Story at-a-glance
- Your job plan is a start, but it often misses a lot of your income.
- Most doctors get only 40% of their pay after taxes and offsets.
- Group plans miss bonuses and have weak rules, so many doctors don’t qualify for full benefits.
- Private own-occ plans fill the gaps with tax-free money that follows you everywhere.
- You need both plans together to keep your family safe if you can’t work.
If you’re like most doctors or dentists, you probably already have disability insurance through your employer or hospital.
You might even see it listed on your benefits statement and think, “I’m covered.”
But here’s the truth: Most employer-provided disability plans are a good start — not a complete solution.
They often leave big gaps that can cost you thousands each month if you ever become disabled.
Let’s break down what these policies actually cover, where they fall short, and how to protect your income the right way.
Why Disability Insurance Matters So Much for Doctors and Dentists
Before diving into the fine print, it’s important to remember why disability insurance exists in the first place.
Your income is your most valuable financial asset.
It pays your bills, funds your retirement, supports your family, and allows you to build the life you’ve worked so hard for.
Over your career, that income could total $10-20 million or more.
If an illness or injury stops you from working — even temporarily — your entire financial plan can fall apart without income protection.
That’s why most hospitals and medical groups offer disability insurance as part of their benefits package.
It’s a great benefit — but it’s rarely enough.
What Employer-Provided Disability Insurance Actually Covers
Employer disability coverage usually comes in two forms:
- Short-Term Disability (STD)
- Covers the first 3–6 months of a disability.
- Replaces a portion of your income (often 50–60%).
- Good for short recovery periods like surgery, maternity leave, or injury.
- Long-Term Disability (LTD)
Starts after short-term coverage ends (around 90–180 days).
Pays monthly benefits for an extended period — sometimes until age 65.
Also replaces 50–60% of your base salary.
Sounds decent, right? But here’s where the problems start.
Problem #1: The Benefit Amount Isn’t Enough
Most employer disability plans replace only 50–60% of your base salary. And that percentage applies before offsets and taxes.
What does that mean?
Even though the plan says you’ll receive 60% of your income, your actual benefit is often reduced by “offsets” — payments you might receive from other sources such as:
- Social Security Disability Insurance (SSDI)
- Workers’ compensation benefits
- State disability programs
- Income earned in another occupation while on claim
So, if you’re receiving $2,000 a month from Social Security or if you take on consulting work while disabled, those amounts can be subtracted from your employer benefit.
And because your employer pays the premium — which most do — your benefits are also taxable.
Let’s do the math:
- You earn $250,000 a year ($20,833/month).
- Your LTD policy pays 60% = $12,500/month.
- Subtract estimated taxes (25–30%) → $8,750–$9,375/month.
- Subtract potential offsets (e.g., $2,500 from SSDI and $1,000 in part-time consulting income).
Now you’re down to roughly $5,200–$5,875/month.
That’s less than 40% of your normal take-home pay.
Could your family live on that?
Could you still pay your mortgage, student loans, childcare, and practice expenses?
For most physicians and dentists, the answer is no.
That’s why supplementing your employer plan with a private, own-occupation disability policy is so important — it fills these gaps with tax-free, offset-free income protection that keeps your lifestyle intact.
Problem #2: Group Policies Have Income Caps
Many hospital and group disability plans cap benefits at $10,000–$15,000 per month, regardless of how much you earn.
That means even if you make $400,000, your maximum benefit might still be $10,000.
That’s a huge gap — especially for specialists and practice owners.
And since benefits are offset and taxable, your real replacement income could be closer to $4,000.
That’s like taking a 65–70% pay cut overnight.
Problem #3: Most Employer Plans Don’t Cover Bonuses or Self-Employment Income
Here’s something most doctors don’t realize until it’s too late:
Group disability coverage usually protects only your base salary.
It doesn’t include:
- Bonuses
- Production income
- Partnership or shareholder distributions
- Side income (consulting, locums, teaching, etc.)
For many doctors and dentists, those can make up 20–40% of total compensation.
If you rely on that extra income, you’ll need a private policy to protect it.
Problem #4: The Definition of Disability Is Weak
This is the biggest gap of all.
Employer-provided plans almost never include a true own-occupation definition — the gold standard for physicians and dentists.
Instead, they use one of two weaker definitions:
| Definition Type | What It Means | Result |
|---|---|---|
| Modified Own-Occupation | You’re disabled if you can’t do your job and aren’t working in another job. | Lose benefits if you work in another field. |
| Any-Occupation | You’re disabled only if you can’t work in any job suited to your education or experience. | May lose benefits even if you can’t practice medicine. |
Let’s say you’re an orthopedic surgeon and injure your hand.
