What’s your most valuable asset, doctor? You might be thinking, your home, your retirement accounts, or your passive income sources. But your most valuable asset likely is your ability to practice. What would happen to your income if you became disabled and were no longer able to practice? And even if you have disability insurance, are you adequately covered? Disability insurance is a complex topic. To gain some clarity on the subject, we turned to Matt Wiggins, co-founder of Pattern. Pattern specializes in disability and life insurance. In his daily conversations with doctors, Wiggins says many are underestimating the potential for disability. “The vast majority of disabilities are caused by illnesses. That’s something a lot of physicians don’t realize,” Wiggins says. “They think the leading cause is car accidents, or something similar. As a result, they say, ‘I’m very careful. I won’t get into a car accident. I won’t go skiing. I won’t do dangerous things.’ But the number-one cause is illnesses, and we can’t control for those.” NIH data demonstrate this. The NIH quantifies disability in DALYs, or disability-adjusted life years. DALYs are the number of years lost to premature death, illness, or disability in a specific population. The top-5 drivers of DALYs, according to the NIH data: Neuropsychiatric disorders (18.7%) Cardiovascular and circulatory diseases (16.8%) Neoplasms (15.1%) Musculoskeletal disorders (11.8%) Diabetes, urogenital, blood, and endocrine diseases (8%) Transport injuries are a distant 10th at 3.0%. According to the Social Security Administration (SSA), there were more than 8 million Americans receiving disabled worker benefits at the end of the second quarter in 2020. For comparison, 6.5 million received benefits in 2005. To better illustrate the potential for disability, consider this: More than 1 out of 4 of today’s 20-somethings will experience a disabling condition prior to retirement, according to a 2017 SSA study. The need for adequate coverage takes on new urgency in medicine today, Wiggins says. Physicians are saddled with record amounts of education debt — financial burdens that become problematic if they lose their ability to practice. Remember this: True own-occupation coverage But it’s not just the amount of insurance you should be most worried about. It’s the type of insurance coverage you get and the flexibility it gives you. “If doctors remember one thing from this post, it should be this,” Wiggins says. “They need true own-occupation coverage.” What is true own-occupation coverage, exactly? With true own-occupation disability insurance, if you become disabled and can’t perform specific duties of your speciality, you receive the full benefits of your policy. You would even receive these benefits if you took a non-physician job, Wiggins says. In other words, you could keep working and still receive payments from your policy. But note well, Wiggins says. These are the only insurance companies that offer true own-occupation coverage: Principal Ameritas Standard Guardian Mass Mutual Ohio National Why you need it, even if you think you don’t According to Wiggins, you need true own-occupation disability insurance regardless of your specialty. It isn’t just for more hands-on doctors. For example, you might be thinking; I’m a psychiatrist, I can do my job if I’m disabled. But psychiatrists may have to sit or stand for extended periods of time, and certainly have to listen carefully. Try doing these things if you have a disabling condition, such as severe, chronic pain. Without true own-occupation coverage, a physician with severe chronic pain would have to withdraw from the workforce to receive benefits. Likely not so for a doctor with true own-occupation coverage. “Most doctors want to be busy. They don’t want to be sitting at home, collecting a disability check, and playing video games all day,” Wiggins says. “If you have the wrong kind of coverage and become disabled, you may be forced to stay home. But if you get true own-occupation coverage, then you have options. You can collect disability, practice medicine in some modified form, or do something else completely, and still collect benefits. Own-occupation coverage gives you choices.” Selecting the right amount of coverage Two factors determine the appropriate amount of coverage for physicians: career stage and financial status. At the beginning of your career, you’re likely the least financially stable and you need to insure what you can’t protect with your own savings. This is when most physicians will need the most coverage. Things look different for physicians in later career stages. “As you approach your mid-40s and 50s, you have to start asking yourself some questions: How much savings do I have? How much am I earning? Do I have any other source of income?” Wiggins says physicians who fall into this category may be able to cover a loss of income from their savings, meaning they could scale back or eliminate disability coverage. The amount a physician is spending monthly on disability insurance may be more productively spent or invested elsewhere. Choosing riders The other essential thing for physicians to consider when purchasing disability insurance is riders. Riders are additional benefits to your policy. Young physicians must have what’s known as a partial or residual rider, Wiggins says. Why? Let’s say a disabling injury prevents you from doing a portion of your job as a physician. For example, you can still see patients, but you can no longer operate. A partial or residual rider on a true own-occupation policy would cover the income loss from no longer being able to operate. You could still see patients and receive this benefit. Without this rider, you would have to be fully disabled and unable to do any of your medical duties in order to get your full benefit. The second essential rider is the future increase option. This rider enables you to purchase more disability insurance at a later date without a medical exam. For example, let’s say you decide you need more coverage 10 years from now, but in the interim, you had melanoma that’s now in remission. No questions asked, you would get that additional coverage. A nice-to-have rider is the cost of living adjustment (COLA) rider. This comes in handy if you become disabled and can’t work at all. Your benefits will keep pace with inflation, enabling you to maintain your lifestyle. Finally, also in the nice-to-have bucket is the catastrophic rider. This rider will increase your benefits if you become totally disabled (i.e., you are no longer able to dress or care for yourself). Nobody wants to imagine these scenarios. But the comforting part of having the appropriate type and amount of coverage is that you only need to think about it once. Make good decisions, and you’re safe. Overlook them, and you’re at risk. “If your income isn’t protected, what’s really protected?” Wiggins asks. “Is anything really protected? Becoming disabled without coverage alters your entire life trajectory. Everything will be changed.” TL;DR Physicians must have true own-occupation disability insurance. With this type of policy, if a doctor becomes disabled, they can receive benefits and still work a non-physician job. Even less physically intensive specialities need true own-occupation coverage. Disabilities such as cancer complications or chronic pain can happen to anybody, making work difficult or impossible. Generally speaking, you’ll need more disability insurance early in your career, when you have fewer assets. You likely can taper off coverage as you age and accrue wealth. A partial or residual rider is a must-have. This covers loss of income if you can no longer do a part of your job. For example, an orthopedic surgeon who could no longer operate could continue to see patients and receive benefits to offset the revenue loss from no longer performing surgery. A future increase rider is also a must-have. This allows you to increase coverage at a later date with no physical. Source
