Disability insurance is the single most important protection for you as a new medical professional, landing at #1 on our Financial Vital’s Checklist.  This is because the ability to earn money is your greatest asset at this time in your life, and it isn’t even close.  After all your training, you will make millions of dollars over the coming decades . . . if you remain healthy enough to work.  

     Catherine had a smile on her face as she put on her headphones and left her newly purchased house.  Running before her family woke always helped clear her mind.  Dr. Catherine Boseman was one year into her career as a gynecologist, with two small children at home and a loving husband.  She was the family’s primary breadwinner, while her husband was a stay-at-home dad.  Catherine found her new job professionally fulfilling and financially rewarding.  Life was good as she settled into her new job in the unfamiliar town where she was finally starting to feel at home.  A light sweat was on her brow as she ran across the intersection, thinking of the surgeries she had scheduled later that day.    

     Donald Jones, an emergency medicine PA, had never been in an attic.  Growing up in Houston, his family had always lived in apartments, so when his elderly neighbor asked him to retrieve a box of Christmas decorations, he was genuinely curious as he agreed to help.  After recently accepting his current ER job, he purchased a home in a quiet neighborhood.  He had worked for one year in an Urgent Care and was excited to move up “to the big leagues” as he playfully referred to the ER.  Donald was already breathing hard after ascending the stairs to the second floor and the ladder into the attic.  He laughed at himself for the extra pounds he had recently gained and vowed to start working out again.  He wiped the sweat from his eyes as he stepped between the beams onto the attic floor to reach the box marked X-mas.  

What is Disability Insurance

     Insurance is a way to protect yourself from an uncommon event that will have an outsized impact on your financial life.  Your house is unlikely to burn down, but everyone understands fire insurance is necessary.  Mortgage companies force you to have insurance as a condition of the loan because they know that unlikely events occur.  Despite being surrounded by patients, medical professionals are strangely blind to the risk of disability, yet they are no less susceptible to the conditions most likely to cause it: neurologic disease, degenerative conditions, trauma, and psychiatric illness.    

     Most humans underestimate risk because they don’t understand it.  There is an approximately 0.25% chance that a house will burn down in any given year, while 5% of workers will have a short-term disability each year.  That is a 20X greater risk per year, which adds up throughout a career.  One out of every four of today’s 20-year-old workers is projected to be out of work for at least a year because of a disabling condition before retirement age (1).  Disability insurance, like homeowners insurance, is absolutely necessary because the cost of not having it when needed is simply too high.    

    Catherine woke up in the ICU 10 days later, confused, in pain, and blind in one eye.  She had to be told that she was struck by a car while crossing the intersection that fateful morning that she now couldn’t recall.  During the accident, Catherine suffered several broken bones, intrapelvic bleeding, and an intracranial hemorrhage.  Her husband and children were overwhelmed with emotion when she woke up and recognized them.

     As Donald fell through the ceiling, he ironically thought of his ER shift scheduled to start in a few hours.  The 20ft fall to the ground floor broke his left calcaneus, right tibia/fibula, and lumbar spine.  His colleagues greeted him with concern as he arrived at the ER by ambulance.  He required immediate surgery on the open tib/fib fracture, which unfortunately got infected, requiring months of IV antibiotics, several hospital admissions, and eventual amputation of his right lower leg.  

Disability Insurance

Coverage & Cost

     Every medical professional should buy disability insurance at the beginning of their careers.  You should purchase it upon graduation from your professional school, even if you have a residency program. 

     The amount of coverage needed depends on what precisely you are insuring.  A single provider with no dependents, no debt, and a frugal lifestyle will not need as much coverage as a married provider with three kids, loads of debt, and a lavish lifestyle.  Even though I was single, I was underinsured when I began my career.  My policy was for $10,000 a month, enough for me to live on at 30 but insufficient given my future plans.  Although I lived frugally, I wanted to get married and have children, and I knew that at some point, I would have to support my mother financially.  Had I become permanently disabled, I would have struggled with these obligations.  Take an assessment of your personal situation and choose your amount based on what you need now and what you expect to need in the future.         