You can’t operate, but you could teach, do telemedicine, or manage a department.
Under most employer plans, you’d be considered not disabled — because you could “work in another capacity.”
A private true own-occupation policy, on the other hand, could pay full benefits even if you worked in another role.
That’s a huge difference — often worth millions over your career.
Problem #5: Coverage Usually Ends When You Leave
Group disability insurance only lasts as long as you’re employed.
If you switch hospitals, join a new practice, or start your own business, your coverage stops the day you leave.
Some employers offer a “conversion option,” but these are usually expensive and have limited benefits.
If you develop a health issue while covered under your employer plan, you may not be able to qualify for a new policy later.
That’s why it’s smart to have personal, portable coverage that goes wherever your career takes you.
Problem #6: Group Plans Are Hard to Customize
With employer coverage, one size fits all.
You can’t change:
- The definition of disability
- The benefit amount
- The waiting period
- The optional riders
You simply get whatever your employer chose.
Private policies, however, let you customize everything — so your coverage fits your specialty, income, and long-term goals.
Problem #7: Employer Coverage Is Taxable
Here’s a key detail most doctors overlook:
If your employer pays the premium for your disability insurance, your benefits are taxable income.
That means your 60% replacement benefit might actually feel more like 40% after taxes.
But if you buy your own individual policy and pay premiums with after-tax dollars, the benefits are tax-free.
That’s a big difference when you’re trying to cover your family’s expenses.
Why Many Doctors Keep Their Group Plan Anyway
Employer coverage still has value — especially if it’s free or heavily subsidized.
Think of it as a foundation, not a full solution.
It gives you a safety net for short-term needs and ensures you have some protection in place.
But for real financial security, you need to build on top of it.
The Smart Strategy: Combine Group and Individual Coverage
Here’s what most experienced physicians and financial planners recommend:
- Keep your employer plan.
- It’s usually free and provides a base layer of coverage.
- Add a private own-occupation policy.
- This fills in the gaps and ensures your total coverage equals 60–70% of your total income (including bonuses).
- Make it portable.
- Your private policy follows you everywhere — across hospitals, practices, and states.
- Add key riders:
- Future Increase Option: lets you raise your benefit as income grows.
- Residual Disability Rider: pays benefits if you can work part-time but lose income.
- Cost-of-Living Adjustment (COLA): keeps your benefit growing if you’re disabled long-term.
- Pay premiums with after-tax dollars.
- That ensures your future benefits are 100% tax-free.
Real Example: Dr. Chen’s Wake-Up Call
Dr. Chen, a 38-year-old cardiologist, relied solely on her employer’s long-term disability plan.
Her base salary was $250,000, but her total income (including bonuses) was closer to $400,000.
When she was diagnosed with multiple sclerosis, her employer plan paid 60% of base salary — about $150,000 per year, before offsets and taxes.
After offsets and taxes, her benefit dropped to around $6,000 a month.
That covered her mortgage and basic bills, but not her student loans, children’s tuition, or savings goals.
If she’d had a private policy, she could have added another $7,000–$10,000 per month in tax-free income — enough to maintain her family’s lifestyle.
How Much Does Private Disability Insurance Cost?
The cost depends on your age, gender, health, and specialty — but it’s usually 1–3% of your annual income.
For example:
- $200,000 income → $170–$500/month premium
- $300,000 income → $250–$750/month premium
That small investment protects millions in future earnings.
It’s the difference between financial stability and financial stress if something unexpected happens.
When to Review or Add Coverage
Review your disability insurance if:
- You’ve changed jobs or employers.
- Your income has increased.
- You’ve started a family or bought a home.
- You’re self-employed or own a practice.
- It’s been more than two years since your last review.
Even if you’re covered at work, a 10-minute policy review can reveal whether your protection is truly enough.
The Bottom Line
Employer-provided disability insurance is a good start — but it’s not a full plan.
It often:
- Covers too little income
- Misses bonuses and side income
- Uses weak definitions of disability
- Ends when you change jobs
- Pays taxable benefits
Private own-occupation coverage fills those gaps.
It ensures your income — and your family’s financial future — are fully protected, no matter what happens.
You’ve worked too hard to leave that to chance.
Next Step: Make Sure You’re Fully Protected
We specialize in helping physicians and dentists understand their employer coverage and build a complete, personalized disability plan that actually works.
Request your free disability insurance quotes today.
We’ll review your employer plan, show you what’s missing, and help you close the gaps — so you can focus on your patients, not your paycheck.
Ready to protect your future?
Get a personalized side-by-side policy comparison of the leading disability insurance companies from an independent insurance broker.
