While most doctors place the emphasis and importance on having life insurance, in our opinion disability insurance is equally important, if not more so. For example, according to the 2013 U.S. Social Security Administration fact sheet, one in four of today’s 20-year-olds will become disabled before they retire.
The main risk that physicians face with not having adequate disability coverage is the potential loss of wages that would occur if they were to become disabled and unable to work. Given the time and financial commitment it requires to become a physician, it is prudent to hedge this risk with a disability policy that will help account for future lost wages in the event of a disability.
When analyzing a disability policy, below are three of the most important factors to consider:
1. Definition of disability:
By and large, this is the most crucial aspect on the list. The definition of disability is the standard by which the insurance company will judge if you are in fact disabled and eligible for payments.
There are several different definitions that are used, but the one that physicians should by-and-large make sure they have on their policy is an own-occupation definition of disability. This means that the insured will be considered disabled under the policy if they are unable to engage and perform the duties of their own specific occupation. Since most doctors have very specialized training, it is important to make sure that you understand the measure by which you will be considered disabled according to your disability policy.
2. Amount of coverage:
This is another central aspect to consider because you want to make sure that you are adequately covered by your policy.
Generally, we recommend physicians to get as much disability coverage that they can get (within reason), again for the same reason based on the time and financial commitment that it takes to become a physician and that you need to try and hedge the risk associated with a potential loss of income.
Different, yet related to the amount of coverage, is deciding how long to keep your coverage. We generally recommend that a disability policy last until the insured turns age 65. But again, one’s unique situation may require a shorter or longer amount of time for coverage.
3. Riders:
There are almost as many rider options as there are opinions about insurance in general.
While some riders may be worth having, it is worth noting that each rider that is added to the policy will generally come with an additional cost. A few of the riders that we often recommend considering are a residual disability rider and some type of inflation protection rider that will index your disability benefit over time.
While there are many other aspects to consider when purchasing disability insurance, the above are crucial elements that should be analyzed carefully to make sure that your disability policy best fits with your overall financial plan.
To consult a financial advisor from Accruent to help you with your financial plan as a practicing physician, please call (336) 760-4829 or email us at info@accruentadvisors.com
To consult a financial advisor from Accruent to help you with your financial plan as a practicing physician, please call (336) 760-4829 or email us at info@accruentadvisors.com
