Will Your Disability Policy Protect You at the Next Level?
The medical profession is unusual in many respects, but one in particular sets it apart from all most other professions; and that is the meteoric rise in income most medical professionals experience beginning the day they complete their residency. And unlike most other professionals, physicians are especially aware of the need to protect their ability to generate their income. But, when it comes to protecting their unusually high income potential, they need to know that their disability policy will continue to protect them at the next level and beyond.
Most professionals experience gradual increases in their income over time; however newly 
minted physicians can see a tripling or even quadrupling of their income within a matter of a couple of years. With disability policies covering just 60 to 70 percent of their income, they need to be constantly assessing their risk exposure and make the necessary adjustments in their disability coverage. Most disability insurance carriers will allow residents a higher monthly benefit than their incomes warrant. A resident earning $50,000 can qualify for up to $5,000 in monthly benefits. But, once they leave residency and begin earning six figure incomes, that amount would not be sufficient.
Fortunately, individual disability insurance policies designed for physicians offer a policy rider that allow for adjustments to keep pace with income increases. They are especially valuable because they enable physicians to increase their insurance coverage without evidence of insurability. The premium amount for the additional coverage is based on the attained age at the time of increase. Some carriers include a guaranteed insurability option as part of the disability policy, while others offer it as a rider that could add 7 to 10 percent to the premium amount.
Physicians who don’t have a “guarantee of insurability rider” or “future-increase option,” would have to undergo medical underwriting again when they need to increase their coverage. If their health declines after obtaining their initial coverage, they could end up paying a much higher premium, or being denied coverage altogether.
It is important to know the distinction between these riders and a cost-of-living increase rider. The latter doesn’t kick in until benefits are paid providing an automatic increase based on the rate of inflation. Physicians should opt for both types of riders to ensure they can maintain their lifestyle during a long-term disability.
The unusually fast rate of income growth is but one more reason why physicians shouldn’t settle for the least expensive or expedient disability policy. And, it’s also the biggest reason, why they shouldn’t just toss their policy in a file and forget about it. For physicians, risk management should be viewed with same level of importance as investment management or any other aspect of financial planning.