Simplifying the Complexities of Disability Insurance Income Protection

While many residents and fellows look to obtain supplemental disability insurance protection to replace a greater percentage of their income during training and their future practice income,  trying to differentiate between the coverages proposed by insurance agents and online resources can be overwhelming.

It’s unreasonable! How can you possibly be expected to differentiate between such contractual language as pre-disability earnings formulas, duration of recovery benefits, forfeiture clauses in guaranteed increase provisions, and barriers to increasing coverage to protect your practice income? The likelihood of this would be the same as expecting a patient to understand a clinical explanation of the various options and implications of the potential treatments they could pursue to address their medical condition.

And while it’s always advisable to consult with an experienced professional who can help you unravel the differences of the contracts many physicians consider, having a basic understanding of five foundational issues should help you make sure the coverage you purchase best addresses your income protection needs.

What happens if I can’t work at all?

This scenario is addressed by a provision called the definition of total disability and it will provide a monthly benefit until you recuperate, reach the maximum benefit period or no longer satisfy how the insurance company defines total disability. This definition will vary greatly between companies (with the most comprehensive definition protecting your ability to perform your own specialty) and it’s important to avoid contracts that allow the insurance carrier to stop paying benefits if they deem you able to return to any occupation.

What happens if an accident or illness causes me to suffer a partial loss of income?

It’s important to make sure you don’t unintentionally purchase “all or nothing” coverage that won’t pay you if you’re suffering a loss of income while working in a reduced capacity.  Without this provision (called residual disability or extended partial) you won’t be eligible to receive benefits the moment you return to work. It’s important to look for coverage that provides benefits based solely on an income loss (some contracts require you to prove you’re working fewer hours or that your regular duties are restricted).

What happens if I continue to suffer a loss of income after I’ve fully recuperated?

Many policies include a provision called a “recovery benefit” that allows your monthly benefit to continue when the insured has fully recuperated and continues to suffer a loss of income due to the need to rebuild their practice or qualify for performance-based compensation. The duration of this payment can vary greatly and is important for those specialties where compensation is tied to patients seen or procedures performed.

How can I protect my future income today?

Most residents and fellows experience a dramatic increase in income in the first few years following graduation and it’s highly advisable to include a “guaranteed increase“ provision in your policy that allows you to increase your benefit at prescribed periods in the future without having to medically qualify. With this provision, you can lock in coverage to protect your future income and lifestyle. It’s important to consider how frequently these opportunities become available, if you are required to increase your coverage when these options become available and if not doing so could cause you to forfeit all future guaranteed increase opportunities?

How can I protect my benefit from inflation if I’m out for a prolonged period of time?

During a long term claim your monthly benefit could be eroded by the rising costs of goods and services. While this won’t have a significant impact on the benefit of someone in their late forties or fifties, younger healthcare professionals may want to consider adding this provision to protect the purchasing power of their benefit, no matter how long a claim may last.

By looking at insurance contracts through these lenses it’s possible to identify  the contract that can best protect your future and everything you’ve work so hard to achieve (and everyone and everything that depends on it) during your practice years.

Are you as protected as you need to be?