Physicians often earn millions of dollars throughout the breadth of their careers, providing a comfortable nest egg for retirement and seamlessly maintaining a desired lifestyle. However, physicians are human. Like all humans, they are at risk of becoming sick or disabled, which could force them to stop practicing. Though it can be a sizeable expense, disability insurance provides protection for physicians’ practices and incomes, allowing them to accept a disability without fear of compromising life goals.
According to Jeff Witz, Educational program Director and Certified Financial Planner at MEDIQUS Asset Advisors, Inc, a doctor’s income prior to disability is covered from 60-70% by disability insurance. In the unfortunate event of a physician falling victim to long-term disability, if covered by disability insurance, the physician would receive monthly benefit payments. These payments would allow the physician to continue paying living expenses and to continue saving for future lifestyle goals.
When researching potential disability insurance policies, Witz recommends a few terms of which to take note: Elimination period, benefit period, and definition of disability. The elimination period indicates the length of time in which the insured physician must not be working due to being sick or disabled before the policy kicks in and sends payment. Elimination periods vary amongst disability plans, with common timeframes being 90, 180, or 360 days. Physicians are best advised to consider how much money they have saved in an emergency fund when considering which elimination period best suits their needs.
Benefit period is the greatest duration of time in which an insurer will pay out monthly benefits. Benefit periods vary a great deal. While some may be around 3 or 5 years, others may extend all the way to retirement age. It is in a physician’s best interest to choose a benefit period that will endure until they foresee entering a state of financial independence.
There is a wide range of definitions of disability. One example of a definition of disability is an Own Occupation, which does not pay out unless the policyholder cannot work at all in any capacity. Own Occupation definitions of disability either decrease or completely remove the policies paid out benefits, as they are rooted in any income that the policyholder is able to bring in. If a physician could not earn income in the medical field to their disability, they could still collect insurance from an alternate source of earned income. Witz adds, however, that a true Own Occupation definition of disability pays out the full monthly benefit regardless of the insured physician’s ability to bring in money from an alternative line of work. As such, a true Own Occupation policy offers the greatest amount of protection for physicians.
Insurance premiums increase with age, so physicians are best served to get a policy when they are younger. It is well worth the expense. Furthermore, the longer a physician waits, the more susceptible they are to having potential red flags in their medical history that might result in denial for a policy. If physicians seek out disability insurance as a medical resident or fellow, they may even be rewarded with discounts, potentially up to 20%.