Would you ever consider scrimping on your malpractice insurance – buying a cheaper policy to save money – or one-size-fits-all coverage to save time? Probably not, because most physicians know that a solid malpractice policy is a vital part of practicing medicine today. Without it, you could be ruined, so the time and money spent on getting the best possible coverage is a good investment in your own economic safety.
But did you know the same is true for disability insurance (DI)? It’s simply not safe to rely solely on a group policy your practice may have purchased. While group DI is often relatively inexpensive and easy to administer, it can also fall short just when you need it most – leaving you in for some unpleasant surprises when it’s too late to correct the situation.
Furthermore, disability may be far more common than you imagine. Even if you’re young and careful, it could happen to you – through an accident, an injury, or a lengthy illness. Statistics show that disability is much more commonplace than most people think: In a recent survey more than half of employees surveyed felt they had less than a 2 percent chance of becoming disabled during their working years, but in reality more than 25 percent of Americans entering the work force today (1 in 4) will become disabled before they retire.
Want to be better prepared? Consider the following:
Learn to speak the lingo
The right disability income policy can help you keep your household going if you suffer a long-term disability. But before you go shopping for a DI policy, you need to know which features to look for – and the language the insurance industry uses to describe them. The following terms are part of the language describing high-quality policies, and are what you should look for to get coverage you can count on:
Non-cancellable and Guaranteed Renewable: To avoid the possibility of losing your coverage just when you need it most, choose a policy that’s non-cancellable and guaranteed renewable to age 65. This will also guarantee premiums until age 65. With group or association coverage, you run the risk of being dropped and left unprotected at a time in your life when, due to your age or a change in your health, it would be very difficult to qualify for coverage from another provider. The premiums for your classification group can also be increased at any time.
Conditionally renewable for life: Although premiums may increase after age 65, your policy should be guaranteed renewable for life, as long as you are at work full time.
The core of any disability income policy is its definition of “Total Disability” which outlines what constitutes being “totally disabled” and therefore eligible for benefits. This definition is in every carrier’s policy; however, it does not always mean the same thing. For example, some policies pay benefits if you are unable to perform the duties of your own occupation, even if you are able to work successfully in another occupation, while others pay only if you cannot work at all.
Residual Disability coverage: Through a rider, a good individual DI plan can provide you with a benefit when you suffer a loss of income as a result of partial (residual) disability – even if you have never suffered a period of total disability. This kind of residual coverage is not available with many group plans.
A choice of Riders: Riders offer optional additional coverage such as Catastrophic Disability Benefit (CAT), annual Future Increase Options, Automatic Increase and Cost of Living Adjustments, or “COLA.”
Protect your practice and yourself
As a physician, you must also protect the source of your income: the practice you’ve worked so hard to establish and grow. Special business DI policies, available from the same DI providers who offer high-quality individual coverage, offer your practice protection while you recover from a disability.
For example, to help meet the expenses of running the office while you are disabled, consider a separate type of disability coverage known as Overhead Expense (OE). Benefits reimburse your practice for expenses such as rent for your office, electricity, heat, telephone, utilities, interest on business debts and lease payments on furniture and equipment.
Overhead expense insurance specifically designed for professionals pays some additional costs not included in regular business overhead expense policies—including the salaries of employees who are not members of your profession. In a practice such as yours, for example, salaries for the receptionist and nurse would be covered, but not the salary of your physician partner or employee. However, high-quality professional overhead policies will cover at least part of the salary of a professional temporary replacement for you, such as a doctor retained to fill in during your total disability.
In addition…
Physicians who are partners in a group practice will want to consider a policy known as a Disability Buy-Out (DBO). In much the same way that life insurance benefits can be set aside to fund a buy-out by the remaining partner (or partners) if one partner dies, DBO is designed to fund the healthy partners’ purchase of the disabled partner’s share of the business. With the proper agreement in place before a disability occurs, hard feelings and the conflicts of interest that can result from a partner’s disability can be avoided.
Take the time to consider upgrading your DI coverage today. Like your malpractice insurance, it could be vitally important to your economic wellbeing in the future—and help protect one of your most valuable assets: the ability to earn an income.
Patrick Brazil is an Equity Partner at Sihle Insurance Group in Altamonte Springs. He has been working with physicians in the disability insurance industry for over 10 years. His email is pbrazil@sihle.com
