Important Considerations for Medical Student Disability Insurance

In 2006 the Association of American Medical Colleges (AAMC) said that schools should require disability insurance for all medical students and provide access to policies. Medical students are particularly vulnerable to the financial hardships that may result from a disability. Disability insurance for Medical Students protects them from possible fiscal disaster and is also a prudent investment. Purchasing a policy while still in medical school presents tremendous advantages that can save students money after graduation and provide the peace of mind necessary to focus on the demands of a career in medicine.

Most medical students do not generate income while in school, but instead accumulate debt at staggering rates. According to the Association of American Medical Colleges, in 2012, medical school graduates who took out loans started their residencies with an average debt of $156,000, a figure that does not include undergraduate debt. (learn more about medical resident disability insurance here) Only the expected future income from a career in medicine makes such exorbitant debt palatable; however, a student that suffers a disability may never realize that income. According to the 1994 Statistical Abstract of the United States, in the course of a year, 1 in 10 people between the ages of 25 and 64 will suffer a disability. When comparing that ratio to the odds of being victim of a house fire (1 in 122); injured in an automobile accident (1 in 160); or even of death (1 in 117), the value and protection offered by medical student disability insurance is clear.

A student who suffers a disability and is unable to complete their education will be saddled with student loan debt and may not be able to work in any field depending on the disability and its severity. Repayment of student loans combined with medical expenses and lack of income due to disability can destroy a financial future. Even a student that is able to continue medical school could face the burden of simultaneously repaying loans and paying tuition.

There are two types of disability insurance available to medical students; Individual and Group.

Individual Disability Insurance:

• Policy is owned by the medical student. Coverage can be maintained throughout one’s entire medical career.
• Rates are based on age and gender – the younger a person is when the policy is purchased, the less expensive it will be. Females pay higher rates than males (due to claims experience).
• A person’s health status also effects eligibility and premiums – obtaining insurance at a younger age may protect the policyholder from the difficulties of securing a policy later in life when other health issues may affect insurability.
• Many policies contain an optional feature that allow for the benefit to be increased in the future regardless of health status. This is a key benefit of obtaining a policy early in one’s career.
• Currently (2014), only 3rd and 4th year medical students are eligible for individual coverage with a maximum monthly benefit limited to $2,500.

Group Disability Insurance:

Universities, Colleges and Teaching Institutions can invest in group long term disability insurance that protects their medical students while in medical school.

Benefits to the Student:

• Lower cost coverage, compared to an individual policy during their training years
• Group benefits meet the needs of those students not eligible for individual plans
• Guaranteed issue – A person cannot be denied coverage due to a pre-existing medical condition
• Ease of billing and administration, handled by the institution
• Includes options to cover student loans

Downsides of Group Disability Insurance:

• Weaker definition of disability
• During a period of disability, benefits are reduced from other sources of income like Social Security, workman’s comp and other earned income – resulting in a lower payout from the plan
• Not portable or expandable – doesn’t follow the student upon graduation

The Liaison Committee on Medical Education (LCME) is the sole accrediting authority for medical education programs leading to the M.D. degree in the United States. Accreditation standard MS-28 states, “all students must have access to disability insurance.” Simply allowing access to disability insurance—a minimal requirement placed on accredited medical schools—or even recommending it, is not enough to save students from the risks of not protecting their future income. In light of the monetary investment that students make to medical schools, it should be the responsibility of each school to promote and educate its students about the benefits, value, and importance of medical student disability insurance. Learn more about physicians business overhead insurance if you’re thinking of starting your own practice.