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You Are Your Greatest Asset: Income Replacement / Disability Insurance Part II


Where does a physician start in identifying the company that best matches his or her needs, priorities and preferences when looking to purchase disability insurance for physicians? The best place to start is by understanding how to differentiate between different disability insurance provisions, riders, and definitions.

Currently, the major players with the high quality disability insurance products for physicians are Guardian/Berkshire, Mass Mutual, The Standard, Ameritas and Principal. At any given time, anyone of these top quality companies may offer the best disability insurance for physicians at their current place in life, from medical school to residency to fellowship and beyond. The specialty that a physician is trained in also comes into play when determining the strength of the policies that are available. Where does a physician start in identifying the company that best matches his or her needs, priorities and preferences when looking to purchase disability insurance for physicians? The best place to start is by understanding how to differentiate between different disability insurance provisions, riders, and definitions.


1. Elimination Periods and Waiting Periods. This is the amount of time you have to wait for your first disability check and the maximum length of benefits is extremely important to know. The elimination and waiting periods can also dictate your price for the disability insurance policy. Typical waiting periods are 30, 60, 90 and 180 days. The most common waiting period that is chosen is 90 days.

2. Non-Cancelable and Guaranteed Renewable Policy. This is an option on an individual disability plan that prevents your insurance carrier from cancelling the plan or changing the definitions for the length of the benefit period. The policy is also automatically renewed as long as the premium is paid on time.

3. Definition of Total Disability. When you are unable to perform all the material and substantial duties of the policy’s definition of total disability, then you would fall into a total disability claim resulting in full monthly benefits.

4. Residual Disability Rider. This rider is used when you have some loss of time or duties and loss of income, usually at least 20%, but some insurance carriers will go down to 15%. This is a more liberal definition than partial disability since you usually don’t have to be totally disabled during the elimination period to qualify. This rider is available on all quality disability insurance plans and should always be considered.

5. Future Increase Option Rider (FIO). This rider allows you to increase your disability policy by the stated monthly maximum amount purchased without having your health re-examined by Insurance Company on the anniversary date. This is a very important rider for newer physicians wanting to protect a projected higher income since their health status could change in the future, making them ineligible for increased coverage without this rider. Physician would still need to provide proof of the larger income through W-2’s and/or tax returns to qualify for the increased coverage.

6. Cost of Living Adjustment Rider (COLA). This would increase the monthly benefit by the CPI not to exceed a ceiling of typically 3% or 6% compounded or simple interest per year during a claim. If you’re disabled for 5 years or more, it may be difficult to keep up with the bills if your expenses keep on rising but your payout is fixed.

7. True Own-Occupation Coverage. A term used to describe the more liberal disability contracts available to physicians. With “Own Occupation” language, if a physician cannot work in his or her occupation/specialty because of sickness or injury then they would receive a monthly benefit regardless if they were working in another occupation/specialty. There would be no offset from monthly disability benefits from earnings in a new occupation/specialty.

8. Premium Structure. A few insurance companies offer a Graded, Term or Step Rate premiums. This type of premium structure lowers your initial premium significantly however the rates go up each year. You have the right to switch to a Level premium at Anniversary when you can more afford the higher premium. Graded premium option is more suited for Resident/Fellows who are on a limited budget however once they are Attending’s they can afford to switch to level premium.

9. Recovery Benefits. A recovery benefit continues to pay benefits (in the same fashion as the residual disability rider) if you return to work on a full-time basis with no loss of time or duties but continue to suffer a loss of income. If there is a demonstrable relationship between your current loss of income and your prior disability, most companies will continue to pay benefits to age of 65 or longer as long as the required income loss is met.

10. Catastrophic coverage. This rider can provide a monthly benefit in addition to any other disability benefit payments under the policy if you are catastrophically disabled:

  • Unable to perform two or more of the activities of daily living without human standby assistance; or
  • Cognitively impaired; or
  • Irrecoverably disabled

Financial Ratings

A disability could strike at any time — now, or 20 years from now – so it is important that your disability insurer have the financial strength and stability to weather the worst of economic storms. A good way to do this is to see how various rating agencies rate a particular company. Using A.M. Best Company for example, a company rate “A=” or better demonstrate the greatest financial strength to withstand bad economic conditions.

In Part III of this series I will outline criteria pertaining to Health and Financial underwriting guidelines and use of exclusions for preexisting conditions.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice