Physician disability insurance is something you have to get right.

If you were to learn only one thing from me, this might be the one thing that I would want you to know. For those of you that don’t know this story, it’s the reason that Money Meets Medicine exists, and why I started The Physician Philosopher. 

When I was a fourth year med student, I applied for term life insurance. We just had our first kid, and when I got recommended to an insurance agent, I assumed that person was an honest and trustworthy professional. I knew I needed term life insurance, and the agent recommended I get disability insurance, too. Even though I didn’t have much income to speak of, I agreed.

I had an essential tremor that I was on propranolol for at the time. The agent assured me his underwriter had reviewed my information and I was sure to get approved. But because of the tremor, I got denied.

Cut to medical training, when you have the option for coverage by a guaranteed standard issue (GSI) policy. There’s no medical exam, no history, no underwriting process, and the essential tremor would have gone totally unnoticed. The only stipulation with the GSI policy is that you can’t have been denied before. And because I had a Northwestern agent trying to make a commission off of selling me physician disability insurance in the past, to this day, I still do not have disability insurance.

Your most important financial asset is your ability to earn an income. You work hard to get your training protecting this asset, and your ability to accumulate an income and everything else we teach you doesn’t matter if you don’t make money first. This is why physician disability insurance is so important. 

Had somebody told me how disability insurance worked back when I was in training, my situation wouldn’t have happened. It’s the whole reason why I teach financial literacy to people in medical training today. 

A lot of physicians think, “Disability insurance is expensive, and when will I really need it?”

You need it.

Common scenarios for doctors using disability insurance is that they’re a surgeon who’s gotten diagnosed with arthritis and they can’t operate, or they suffer from a mental health disorder that prevents them from working full-time. 

There are a lot of misconceptions about disability insurance, and our goal here is to clear some of that up.

How the process of buying physician disability insurance works

Lisha got disability insurance right as she graduated from medical school, before residency.

Despite being strapped for cash, shel made it a point to get disability insurance. And that’s because one of the best things that we can do as doctors is protect our biggest asset: our ability to make money.

In terms of cost on a disability insurance policy (in the interest of being open and transparent), Lisha pays $106 per month in terms of cost on a disability insurance policy. She’s still a fellow, so once she becomes an attending, that amount will increase because the benefit will increase. The amount will also vary depending on your gender and family history.

Important note: Disability insurance costs more for women because they’re more likely to become disabled through events like pregnancy. If you’ve been pregnant before, chances are your disability insurance policy will cost you more than someone who hasn’t.

Disability insurance is typically sold through an independent insurance agent. They can sell insurance from multiple different companies. So they say, “Hey, I can get you a quote from company A, from company B, from company C, and company D,” and let you compare rates and benefits. They earn a commission when you buy the policy, but it shouldn’t necessarily matter to them which company you buy the policy from. 

Lisha liked how transparent her insurance agent was and that he was willing to explain different aspects of the policy. He helped give her an understanding of the average price for someone her age and gender. Her agent also walked her through the pre-approval process, because you actually have to qualify for the insurance.

What a lot of people also don’t realize about how the process works is that their disability insurance doesn’t go into effect for 60 to 90 days. That’s because this is long-term disability insurance. Covering yourself for a potential disability is one of the important reasons we frequently discuss for having an emergency fund, and having the ability to cover your living expenses for three to six months.

The most important thing to look for in physician disability insurance

Making sure you have a specialty specific definition for the term “disability” may be the most important thing in a disability insurance policy.

As of this recording, policies from Ameritas, Guardian, Mass Mutual, Ohio National, Principal, and Standard have historically given what’s called an own occupation specialty specific definition, and this is really, really important because there are a variety of definitions when it comes to disability.

Like any legal policy, the words that are in it matter. What these words mean is that if you can’t do the substantial and material duties of your occupation and your benefits don’t change, even if you’re gainfully employed in another occupation, they’ll still pay you. 

I know physicians who’ve gotten disabled and still have a job working as a physician in medical education advising students, and they still get paid because they’re disabled from their specialty. If your policy doesn’t have a good definition, that won’t happen. 

 Regardless of which company you’re working with, you need to make sure it is a true occupation definition, which means that if you’re deemed disabled and unable to perform the material and substantial duties of your occupation and your benefits do not change, even if you make income in another specialty. It seems a little confusing, I know, but you want a definition that is as specific as possible. The more broad and vague the definition is, the less likely it’s going to help you when you need it most. 

Where do group policies play a role when it comes to disability insurance?

“If I have a group policy, aren’t I covered?”

Not necessarily.

Group policies have limitations. They’re not what’s called portable, which means that you can’t take it with you, whereas a private policy comes with you whether you stay at your current job or go to a new job.

The only time we really recommend a group policy is if you’re somebody who has a preexisting condition and you can’t qualify for disability insurance on your own.

Cost factors to keep in mind and final thoughts on physician disability insurance

Disability insurance companies don’t want to pay you more to be disabled than your residency program is paying you to work, so usually there’s a limit on how much you can get as a trainee.

When we last looked this up a few years ago, the limit was a benefit of $60,000 per year. So what does that mean? That means if you were to get disabled, then they would only pay you out a maximum of $5,000 per month for a yearly benefit of $60,000 (that limitation goes away when you become an attending).

Disability insurance is also state specific in terms of cost. A disability policy from Georgia, Florida, or California will definitely not present the same premiums to be paid. 

Regardless of the company or policy you choose, we hope this discussion will help you go into it being as informed as possible. Ask your agent questions, don’t do business with someone who won’t answer your questions, and do your own research. Physician disability insurance is something you have to get right.

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