Disability insurance protection is a critical component of a financial plan for most people – but especially for physicians. This is because doctors, dentists and other similarly-situated professionals generally have huge sums of money invested in education, need to be in reasonably good health in order to discharge their day-to-day duties in a clinical setting, and are generally earning (or can reasonably expect to earn) substantial salaries they would have a hard time matching elsewhere if they could no longer work as doctors.
But doctors are not exempt from the risk of illness or injury, which can happen to any of us. If disability should occur, disability income insurance is the lynchpin that can hold your entire financial picture together by offering protection from lost income.
But not all insurance policies are alike. There are very important distinctions among them.
Disability Protection Criteria
This is the number one criteria in most cases for physicians. You want a policy that will pay benefits if you cannot work as a doctor. Some of you may want a policy that will pay benefits if you cannot work in your medical specialty. The only policies that guarantee they will pay benefits in these circumstances are “own occupation” policies. Not all policies make the grade. They will cost a little more, but for physicians, for whom the inability to work in their own profession makes a huge difference to their income, they are the only policies that provide adequate protection – at least for the first few years of disability.
Benefit Period
How long will the policy continue to pay benefits? The average duration of a long-term disability insurance claim for the individual insurance market is 31.6 months. But a few disability claims will last for entire careers. You can choose a benefit period from anywhere from a few years to until age 67. If you own your own policy and pay premiums yourself, rather than rely on an employer to pay premiums for a policy they control, your benefits will be tax-free.
Cost of Living Adjustment (COLA)
This policy feature will help provide protection against future increases in the cost of living. If you lose your job because of disability, you also lose your future pay increases that you would have received had you not become disabled. This is a very real loss, and should be protected against. If you elect a COLA rider for your disability insurance policy, you will receive an automatic increase in your monthly benefit each year – usually commensurate with the consumer price index gain for the year, though some policies offer a fixed annual percentage increase.
Catastrophic Disability Rider
If your disability is severe, you may have some additional monthly expenses, or you may want a bigger cushion each month. A catastrophic disability rider pays an additional benefit if you cannot perform at least two activities of daily living. This may give you some additional resources to help pay for caregivers and extra assistance.
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