disability insurance

9 Things I learned when I tried to purchase disability insurance

As an incoming resident physician, I need disability insurance. Although a group policy is offered through my employer, it doesn’t provide enough coverage to adequately cover my monthly expenses or insure my future income. Thus, I purchased an individual long-term disability insurance policy. This is what I discovered:


1.     Disability Insurance is expensive. Quotes from different companies from $100-250 per month.  Apparently, a substantial number of people use disability insurance, so companies raise the price to cover the payouts and ensure they aren’t losing money. Many companies offer “graduated” premiums (which allows clients to pay a reduced monthly premium for a few years in exchange for a higher premium later in life) to make it more affordable. I still opted for a “level premium” with a set rate and it’s $110 a month.

2.     The definition of disability is important. The definition of disability is variable. Some people might consider themselves disabled if they can’t work full-time, while others may only consider themselves disabled if they are unable to work at all. The broader the definition of disability, the harder it is to claim the benefit. Physicians need “own-occupation” disability insurance so that if we are unable to meet the specific demands of our own specialty (i.e. Surgery) we will get compensated, even if we can technically still do the work of another specialty (i.e. Family medicine). As a family medicine resident who plans to specialize in sports medicine, I still opted for an own-occupation definition of disability.   

3.     Gender bias is real. Disability insurance is more expensive for women than it is for men. Insurance companies claim that women are more likely to get disabled and seek payout from disability insurance (due to factors like pregnancy) so they charge us more for it. To avoid paying such high premiums, I purchased a “unisex” policy (which is the same price for men and women). These policies offer similar coverage and tend to be cheaper than gender-based policies for women.

4.     Some companies are better than others. When I contacted a few disability insurance brokers, I realized that one company was vastly cheaper than the others. Mass Mutual was the only company that offered an individual unisex disability insurance policy for female resident physicians. Since unisex policies are cheaper for women than gender-specific policies, the monthly premium for disability insurance from Mass Mutual was vastly cheaper than any other company. On the flip side, Principal offers discounted gender-specific policies for men, so many male residents purchased individual disability insurance policies through that company instead.

5.     Certain “riders” or added protections are essential. When I shopped for disability insurance, I had the option to buy additional protections. As a resident physicians with high-income potential there were 3 main riders I needed: 1) a cost-of-living-adjustment rider (so that my payout will increase with inflation each year), 2) a residual & recovery rider (so that I am compensated for any partial disability until I am back to my full productivity), and 3) a future purchase option (so that I can purchase more disability insurance after residency when my salary increases without having to re-qualify or pay a much higher price). Since I have a substantial amount of student loans, I also purchased a student loan rider so that if I get disabled before I pay off my debt, the disability insurance policy will pay me an extra $1700 for up to 10 years to cover my student loan payments.

6.     There is a limit on how much individual disability insurance we can buy. By law, resident physicians can only purchase an individual disability insurance policy with a max benefit of $5,000 per month. (They don’t want to incentivize us to become disabled by compensating us more than our current salary). We can purchase more disability insurance as attending physicians, but we need to have an individual disability insurance policy as residents so that we are fully covered now and can upgrade our coverage later for a cheaper price.

7.     It’s cheaper if you’re healthy. As I filled out the disability insurance policy application, I answered a TON of personal questions. Insurance companies take a very thorough history to determine our risk of being disabled in the future. I was asked about my own medical history and that of my family. They wanted to know if I had broken any bones, got in any recent car accidents, and whether I had ever smoked cigarettes. I was also asked if I had plans to travel out of the country or engaged in any high-risk behaviors like rock climbing or sky-diving. They wondered if I had ever gotten pregnant and the result of my last “wellness check” from the physician. Because I was young and healthy, my rate remained low.

8.     The price varies by state. I currently live in Florida, but I will begin residency in Atlanta, GA. Apparently, my disability insurance premiums are lower with my Georgia address than they are when I use my Florida address. Insurance companies look at hobbies, accident rates, and other data and determined that we pose a greater or smaller risk to them depending on where we live. California is one of the most expensive places, Georgia is one of the cheapest.

9.     Be wary of group policies through professional organizations. As physicians, we can buy into the group disability insurance policy through the American Medical Association or our specialty-specific organization. These policies seem cheaper and looked enticing. However, after doing some research I saw several drawbacks. First, the premium was not “level,” meaning the cost of policy could increase every few years as I aged. Secondly, they did not offer sufficient “future purchase options” so I couldn’t upgrade my coverage as often as I’d like (i.e. when my salary increased as attending physician). Lastly, buying into these group policies would negate or significantly reduce the payout from any disability insurance coverage I already have from my residency. Group policies usually cancel each other out, individual policies do not.  

