Three Essential Policy Features

Whenever possible, the following three policy features should be included in all physician and dentist disability policies:

Non-cancellable (non-can) and guaranteed renewable

Means that the policy cannot be cancelled or changed by the insurance company prior to age 65 or 67. The premium rate is also guaranteed to remain the same until this age. Unlike many employer-provided group policies or medical and dental association policies, the non-can individual policy provides price and benefit stability throughout a doctor’s professional career.

Own Occupation/Specialty

Defines total disability as: unable to perform the material and substantial duties of your occupation or specialty. Do not settle for other, less desirable definitions of total disability, such as Modified Own Occupation or Any Occupation.

Residual Disability

Not all disabilities qualify as total disability. You might experience a partial disability that limits your ability to work and results in decreased income. Or you may experience an initial total disability, followed by an extended period of partial disability. In either of these cases, your monthly benefit would be proportionate to the percentage of your income loss. Some insurance companies offer the benefit as a built-in feature of their basic policy and others offer it as an optional rider. As long as you have it included in your policy (and you definitely should), it does not matter whether it is built-in or an optional rider.

Other important policy features to consider:

Ideally, every physician and dentist disability policy would include the following features as well.  Some of these features are optional benefits that you could choose to include or leave off your policy.  Usually, the only reason to leave off valuable features is to reduce your premium costs.

Other features are not optional to you, but are automatically offered on some policies and are not available on others.

Below are several policy features that you should seriously consider before getting a policy:

Mental & Nervous (M&N) and Alcohol & Substance Abuse Claims

Many polices offered today pay limited benefits for M&N claims. These policies limit payment for such claims to 24 months during your lifetime or to 24 months per claim occurrence. However, there are a few policies offered today that do not limit payment of M&N claims in this way. M&N claims make up a growing percentage of claims on disability insurance policies so it’s important to know whether or not your policy limits payment of these claims.

Recovery Benefit

Let’s assume that you have been disabled and receiving claim benefits from your policy. If you continue to suffer a loss of income resulting from your disability even after you return to work full-time, many policies will pay a monthly benefit. For example, consider that you have been out of work on disability for a year. You return to your practice but may not have a full work load right away. It may take time to rebuild your work load and return your income to its pre-disability level. The Recovery Benefit pays during that time. Some policies pay until you have reached 80% of your pre-disability income. Others only pay for a limited time, such as one or three years.

Guaranteed Insurability Options

Let’s imagine that you just began practicing your specialty and you purchased the maximum amount of disability insurance based on your current income. As you build up your practice, your income should increase. Then at some point before you reach your earnings peak, you develop a serious medical condition, such as heart disease or a serious back injury. If you try to increase your disability coverage after your diagnosis, the insurance company could decline to issue the additional coverage, they could issue the policy with a higher than normal premium, or they could issue the policy with an exclusion for disabilities due to your back.  What’s the solution? Guaranteed Insurability Options. If you include them when you apply for your original policy, you can apply for additional coverage in the future without proving your good health. As long as you apply for the coverage using your Guaranteed Insurability Options, the insurance company cannot turn you down due to your health status. However, you must have sufficient income to qualify for the additional coverage.

Cost of Living Rider

The COLA rider annually increases your monthly benefit on the anniversary of your claim. If you become long-term disabled, inflation will reduce the buying power of your monthly benefit. The COLA rider is your only means of increasing your monthly benefit while disabled. The increase may be tied to increases in the CPI-U, with a stated maximum, or it may be a guaranteed increase. Most leading physician and dentist policies currently offer a choice of 3% and 6% riders.

Catastrophic Benefit Rider

Provides extra protection, in addition to your policy’s monthly benefit, in the event you become catastrophically disabled due to an injury or sickness that causes cognitive impairment, the inability to perform two or more Activities of Daily Living, or Presumptive Disability.

Retirement Protection Rider

This rider provides a benefit, in addition to your policy’s monthly benefit, that ensures contributions to your retirement savings will continue even while you are disabled. Without this benefit, it’s unlikely that you would be able to contribute a significant amount to your retirement savings. This benefit can also be offered as a separate, stand-alone policy.