Articles

6 Disability Insurance Riders You MUST Have

By Jimmy Turner, MD
The Physician Philosopher

While we cannot predict the future and we, therefore, cannot protect ourselves from certain financial stressors should they arise – we can protect ourselves from catastrophic financial situations like death, disability, and a lack of malpractice coverage. When it comes to disability insurance policies, what are the disability insurance riders a high-income earner must include in their policy to be protected? 

As is my bent when it comes to personal finance, I aim to teach the crucial 20% you need to know to get 80% of the results.  

For example, if you have a claims-based malpractice policy (without tail coverage), you will find the financial pain can be very real if you end up wanting to change jobs. Tail coverage is necessary and can prove quite expensive. In fact, the cost may keep you in a job you hate. So, you better have an occurrence-based policy, ask your group to cover your tail, or at least have a plan to pay for tail insurance by increasing how much you keep in your emergency fund. 

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But that’s part of the 20% you need to know about malpractice insurance… what is the Pareto Principle application of disability insurance? Here are the six components to a disability insurance policy that you should have to protect you from catastrophic financial loss.

Buy The Disability Insurance Riders from The Good Guys/Gals

Before we dive into the good stuff, I want to mention one thing upfront. I was screwed by the disability insurance industry when I was a 4th-year medical student. For this reason, it is my number 1 goal on this site to protect my readers from experiencing the same fate.

For this reason, I have a list of recommended insurance agents for doctors that will offer you everything discussed below. If they don’t, I’ve got no problem removing them from my list. In fact, the Physician Philosopher readers serve as a vetting process for this list. Going forward the list is likely to get smaller and smaller as I realize which insurance agents are offering the best service for my readers. 

My readers come first, and always will.

All that to say, let me know what you think after working with the recommended agents on this site! Here are the six riders found in a good disability insurance policy. 

1. Non-Cancellable, Guaranteed Renewal

The fancy words above mean only two things. Your disability insurance company cannot cancel your policy and – so long as you make your premium payments – it is guaranteed to be renewable.

This includes if a disability insurance company goes under. They are required to sell the contract to another company in order to make sure this rider holds true. In this way, these two terms serve as important protection for you and are required in any good disability insurance policy.

In fact, this is so common sense that any company that offers you something different, shouldn’t be selling disability insurance. 

 

2. Own-Occupation, Own-Specialty Definition

The definition of disability is arguably the most important aspect of any disability insurance policy. Why? Let me give you an example.  

Stick with me here. This is important stuff.

A Bad Disability Definition

In my current job, 60% of what I do is regional anesthesia and 40% of my time is spent in the General OR section. Part of this general OR work includes working in the Pre-Anesthesia Clinic (PAC). I also have a side hustle called The Physician Philosopher LLC.

Let’s say that I was involved in an accident and lost my left arm. Without an arm, I certainly couldn’t perform regional anesthesia or anesthesia in the operating room anymore, which is very procedurally heavy. However, what I could continue to do is PAC work where I dictate my clinic visits or oversee APP’s that are in the clinic.  

I could also continue to make money from this site.

Imagine if I told my insurance company of my disability expecting to get paid and they said, “I’m sorry you cannot work in the operating room or in regional anymore, but you can work in the PAC full-time, right? Oh, and can’t you also continue to blog and podcast on Money Meets Medicine?” 

What sort of definition would result in a decision like this? A Medical Own-Occupation definition like the one offered by Northwestern Mutual.

A Medical Own-Occupation definition of disability

You qualify for disability if:

  •  If you are totally disabled AND you can no longer do ANY of your substantial and material duties, you can take your full disability benefit. Or…
  • If you can do one or more of your substantial and material duties… you can change your occupation altogether and receive some or all of your benefit. You are totally disabled if you meet all of the following:
    • The majority of your time prior to disability has to be spent in direct patient care and services (TPP: sorry teachers, researchers, etc).
    • You are unable to perform the duties that accounted for more than 50% of billed charges.
    • You are not working (TPP: Sorry if you have a side hustle like me! That income counts against you! )

You can see how the definition above (emphasis mine) would be unhelpful in a lot of situations. 

