Physician Disability Policy Check Up: Are You Covered Appropriately?

Over the years there have been many changes to disability policies offered to physicians. Whether you purchased your policy in residency or as an attending physician it is critical to ensure it has certain provisions and rich language that deliver the most benefits.

Here are a few key policy areas to pay attention to:

The definition of disability. Many consider this definition to be the most important part of a disability policy as this language will decide how claims will be paid.  I will limit the discussion to the two most common definitions: own-occupation or “own-occ” and modified own occupation.

Own-occupation (also referred to as “true” own-occupation) is the most liberal definition available.  A policy with this definition will pay a benefit if you are disabled and “unable to perform the material and substantial duties of your occupation.”  This definition makes it possible for you to work in another occupation or medical specialty earning the same or more income, and collect your full disability benefit. 

A policy with a modified own occupation definition will pay a benefit if you are disabled and “unable to perform the material and substantial duties of your occupation and you are not gainfully employed.”  Therefore, you must choose not to work to continue receiving full disability benefits, even if you are able to work in another occupation or medical specialty.  This is a common definition found in group coverage and is often seen in individual policies.

The renewability provision.  The renewability provision of a policy is a critical component of any disability policy.  A guaranteed renewable policy states the insurance company cannot cancel or change provisions as long as the premiums are paid on time.  Non-cancelable policies do not allow your insurer to raise premiums for the entire policy life.  Policies that are both guaranteed renewable and non-cancelable are preferable because they offer you more protection. 

The residual disability benefit rider. Not all injuries or illnesses result in a total disability.  Most policies will require the residual disability rider for you to collect on a benefit if you are not totally disabled.   An illness or injury may limit your ability to work full time in your occupation, which usually results in decreased income.  Having the residual rider will allow you to continue receiving benefits proportionate to your loss of income if you are able work in your occupation on a part-time basis.

You must qualify by experiencing a loss of income of 15 percent or 20 percent, depending on the policy provision, to receive a residual benefit.  For the first 12 months residual disability benefits are payable, many companies will pay a dollar-for-dollar benefit up to the policy’s monthly benefit.  After the first 12 months, benefits would then be paid in proportion to the income loss. 

The recovery benefit. This provision is usually built in to the residual disability benefit rider, but some companies offer it as a separate rider.  This benefit helps with financially recovering from a disability after returning to work if you experience a loss of income of at least 15 percent or 20 percent, depending on the policy provision.  Some companies will pay benefits for up to the full benefit period.  That way, if you have recovered and returned to work, you will still be able to collect a benefit until your income has reached 86 percent or 81 percent of your  pre-disability earnings.

The COLA rider.  A cost of living adjustment (COLA) rider will allow your disability benefits to keep pace with inflation.  This rider is usually triggered after receiving benefits for a year.  COLAs that provide the most benefit are compounded annually with no cap on the monthly benefit.

The future increase option rider.  This rider allows you to increase your coverage as your income increases even if your health changes.   Young physicians who expect their income to increase should consider this rider because they will not have to do another blood or urine exam or answer medical questions to increase their coverage.  Knowing the special option dates and amount of coverage available to increase is important.

As highly skilled professionals, you should consider purchasing a true own-occupation policy with strong provisions.  Make sure that you find a policy that will meet your individual needs.  Speaking with a qualified professional insurance agent who specializes in disability for physicians can help you determine which is the right policy based on your particular specialty and insurance goals.