My point? Disability insurance is a must for resident physicians. It’s a bit expensive, especially for females, but we can get around that issue by purchasing a unisex policy and/or opting for a graduated premium. When we buy this insurance, we need a definition of disability specific to our own specialty, with the 3 main riders for complete coverage. Purchasing this policy in residency is cheaper and gives us the protection we need. Be mindful of what address you use on the application since the price varies by state and remember that group policies through professional organizations may be insufficient.


Disability Insurance 101: why you need it, what to include in your policy, and how to purchase it

disability insurance.png

When we’re first starting our careers, our focus is trying to advance and increase our pay. With our tight budgets, one of the last things on our mind is paying for added insurance. Trust me, I get it. However, as [future] high-income earners, long-term disability insurance is essential. It may not be at the top of our priority list, but it should be.


What is it and who needs it?


Unless you are already financially independent or were lucky enough to have a trust fund in your name, disability insurance is a must. Although we’d like to think we’re invincible, we are not. If some unfortunate event occurred that caused you to become disabled and prevented you from doing your job, you’d still need a way to support yourself. You can’t predict whether you’ll be disabled in the future so you must insure against that risk right now.

You may be tempted to wait to purchase this coverage when you make more money, but I’d caution you against that. The younger, healthier, and earlier in your career you are, the more you need disability insurance. You have your whole life ahead of you with decades of potential high earnings, long-term disability insurance protects you in case this were to change.


Do I still need it if I have a group policy through my employer?

More than likely. Long-term disability insurance may be offered by your employer, but that policy may not offer sufficient coverage. Most employer group policies only pay out 60% of your income if you get disabled, up to a certain maximum per month. The amount they provide may not be enough to cover your monthly expenses, pay back your student loans, and still allow you to save for retirement. As a rule of thumb, the higher your salary, the more likely you are to need an individual long-term disability insurance policy, outside of your employer.

Secondly, group policies may be less likely to pay out if you do become disabled because their definition of disability may be too broad. In other words, it may be harder to meet your job’s definition of disability to even apply to receive the benefit. For example, you may consider yourself disabled because you can’t do your current (high-paying) job as well, but the insurance company might deem you able to do some other (lower-paying) job and refuse to pay out, leaving you to deal with the decrease in pay on your own. You want to protect yourself against that risk by getting your own individual long-term disability insurance policy.

Some people may be able to purchase a group disability insurance policy through certain professional organizations. Although these policies seem enticing, they can have several drawbacks. The premium may not be “level,” meaning the cost of the policy may increase every few years as you age, eventually costing you a substantial amount as you get older. It also may not offer sufficient future-purchase options that allow you to upgrade your coverage as your salary increases.


What to look for in a good policy?

A good individual long-term disability insurance policy has 3 components: enough coverage, a specific definition of disability tailored to your own occupation, and additional riders for added protection. Let me explain.

Along with enough coverage and a specific definition of disability catered to your [high-paying] job, you also need to purchase disability insurance “riders.” Riders are added protections you pay for to ensure that you have all the coverage you need. Examples of riders you should consider purchasing are the: cost-of-living-adjustment (COLA) rider so that your payout will increase with inflation each year, residual and recovery rider so that you are compensated for any partial disability until you are back to your full productivity, and a future purchase option so you can purchase more disability insurance if your salary increases without being denied or charged outlandish rates because of your age or medical conditions.  


How do you purchase it?

As a graduating medical student, I knew I needed disability insurance. I emailed a few vetted brokers/agents that had a track record of working with high-income professionals and entered some basic information on their websites to get quotes. Once I found a policy that had the benefit I wanted with the riders I needed and an own-occupation form of disability, I then chose the cheapest policy.

The insurance agent asked me a bunch of medical questions as he filled out the application on my behalf. He inquired about my hobbies, medical history, and travel plans to discern my “disability risk” as requested on the form from the insurance company. I then reviewed the information in a secure portal and signed the form online. I was approved within 24 hours.


To summarize: Disability insurance is a must-have for high-income professionals. We can’t predict what may happen in the future so we owe it to ourselves to get insurance that will “protect our income” just in case we were unable to work for some reason. Oftentimes, group policies from our employer are helpful but not sufficient. We need an individual own-occupation disability insurance policy with extra riders until we become financially independent. If you don’t already have a policy, I encourage you to get one today.

Tell me, was this helpful? What additional information about disability insurance would you still like to know?


Types of Insurance We All Need (in addition to health insurance)

Many of us are young and healthy with our entire lives ahead of us. As we continue to progress in life, we need to make sure we are doing so with the right protection. In other words, we need insurance. I don’t just mean medical coverage and car insurance though. Let me explain.