If you have a side hustle, if you have a substantial FTE reduction for research or teaching, if the majority of your billing comes from the clinic and you can still perform this work, etc.

If you have a policy definition like the one above, you should talk to one of The Physician Philosopher’s recommended insurance agents to get a new policy.

 

A Good Disability Definition

Okay… so, that is what a bad disability insurance definition sounds like. What does a good definition look like?

A good definition of disability insurance would pay in full because I was disabled from the vast majority of my job. It would also allow me to earn income elsewhere.

This “good” definition is called an “Own-Occupation” definition. It should describe disability as being unable to perform “material and substantial duties of your occupation” based on the job you were performing immediately before your disability.  

In fact, this definition is so strong, that if you were disabled from your job as a doctor, you could still continue to make money doing a different job and the policy should still pay. (This is one of the huge advantages of a private policy over a group policy). And…there are only six companies that offer this definition.

The Big Six Disability Insurance Companies: Ameritas, Berkshire (Guardian), Mass Mutual, Ohio National, Principal, and Standard. 

It is my opinion that you should not buy a disability insurance policy from anywhere else.

 

3. Partial/Residual Disability Insurance Rider

What if you were disabled, but not totally? Or what if you become gradually disabled? That is what a partial disability insurance rider is all about.

This rider takes away the need to have a “total” disability. If you lose income greater than 15-20% of your income, this will trigger the rider. When you get to 75-80% of your income is lost, this is then considered a total disability.  

You can imagine that there are many situations where you are only partially disabled. For this reason, purchasing a partial disability insurance rider makes a lot of sense.

 

4. Cost of Living Adjustment (COLA) DI Rider

The COLA rider is the one rider on this list that isn’t absolutely necessary in my mind. It is a good idea if you can afford it. However, if you have to choose between the COLA rider and increasing your policy to the amount you need… then, just increase the policy benefit.  

The purpose of the COLA rider for disability insurance is to pay for future increases in the cost of living. This is to hedge against inflation, which is very real. If your disability lasts 12 months, which is a big “if”, it will kick in.  

Again, I’d favor a larger monthly benefit over a COLA rider, if you are forced to choose.

 

5. Future Purchase Increase Disability Insurance Rider

This is absolutely necessary, particularly for my resident/fellow readers.  

To put it simply, a future purchase rider allows you to purchase more disability insurance in the future. The important part here is that the future purchase doesn’t involve divulging more information. There is no additional medical exam, history taking, or blood work. 

This is super beneficial for residents and fellows. Why? Because you likely cannot afford the amount of disability insurance you will need as an attending during residency. Therefore, you should purchase disability insurance is July of your intern year at a rate you can afford. Then, add on the future purchase option so that if your health changes, it won’t matter.

This would have been ideal for me given that I ended up getting diagnosed with Grave’s disease and anxiety related to it shortly after becoming an attending physician. 

Note: the future purchase amount is usually based on the initial benefit. 

 

6. Recovery Benefit

Say you are a surgeon battling cancer, but you beat it! Now, you want to get back to doing what you love. Yet, you probably won’t start making 100% of what you previously made immediately. In fact, much of your referral base may be very limited at first. It is also likely that you do not have the same stamina to perform multiple procedures at first.

Instead of jumping right back into the same schedule and operative load, you’ll gradually climb to where you were. If your disability stops paying before then, you’ll be losing money while working. That doesn’t make a lot of sense.

Enter here the recovery benefit rider. The Recovery Benefit rider helps when you want to try and come back to work following a disability event. 

There is nothing quite like a little help getting back on your feet!

 

Take Home:

If this all seems over your head, there is a simple solution. Pick 2 agents from the recommended insurance agent list. Call them. Let the agents answer your questions. Then, get quotes with the riders listed above. 

The take home here is that physicians really should have disability insurance. Until you reach financial independence, this insurance has the potential to save you. Don’t mess it up as I did. And, don’t wait until it is too late!

Do you have disability insurance? What is your policy’s definition of disability? Have you worked with an agent on the list? Who would you recommend? Leave a comment below. 

TPP

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