What Medical Residents Should Know About Disability Insurance

Residents are swamped with ever increasing responsibilities and have less time and income to spend on important financial matters like disability insurance. Baker Birdwell’s quick guide runs through the basics to consider.

Per the AMA, having sufficient disability income protection is one of the most important components in securing your financial future. 77% of physicians rate it as essential, and 60% know of a physician who had a disabling illness or injury.

The best time to get coverage is when you are young and healthy, as you can lock in low rates. Some schools offer programs to buy coverage. If you have any health issues, these can be the best way to purchase coverage. If you are healthy, you may have some excellent alternatives to these programs.

What are your choices for coverage?

Employer paid group Long Term Disability (LTD)

  • The benefit amount is minimal because it is based on your salary as a Resident. Benefits may be taxable and end with your Residency. Benefits may also reduce if you receive social security or workers comp disability benefits.

Association Plans like the AMA’s

  • Benefit amounts may still be minimal – the AMA maximum is $5,000/month.
  • Definition of Disability, or what must happen for you to be considered disabled, may vary a great deal. We’ll review this in a moment.
  • Premiums are low, and go up in steps as you get older.
  • Coverage may be layered on top of other LTD benefits.

Individual Disability Plans

  • Benefit amounts will be the highest available and with future insurability options, you may increase benefits as your earnings increase, even if you are no longer insurable.
  • You can choose the benefits that are important to you: different definitions of disability, Residual or Partial disability provisions, Future purchase options, Student Loan Payoff riders, Cost of Living Adjustment riders, and Catastrophic disability riders.
  • Premiums are more expensive; however, they are guaranteed level to age 65. They only increase when you increase your benefits.
    • As the AMA says, Don’t settle for the cheapest insurance – it also provides the least coverage.

Key Provisions of Disability Insurance:

What is Definition of Disability?

This is the heart of a disability policy. Simply put, what has to happen for you to receive and keep receiving benefits? Here are the definitions you will see:

Own Occ / Own Specialty

If your disabling condition prevents you from doing your specific specialty or occupation, you are paid full benefits, even if you return to work in another specialty or occupation. This is the best definition for physicians available.

Transitional Occ (not very common)

If your disabling condition prevents you from doing your specific specialty or occupation, you are paid full benefits. However, if you are able to return to work in another specialty or occupation, AND you receive full benefits until your new job’s income plus your disability benefits exceed 100% of your prior job’s earnings.

Own Occupation / Not Working

If your disabling condition prevents you from doing your specific specialty or occupation, you are paid full benefits.However, if you are able to return to work in another specialty or occupation, AND you elect to do so, benefits stop.

Any Occ

If you can do any occupation, you are not considered disabled.

3 Important Riders to consider

Residual or Partial

If your condition allows you to work part-time, you are paid a pro-rata benefit based on your proportionate loss of income.

Future Purchase Options

You can buy more coverage without medical underwriting.

Student Loan Riders

If disabled, in addition to your monthly benefit, your loan payments are made.