1.     Almost everyone needs long-term disability insurance. Unless you have a huge trust fund, enough passive income to completely cover your monthly expenses, or enough retirement savings to deem yourself financially independent, you need disability insurance. Why? Because if some unfortunate event were to occur that prevented you from working, you’d still need a way to support yourself. Disability insurance guarantees you a certain monthly income if you were to get fully or partly disabled, suffer from some medical illness, or get into an accident that prevented you from working your job. Since you can’t predict whether you’ll be disabled in the future, you need to insure against that risk right now. The younger, healthier, and earlier in your career you are, the more important it is to have disability insurance.

Although long-term disability insurance may be provided through your employer, group policies from your employer may not offer sufficient coverage. The payout from your employer is usually capped at a certain amount and may not fully replace your income. Plus, group policies may be less likely to pay out if you do become disabled because their definition of disability may be too broad. In other words, it may be harder to meet their definition of “disabled” and thus you may be less likely to receive the benefit when you need it. My point? Most high-income young professionals should purchase an individual, long-term disability insurance policy outside of their employer.


2.     You may also need life insurance. Life insurance guarantees a portion of your salary to your spouse or dependents should you pass away sooner than expected. This is critical if someone else depends on the money you make. I will be honest and say that as a single female with no kids, I don’t have an individual life insurance policy. However, if I get married to someone who is dependent on my income or have kids, it will be one of the first things I purchase.

There are two types of life insurance: whole life insurance and term life insurance. Term life insurance provides a benefit to your family if you die during the term of the policy (usually 30 years). Whole life insurance provides a benefit to your dependents regardless of when you die. Whole insurance may sound more appealing, but you may want to think twice before purchasing it. Unlike term life insurance, whole life insurance is insanely expensive (about 10x more than term insurance), has a lot of hidden fees, and is unnecessary for many high-income earners who can provide money to their families in a more efficient manner.

My point? Most people need term life insurance to make sure their families don’t struggle financially if they were to die sooner than expected (within the next 20-30 years). If you were to die after that time, then you should hopefully have enough money saved (via retirement accounts and other high-yield investments) to take care of your family.


3.     Some professionals need malpractice/liability insurance. Most physicians are familiar with this type of insurance and most non-physicians don’t have to worry about it, but even still, I think it deserves a quick blurb. Malpractice insurance protects you in case you make a mistake at work that severely impacts someone else’s quality of life. You want to ensure that the patients or clients you work with can’t sue you and take everything you own. The ideal amount of liability insurance depends on your career specialty and other risk factors that put you at increased or decreased risk of being sued.

There are two main types of malpractice policies you can purchase: a “claims” policy and an “occurrence” policy. Claims policies cover you if someone files a claim against you during a certain period of time or while you work for a certain organization. The downside is that if someone waits to file a claim against you when you no longer work for that company, then a claims policy will not cover you. On the other hand, an occurrence policy covers you for any event that “occurred” during the time frame you were at the organization or under the policy. With an occurrence policy, if someone waits years to sue you then you are still covered because the action in the suit “occurred” during the time you were covered under the policy. As you can imagine, occurrence policies are more expensive but offer much better coverage. If you are working a job that only offers a claims policy, then you need to make sure you have what’s called a “tail” (added protection that will cover you in case someone sues you after you’ve changed jobs).

My point? Consider getting malpractice or liability insurance. The best kind is an occurrence policy, however, that is also the most expensive. If your job already covers the cost of a “claims” liability insurance policy, be sure to purchase “tail” coverage so that you have liability insurance after you change jobs.


4.     Consider adding an umbrella insurance policy to supplement your car and home insurance . While liability insurance covers you if someone sues you for something you did at work, umbrella insurance covers you in case you’re sued for something you did outside of work (i.e. civil disputes, business deals, etc.). For example, umbrella insurance can pay for your legal fees if your dog bites someone in the neighborhood, you accidentally injure someone at a social function, or some toddler gets injured at your child’s birthday party. It also acts as additional automobile and homeowner’s insurance. Although umbrella insurance doesn’t cover your own injuries or damages to your own property, it does protect you and cover your legal fees from harm you may cause to someone else.

Since umbrella insurance is added insurance, you can only purchase it after you have already purchased a certain amount of automobile or homeowner’s insurance. As a rule of thumb, umbrella insurance is purchased in benefit increments of a million dollars and it is usually best to purchase enough to fully cover your net worth (including the value of all your assets and potential future income). A policy with a benefit coverage of $1 million usually costs $100-$300 a year.  


To summarize, get insurance and enough of it. In addition to medical coverage, car insurance and homeowner’s insurance, most high-income professionals need disability insurance if they themselves are dependent on the income they receive from their jobs. They also need term life insurance if someone else, like a spouse or kids, is dependent on their income. Malpractice/liability insurance is useful in case someone tries to sue you for something you did at work and an umbrella insurance policy protects your net worth from unforeseen lawsuits outside of work. As [future] high-income young professionals, it is imperative that you get the insurance you need to protect yourself and your net worth.