     Many employer-sponsored plans cover 40-60% of your income, while privately purchased own occupation plans typically cover 60-80%.  Disability insurance for physicians is not cheap.  Premiums for private plans generally cost 2-5% of your income, depending on what is covered.  When I began my career 17 years ago, I paid around $5,000 a year in premiums for $10,000 per month in disability insurance.    

    Catherine would have a long, difficult road to recovery.  She would never look or feel the same again; however, she was lucky that, with time, she would eventually be able to resume her medical practice.  Unfortunately, it would take over a year before she could return to work, and even then, she could only work part-time.  Between the health insurance from her job and the driver’s insurance, Catherine mercifully had minimal hospital bills.  However, she had not purchased disability insurance, and her family’s finances crumbled during the 1 ½ years she went without work.

     Donald was out of work for nine months and continued to have significant medical issues related to the fall for over a year.  His new ER job had a policy where health insurance coverage began 60 days after the employee’s first shift.  Fortunately, this interim period had just expired at the time of his accident, as he had not purchased COBRA insurance upon leaving his prior job.  Unfortunately, he did not have disability insurance, and Donald struggled to pay his bills after his emergency fund was depleted.  He had to cash out the 401k plan from his previous employer, taking a 10% penalty and paying the income tax in order to make ends meet.  When he returned to work nine months later, he could only work part-time, as being on his prosthesis for 10-hour shifts took a toll on him.  

Types of Disability Insurance

Employer-Sponsored Disability Insurance

Since 75% of physicians currently work for hospitals or for-profit entities, many medical professionals may be eligible for disability insurance through their employer.  While this is the most economical choice, employer policies are usually generic and have several potential limitations.  An employer’s policy may not cover your specialty but lump you in with other employees.  The coverage may be less than you need should you become disabled, or the employer may alter the plan after your employment commences.  Additionally, this type of policy will not follow you, so you must ensure you have coverage at every job.  Speak extensively with your HR department and read and understand the policy.  Because of these limitations, you may want to purchase a separate policy, even if covered by an employer’s plan.  

Own Occupation Disability Insurance

  With own occupation insurance, you can claim disability benefits even if you can work doing something other than your most recent job.  This type of insurance costs more but covers what you truly need.  The details of own occupation insurance are tremendously important.  As a medical professional, you must ensure that your policy covers your specialty, as some consider your occupation in a broader sense, such as “Medicine” or “Law.”  The specialty designation is particularly important to those doing procedures such as Emergency Medicine, Interventional Radiology, and Oral Maxillofacial Surgery.  If you are a neurosurgeon who injures your hand, you don’t want your policy to deny coverage because you can do clinic work as a general practitioner.  If you work in the primary care field, this provision may not be as critical, as if you are disabled enough that you can’t work as a psychiatrist, you probably can’t work anywhere else either.  An own occupation policy is tied to you, not your employer, so it will follow you throughout your career.      

Modified Own Occupation

With this type of policy, you lose your benefits if you start working at any job.  If you become injured and can’t work as an anesthesiologist anymore, you may want to go into teaching or public speaking, but this type of policy will disincentivize you.  If you have a modified own occupation policy, any work will end your disability benefits.    

Transitional Own Occupation

This type of policy reduces your benefit amount based on any money you earn.  If the anesthesiologist mentioned above had a transitional policy, any payment from public speaking would be subtracted from his disability payment.  

Any Occupation: Disability Insurance

  This policy will deny benefit payments if you are deemed capable of working another job, even if you don’t.  Our anesthesiologist could have his payments canceled if it is believed that he could perform public speaking or become a teacher.      

