“What happens to your income if you get hurt or become too sick to work?” It’s one of the first questions that we ask medical residents and new physicians. For some people that answer is usually “I don’t know” followed by “I think my employer has something,” or “my spouse will have to work.” The average healthy person is rarely counseled on how they will handle a disability.
Although most of us don’t expect to get sick or injured, the Social Security Administration states “just over 1 in 4 of today’s 20-year-olds will become disabled before reaching age 67.” That’s a scary thought. Even scarier to think that you, as medical resident just starting your career, could face an illness or injury that prevents you from completing your employment responsibilities.
Unfortunately, control over the future is rarely possible. That’s why buying disability insurance now is so important. But knowing which disability insurance to purchase can be confusing, so here are ten tips to help you make the right decision.
Tips for Purchasing Disability Insurance
- Group vs. Individual Insurance
Group Insurance: Most residency programs actually have a group policy in place that will be provided for you. Group insurance, which is issued to your organization, is a non-discriminatory policy with a typical benefit level range of $2,000-$3,500. One of the cons to a group policy is that they tend to be a little less comprehensive than individual policies because it must cover an entire population of people. Plus, when you complete residency, you’ll most likely lose the plan as group plans are not portable. It’s important to note that benefits received from most group plans are taxable income since the employer usually pays the premium.
Individual Insurance: Some residency programs don’t offer adequate group disability coverage; therefore, you have the option to purchase an individual disability plan. The good news about an individual policy is you can keep it as you change employment or move from state to state. Your individual coverage can be tailored to fit your specific needs and lifestyle as a resident physician. Since policies are based on your situation at the time of application, it is generally recommended to lock in a plan when you’re young and healthy to get the most affordable rates.
- Research Based Decisions – Considering your career choice, you are most likely someone who educates him or herself on the facts. There has been much research on the potential to become disabled and one fact is that Americans underestimate their risk. According to the February 2013 Fact Sheet from the Social Security Administration, 64% of wage earners believe they have a 2% or less risk of becoming disabled during their career; this number is actually around 25%. Furthermore, in a 2012 study, there were over 2.5 million workers in their 20s, 30s and 40s who became disabled, according to Disabled Worker Beneficiary Data. So, while many of us like to think we are invincible, studies show this is not the case. Statistics like these show just how important having disability insurance truly is.
- Take Advantage of Lower Rates – It’s easier and less expensive to get disability insurance while you are young and healthy.
- Inquire About Future Purchase Options – Ask your advisor if your plan has a Future Purchase Option Rider, which allows you to increase coverage once your salary increases after residency. Having this rider will allow to increase coverage without having to undergo health underwriting.
- Own Occupation Provision – Own occupation states that a benefit is paid to you if you cannot work in your occupation, or medical specialty, due to an illness or injury. There is no reduction in benefit if income is earned in another medical specialty or occupation.
- Ask About Residual Riders – While your advisor can give you all of the specifics, simply put, a residual rider will allow you to receive partial benefits if you endure a 15 – 20% or more loss of earnings. This percentage is specific to each insurance provider, so make sure you ask your advisor to get the full details.
- Add a COLA Rider – Another beneficial rider to add, if you do happen to become sick or injured, is a Cost Of Living Adjustment, or COLA Rider. This rider increases your benefit to account for inflation, as long as you are claiming benefits for more than a year.
Though no one wants to think about the possibility of becoming injured or sick, the odds prove it is wise to invest in your financial future with disability insurance protection no matter how young you are in your career. Hopefully these ten tips will help you find the right disability plan to protect your future.