Disability Insurance

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After spending a long time reading about different kinds and terms of insurance, I thought it may help other residents to read what I came up with. Here are the questions that I've asked in the beginning of my journey and their answer.

 

What's Disability Insurance? It is an insurance on your health, if you developed partial or complete disability that prevents you from doing your job (either partially or completely), the insurance company will pay you a monthly benefit (instead of your salary loss).

Is it really important? It depends, all of us have invested an arm and a leg in our career in order to become physicians. If you have a good bulk of saved money that can help you if you became disabled then you might not need this, otherwise you will need it.

When should I apply for it? Since no body knows if or when you are going to be disabled, the earlier is the better. Also, applying during residency or shortly after graduation will get you a discounted price.

What types of disability insurance I can apply for?

  • Employer sponsored disability insurance which is a part of the benefits in your contract, usually cheap but you can't carry it out.
  • Private company disability insurance, you will apply for it in private insurance company, usually a little more expensive and you can carry it between jobs.

Do I need to get a private disability insurance if I had employer sponsored one? typically you don't have to, however you may need it for two reasons:

  • To supplement the employer-sponsored disability insurance. If your employer sponsored one covers for 10,000 then you may opt for an additional 10,000 coverage from a private company.
  • More secure, It covers you when you move between jobs, covers you in case you lost your current job (which can happen because of the disability itself), continues to cover you if you decided to work solo.

What options should I look for? This is the most important question, the following are the important options and criteria for disability insurance that you should be looking for:

  • Elimination period: the period between the onset of disability and the start of benefits. In other words, how long the insurance company is going to wait before instating your monthly benefits. Typically 2-3 months is a good elimination period.
  • Maximum period: the age at which the disability insurance will terminate. Varies between 65-85. Of course the longer the better.
  • Future increase option: allows you to apply for increasing your benefits in the future without re-undergoing medical examination. This is essentially important for residents, since their maximum benefits is limited (benefits can't exceed 80% of the salary, this is the law), when they graduate and start getting more salary this option will enable  them to increase their benefits.
  • Waiver for premium: in case if being disabled, you will not have to pay for your premiums (the monthly or annual costs of insurance). The remaining premiums (costs) are waived.
  • Own-Occupation: a must have option, means that you will get the benefits if you can't work your occupation (as a physician) even if you can perform other jobs.
  • Complete Disability definition: the typical definition is the loss of any of vision, hearing, both hand functions or one hand and one foot.
    • Residual Disability definition: loss of part of monthly income due to partial disability.
  • Is the insurance company insured? In case of bankruptcy of the insurance company or being unable to pay your benefits, the 'Insurance Guaranty" company will make sure your benefits are protected.
  • No Off-setting benefits: you can add two or three disability insurances. In case of disability, each insurance will pay their own full benefits regardless of what other insurance will pay. Keep in mind the total will never exceed 80% of your monthly salary. Also some companies have a maximum combined benefits that you are able to get (usually around 20,000).

Are the benefits (the monthly benefits after being disabled) taxable? No in most cases. Since you pay the premium from after-tax money, the benefits you get will not be taxable. In other words, what you will apply for is what you will get in your pocket.

Is there a maximum for what I can apply for? yes, the law mandates the maximum disability insurance doesn't exceed 80% of your monthly income (pretax income).

How can I apply? once you decide which company you will go with, you will fill an application online, then they will give you a phone call to ask about your medical history in details. After that you will be scheduled for a brief medical examination (weight/height/CBC/metabolic profile/urine drug screen) that is done by another unrelated company. You will not pay for the medical examination, and it takes about 10 minutes.

How much does it costs? usually about 1-3% of the benefit you are looking for. If you are asking for 5000$ monthly benefits, it will cost you around 50-150$ a month. You may get the 50$/month premium if you applied during residency.

What are the big private insurance companies ? I've got some quotes from different insurance companies, here is what I've found:

AMA Insurance: 5000$ benefits costs around 50-60$ a month for AMA members with 2 months elimination period.

Guardian: 5000$ benefits costs around 100-150$ month with 3 months elimination period.

Massmutual: 5000$ benefits costs around 100-150$ month with 3 months elimination period.