How to Obtain Disability Insurance

     If your employer offers disability insurance, you simply need to sign up; however, you must do your diligence on the plan’s specifics.  Get help if needed.  If you are an independent contractor, self-employed, work for an employer that doesn’t offer disability insurance, or your plan is insufficient, you have two options.  First, you can work with an insurance broker who will guide you through the process, making it more accessible.  There are many brokers to choose from, and they can be found online or by asking for references from your colleagues.  It is best to work with a broker with extensive experience, specifically with medical professionals.  One place to start is through the White Coat Investor website: https://www.whitecoatinvestor.com/insurance/; understand that these recommendations are paid affiliates of their site.

However, all insurance brokers are salespeople, so do your own homework on anything recommended.  The other option is to deal directly with an insurance company.  It takes more work to compare and contrast the companies and their policies. Still, if you are the do-it-yourself type, there are many vendors, including Northwestern Mutual, Assurity, MetLife, MassMutual, Guardian, Mutual of Omaha, Ameritas, and Principal.  

     During the underwriting process, be prepared for a life colonoscopy.  Your age, medical history, habits, lifestyle, hobbies, and family history will be assessed.  You will likely have to undergo a physical examination and a battery of blood tests.  I used MetLife for my policy, but don’t remember how I found them.  Having worked with insurance brokers and directly with insurance companies in my real estate and business career, I recommend going with a broker.  The convenience and guidance are worth any additional cost.

How to Pay for Disability Insurance

     If you are an employee, your employer pays all or part of the insurance premiums.  If you are responsible for a portion, it will come from your paycheck.  You cannot deduct premium payments from your taxes if your employer pays them; any benefit you receive will be taxed.  

     If you work as an independent contractor, you can pay the premiums from either your personal or business accounts.  I paid my premium annually, but it can also be paid monthly, depending on your preference.  I prefer annually so you don’t forget to make a payment and negate your coverage.  You can deduct the premium payments from your taxes if you pay from your business account.  However, any benefit payments you collect will be taxed as ordinary income.  Since the whole concept of disability insurance is to protect against a loss of income, I recommend you pay your insurance premiums from your personal account.  You won’t be able to deduct your premiums, but should the worst happen, you will receive benefit payments tax-free.  

When to Cancel Your Insurance

     A general rule is that you can cancel any insurance when you no longer need the protection it provides.  For disability insurance, you should maintain it until you are no longer dependent on the income from your job to live.  Depending on the individual, this will occur at different times in your life.  I canceled my disability insurance after I had enough business and real estate income to cover my living expenses comfortably.  Conversely, if you work part-time and don’t develop alternative sources of income, you will need to keep your disability insurance throughout your career.    

     Donald and Catherine each walked arduous paths to recovery but were eventually able to return to work.  They relied on the help of family, friends, and colleagues to make it through the dark days of their respective disabilities.   Although they have recovered, they will never be the same.  Besides dealing with their new physical realities, each suffered significant financial difficulties that caused emotional distress to themselves and their families.  No amount of insurance can prevent disability, but being properly insured can help the fallout from trauma or disease and allow you to focus on what really matters.  

Conclusion

     Most physicians, dentists, and podiatrists will need own occupation insurance covering a designated specialty with no other caveats.  This is certainly true if you are in a specialty that performs procedures.  A transitional rider on any policy will be cheaper.  It may be a reasonable choice if the benefit amount will cover your living expenses, as you will not be allowed to earn more than that amount while collecting benefits.  Other healthcare professionals may not require a designated specialty, but individual needs vary.  The bottom line is to read and understand the policy!  You are responsible for knowing what details it contains.  Do not rely on an insurance salesperson to tell you what is covered.  Do your homework.

     Insurance is a difficult concept for some, as it is a product you purchase, hoping never to get your money’s worth.  However, disability insurance is not just about money.  Being adequately insured provides peace of mind for you and your dependents.  It not only helps cushion the financial impacts of disability but the emotional toll it takes on those around you.

1.  Social Security Administration, Disability and Death Probability Tables for Insured Workers Born in 1999 https://www.ssa.gov/oact/NOTES/ran6/an2020-6.pdf, Table A.