Physicians are quite accustomed to helping people who are temporarily or permanently sidelined from the work force by injury or illness – one at a time. But many physicians don’t quite grasp that they themselves could face disabilities like their patients – disabilities that threaten to derail years of financial plans, hopes, dreams and aspirations. Doctors need income protection.
Affluent Americans tend to be better at purchasing life insurance – possibly because premiums are lower for an adequate level of protection early and mid-career, but also because many physicians just don’t quite grasp the financial risk they face in going unprotected or under protected against disability.
Why You Need Income Protection
According to information published by the American Medical Association,
- A worker age 30 is 230 percent more likely to face an onset of disability than he or she is to die. Put another way, that workers’ family is 230 percent more likely to need benefits from a disability insurance policy than from a life insurance policy
- For a 35-year-old, the ratio of morbidity to mortality declines, but only slightly: A 35 year old worker is 221 percent more likely to become disabled than to die.
- A 40-year-old is 195 percent more likely to be disabled than to be dead.
- A 50-year-old is 153 percent more likely to be disabled than to be dead.
- Even people reaching the age at which they qualify for the AARP are less likely to have died than become disabled. The morbidity to mortality ratio at this age is 1.33 to 1.
Clearly, for most physicians early in their career, they are far more likely to need and qualify for disability benefits than they are to trigger the award of a life-insurance death-benefit. This circumstance continues throughout most of their careers.
These aren’t minor injuries that can be taken care of with a long weekend of rest and recuperation, either.
1 worker in 3 can expect to be out of work for a total of 3 months or more. 1 in five will be out of work for a year. And one in 7 will be out of work for five years or even more.
What Disability Insurance Does
Quite simply, disability insurance (sometimes referred to as disability income insurance) provides the insured and his or her family with a cash benefit in the event he or she becomes disabled and unable to work. It provides income protection. For a physician who spent many years to get into the profession, it is crucial.
Physicians tend to have relatively high incomes to protect, but also relatively high debt level as well. Federally-guaranteed medical school debt is notoriously difficult to discharge and is not ordinarily dischargeable through the bankruptcy process,
Young physicians, however, can usually easily protect their incomes – and the financial security of spouses and children – for a premium of between 2 and 4 percent of their incomes. In most cases, for privately purchased disability insurance, the benefit is tax-free.
The cash benefit typically amounts to about 50-65 percent of pre-disability income. Sure, that’s low enough to provide an incentive to those collecting benefits to get back to work as soon as they can. But meanwhile, that monthly cash benefit means food on the table and a roof over the family’s head – just when things seem their darkest.
I have workers compensation. I’m alright
Workers compensation is a valuable part of worker protection, but chances are it’s not nearly broad enough to protect you. It only covers illnesses and injuries that are demonstrably incurred on the job.
But the vast majority of disability-causing incidents and illnesses have nothing to do with the workplace.
- Only 0.4 percent of disabilities can be attributed to work-related illnesses, according to the National Safety Council JHA U.S. Group Disability Rate and Risk Management Survey.
- Only 3.5 percent of disabilities are the result of an on-the-job injury.
- Altogether, on-the-job injuries and illness – those that would be covered under workers compensation – account for less than 5 percent of all disabilities. Over 95 percent of disabilities would receive no benefits under workers compensation, though their disabilities would be no less severe and devastating for them.
Doctors early in their careers have millions of dollars on the line. With a substantial investment already made in education, doctors stand to make at least 5 to 7 million dollars over the course of their careers. Often more, but only if disability doesn’t cut their careers short. In the grand scheme of things, a 2 to 4 percent premium isn’t much compared to the benefit of locking in most of that income against that very substantial risk. Disability insurance can provide you the income protection you need to live in financial peace.
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