Physicians can buy more disability insurance than others because of special programs
As a physician, you have invested massive amounts of time and money in your specialty. That’s why you need to know your income will be protected if you become sick or injured and unable/limited to practice within your specialty.
There are special programs available for residents and fellows to help protect your future income — even if your health changes or you join a practice where coverage is unavailable, limited, or more expensive. These programs offer —
• Generous monthly disability benefits without a proof of income requirement.
• Future increase options that allow for increasing future coverage without evidence of good health.
• Graded premiums to help keep the cost down today.
The reason why you need to put disability coverage in place today is to guarantee portability. And, an individually owned disability insurance policy stays with you, even if you change employers. If you lock in coverage today while healthy, you will never be subject to premium increases or medical exclusions if your health changes.
Usually a monthly disability benefit is based on replacing a percentage of current income. Most insurers will replace up to 60-70% of income. However, for fellows and residents the rules are a little different. Insurers look at your income, but also consider the year of residency or fellowship and assign an amount of coverage. Based on today’s limits, a PGY3 earning $45,000 could purchase as much as $5,000 of monthly benefit. Without the special programs a resident would need to earn at least $100,000 annually to qualify for $5,000 a month in coverage.
Future Increase Options
In addition to base coverage these special programs also offer future increase options (FIO*) riders. An FIO rider entitles you to apply for additional coverage — regardless of your then current health status. Without an FIO rider you may be unable to purchase additional coverage, if your health should deteriorate.
|Base Coverage||Future Increase Options||Total Coverage|
Group disability coverage usually reduces the amount of individual insurance you are eligible for. Thus, residents would not qualify for much individual coverage if they are included with a group disability plan. However, these special programs allow you to purchase a larger individual benefit regardless of your group coverage.
Graded premiums are an option that can help reduce costs early in your career. Disability insurance typically has guaranteed level premiums that are payable to age 65 or 67. Your future income will be substantially higher once in practice. However you need to protect your future income today. With a graded premium the initial cost is more affordable and premiums incrementally increase. Once you get into practice, you may convert your graded premium to a level premium based on your then-current age.
With disability coverage the prudent plan is to get the maximum coverage in place at the youngest age possible. At the point of application a medical exam is done and medical records are analyzed by the underwriting departments of the various insurance carriers. If you have a pre-existing condition that could increase the likelihood of a claim the insurance company may exclude the condition. Also, if you delay purchasing coverage and have a health issue you may be unable to get additional coverage.
Decisions you make today about the amount and kind of coverage will become more and more important as you progress through your career and life. You need to maintain options as the transition is made from training to in practice, and beyond.
Taking advantage of special programs for disability insurance can allow you to lock in coverage that will be there throughout your career. The reality is that some day having or not having benefits could prevent you from going into private practice. We work to help you understand your options and select the appropriate disability program.
*While no medical evidence is required for you to be eligible for you to purchase additional coverage through the FIO rider, your application for coverage will be based on financial underwriting. You will be required to submit evidence of your income, and all disability insurance which you have in force with all insurers, which you have applied for or are eligible to receive.
Other In Force disability insurance may reduce the amount of Future Increase Option coverage available for exercise.
Registered Representative, a Financial Advisor of Park Avenue Securities LLC (PAS) and a Financial Representative of The Guardian Life Insurance Company of America, New York, NY. Securities products/services and advisory services offered through PAS, a registered broker-dealer and investment advisor. PAS is an indirect wholly owned subsidiary of Guardian. The Bulfinch Group in not an affiliate or subsidiary of PAS or Guardian. Life insurance offered through The Bulfinch Group Insurance Agency Inc., an affiliate of The Bulfinch Group, Inc. The Bulfinch Group is not licensed to sell insurance. Disability income and long term care insurance are underwritten and issued by Berkshire Life Insurance Company of America, Pittsfield, MA, a wholly-owned stock subsidiary of The Guardian Life Insurance Company of America, New York, NY.
PAS is a member FINRA, SIPC.