Most physicians insure their house, their car, and their life long before they think about their income. That order is backwards. Your income over a full career is the asset that pays for everything else.
The definition that matters most
Every disability policy defines what "disabled" means. That definition decides whether a claim gets paid. For physicians, there are three you will see:
True own-occupation
The policy pays if you can no longer perform the material duties of your own occupation, often defined down to your specialty, even if you go on to earn money in another role. A surgeon with a hand injury who moves into teaching or consulting can still collect.
Modified own-occupation
The policy pays if you can't perform your specialty and you are not working in another occupation. If you choose to work elsewhere, benefits may stop or be reduced.
Any-occupation
The policy pays only if you can't work in any occupation you are reasonably suited for by education, training, or experience. For a physician, that is a very high bar to meet.
The wording varies from one insurance company to the next, so read the definition in the actual contract, not just the summary.
Why hospital group coverage often isn't enough
Group long-term disability through your employer is a good start. It usually is not the whole answer, for a few reasons:
- Benefit caps. Group plans commonly replace a percentage of salary up to a monthly maximum. High earners can hit that cap well before 60% of their real income.
- Broader definitions. Many group plans use an own-occupation definition for a limited period, then shift to a broader one.
- It stays with the job. Change employers, go part time, or open your own practice, and the coverage may not come with you.
- Taxes. When your employer pays the premium, the benefits you receive are generally taxable income. Benefits from a policy you pay for with after-tax dollars are generally received tax-free. Confirm your situation with a tax professional.
Policy features worth understanding
- Non-cancelable and guaranteed renewable. The company can't cancel the policy or raise the premium as long as you pay it.
- Residual or partial disability. Pays a partial benefit if you can still work but your income drops because of a disability.
- Future increase option. Lets you buy more coverage as your income grows, often without new medical underwriting.
- Cost-of-living adjustment. Increases benefits over time during a long claim so inflation doesn't erode them.
- Elimination period. How long you wait before benefits start. Ninety days is common. A longer wait lowers the premium.
When to buy
Disability coverage is priced and underwritten on your age and health at the time you apply. A new diagnosis, even a minor one, can lead to exclusions or higher costs later. That is why many physicians start coverage during residency or fellowship and use a future increase option to grow it as their income rises.
Questions to ask about any policy
- How exactly does this contract define "own-occupation," and does it name my specialty?
- Is it non-cancelable and guaranteed renewable?
- Does it include residual disability, and how is it calculated?
- Can I increase coverage later without a medical exam?
- How does it coordinate with my group coverage?