A long-term disability policy can protect your income

Achieving your personal and professional goals depends on your ability to earn an income. A disabling accident or illness, however, can prevent you from practicing medicine for a long period of time.

About one in five Americans will become disabled for 1 year or more before age 65, with the average disability lasting 30 months. Few physicians are prepared to rely solely on their savings to carry them through an extended recovery period. Long-term disability policies can provide you with income if you are injured or become ill. But before you start shopping for a policy, you need to know the features to look for, and the language the insurance industry uses to describe them.

Total disability coverage

Two types of policies are written for total disability: “own occupation” and “modified own-occupation.” An own occupation policy will continue to pay your disability insurance claim even if you are employed in another occupation.

Currently, six companies offer own occupation policies: the Standard, Guardian Insurance, MetLife, the Principal Financial Group, Ameritas Life Insurance Corp., and MassMutual.

A modified own occupation policy, by contrast, will pay a claim only if you are unable to perform the substantial and material duties of your occupation and you are not working. In other words, it will not pay you if you work in a field other than your medical specialty-either medical or non-medical- when you are able to resume working.

To avoid the possibility of losing your coverage just when you need it most, choose a policy that’s non-cancellable and guaranteed renewable to age 65. Such a policy also will guarantee premiums until age 65.

Riders to consider

By adding a rider to your policy, you can ensure that you obtain benefits if you suffer a loss of income as a result of partial (residual) disability. This is an important feature because most disability claims are for less than total disability.

An annual future increase options rider is especially important for younger physicians, because it allows you to increase your base benefit as your income grows without having to go through medical underwriting.

Costs

The cost of a long-term disability policy usually is about 2% of the gross income you are trying to protect. So to protect $100,000 of income, you should plan on spending about $2,000 annually. This amount is similar to the cost of policies to protect homes and vehicles, which typically range between 2% and 4% of the asset’s value.

Although no one likes to contemplate the possibility of severe injury or illness, such occurrences are a part of life. You need to protect yourself, your family, and your business if something should happen to you.

Additional information regarding long-term care policies is available through the Council for Disability Awareness at www.disabilitycanhappen.org.

The author is a financial adviser with North Star Resource Group in Minneapolis, Minnesota. Send your practice-related financial questions to medec@advanstar.com.