usually, I find for mental/nervous coverage it’s a personal decision as to whether this is important to you. It’s important to remember many physical disabilities evolve into mental ones over time as physical limitations improve but mental limitations remain.
    • These kinds of disabilities happen, so if the cost is roughly the same or within 10% of another carrier, I’d recommend going with the company that offers no limitation to mental/nervous coverage.
  • Student loan coverage: This is becoming more popular with many carriers and they all seem to treat the feature differently. It may be something to consider adding to your policy if you have student loans.  Because there are so many student loan repayment programs that treat repayment during disabilities differently, talk with your advisor to determine if adding this is appropriate. I would look at this feature as secondary to all other decisions (meaning, if the carrier you like best has the feature, then discuss it).

In summary, here are the key points to remember about disability insurance:

1. Make sure the contract protects your specific duties as a doctor AND allows you to continue receiving benefits even if you can work doing something else.

2. It includes partial/recovery benefits if you can still work in your occupation on a limited basis.

3. It includes a future increase option (if you can get it based on medical history) that allows you to increase your coverage in the future without any medical underwriting.

4. It includes a cost of living adjustment rider (inflation protection) that will keep your benefit up with inflation if you do become disabled.

5. Consider the pricing to narrow your options down to two or three, and then use the nuances to decide.

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Tanner Fedell

Author: Tanner Fedell

I am an independent financial consultant working through North Star Consultants in Dallas, Texas, but I also work virtually with clients throughout the U.S. Whether you are an individual or a business, we have a whole host of solutions to fit your needs that I won’t bore you with listing here. If it impacts you financially, we can help.

Tanner is a registered representative and investment advisor representative of Cetera Advisor Networks, LLC.

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