FAQs
Who Needs Disability Insurance?
If you have a job, you most likely need disability insurance. Most people believe they will not become disabled, however your chances are higher than you might think.
You actually have a three in 10 chance of suffering a disability that keeps you out of work for 90 days or longer at some point during your working career. Also, 90% of disabilities are caused by illnesses not accidents.
All of us have expenses such as mortgage/rent, credit card bills, student loans, and basic living expenses. Would you be able to continue paying these expenses if you were too ill or injured to work for an extended length of time? Plus, a disabling injury or illness could lead to increased medical expenses.
You also have to think long term. How much do you earn in a year and what would that be over a lifetime. A 35-year-old family medicine physician who makes $150,000 a year and suffers a permanent disability could lose $4.5 million in future earnings (not including inflation adjustments which would make the loss even greater).
For all these reasons, almost anyone who works—whether they’re single, married, with children or without—should consider disability insurance.
1 - The Real Risk of Disability in the United States, Milliman Inc., on behalf of the LIFE Foundation, May 2007
2 - The Council for Disability Awareness, Long-Term Disability Claims Review, 2010
If you have a job, you most likely need disability insurance. Most people believe they will not become disabled, however your chances are higher than you might think.
You actually have a three in 10 chance of suffering a disability that keeps you out of work for 90 days or longer at some point during your working career. Also, 90% of disabilities are caused by illnesses not accidents.
All of us have expenses such as mortgage/rent, credit card bills, student loans, and basic living expenses. Would you be able to continue paying these expenses if you were too ill or injured to work for an extended length of time? Plus, a disabling injury or illness could lead to increased medical expenses.
You also have to think long term. How much do you earn in a year and what would that be over a lifetime. A 35-year-old family medicine physician who makes $150,000 a year and suffers a permanent disability could lose $4.5 million in future earnings (not including inflation adjustments which would make the loss even greater).
For all these reasons, almost anyone who works—whether they’re single, married, with children or without—should consider disability insurance.
1 - The Real Risk of Disability in the United States, Milliman Inc., on behalf of the LIFE Foundation, May 2007
2 - The Council for Disability Awareness, Long-Term Disability Claims Review, 2010
I already have or will have Group Long Term Disability Insurance through my employer. Do I need individual coverage also?
Group plans are not as comprehensive as your own personal individual policy. The reason for that is your group insurance carrier is taking on adverse risk since the group policy is covering ALL employees, which include the young, healthy as well as employees with preexisting health conditions and the older employees. For that reason the group insurance policy will be more limited. Below is some information regarding group long-term disability insurance.
Group plans are not as comprehensive as your own personal individual policy. The reason for that is your group insurance carrier is taking on adverse risk since the group policy is covering ALL employees, which include the young, healthy as well as employees with preexisting health conditions and the older employees. For that reason the group insurance policy will be more limited. Below is some information regarding group long-term disability insurance.
- Review the actual group benefit contract. You should request this from your employer human resources department.
- Group plans are not non-cancelable. They may be changed or canceled at any time. This could leave you without coverage when you need it or with less benefits than what you assumed you had.
- Portability - Most group plans cannot be taken with you if you should decide to switch employers.
- Taxation - Many group plan benefits are taxable since your employer is paying the premium for you. So when you become disabled the benefit could be reduced by taxes.
- Group benefits have a maximum benefit amount that covers your income and usually does not take overtime, call pay or bonuses into consideration, which will leave you with a lower net after-tax benefit.
- Many group disability plans have a restrictive definition of disability. They may require you to be totally disabled before they will pay a benefit. In other words, if you have the ability to do any type of work, benefits may not be payable. (Any Occupation Definition)
- Other group disability plans will pay you a full monthly benefit if you are not working in your occupation and not working in any other occupation. (Modified Own Occupation Definition)
- Benefits may be offset by income received by workers compensation, state disability or social security.
I am in medical residency. Should I purchase before I complete my training or wait until I go into practice?
It is better to purchase your policy before leaving your residency or fellowship. Some teaching hospitals have discounts or guarantee issue coverage which will not be available once you graduate. Also, there are special limits for residents and fellows which allow you to set up a certain amount of coverage for yourself even though you will have coverage with your employer when you go into practice. Once you go into practice, and are provided group disability insurance, you may be limited in the amount of individual disability insurance you can purchase.
It is better to purchase your policy before leaving your residency or fellowship. Some teaching hospitals have discounts or guarantee issue coverage which will not be available once you graduate. Also, there are special limits for residents and fellows which allow you to set up a certain amount of coverage for yourself even though you will have coverage with your employer when you go into practice. Once you go into practice, and are provided group disability insurance, you may be limited in the amount of individual disability insurance you can purchase.
When should I purchase coverage?
Disability insurance rates are based on a few factors, your age at the time of purchase, your occupation and your health status.
Age at the time of purchase
The price of a disability contract is based on the age of the applicant at the time of purchase. The younger a person is, the lower the cost of the policy. It could actually cost you less over your lifetime to buy a policy now vs. waiting until a future date.
Occupation
Insurance companies have determined that people in some occupations have a greater risk of becoming disabled than people in other occupations. In the medical industry, surgeons, anesthesiologists and other specialists who perform invasive procedures statistically have more disabilities than other non-invasive specialists. Because of this, insurance companies will charge more for disability insurance to cover an orthopedic surgeon than a pediatrician.
Health Status
The third factor in determining the rate for disability insurance is your health. Generally, the healthier you are at the time of application, the lower your rate. Most people tend to be in better health at younger ages; therefore, rates tend to be lower. Once a policy is in force, future changes in health will have no effect on the premium.
Disability insurance rates are based on a few factors, your age at the time of purchase, your occupation and your health status.
Age at the time of purchase
The price of a disability contract is based on the age of the applicant at the time of purchase. The younger a person is, the lower the cost of the policy. It could actually cost you less over your lifetime to buy a policy now vs. waiting until a future date.
Occupation
Insurance companies have determined that people in some occupations have a greater risk of becoming disabled than people in other occupations. In the medical industry, surgeons, anesthesiologists and other specialists who perform invasive procedures statistically have more disabilities than other non-invasive specialists. Because of this, insurance companies will charge more for disability insurance to cover an orthopedic surgeon than a pediatrician.
Health Status
The third factor in determining the rate for disability insurance is your health. Generally, the healthier you are at the time of application, the lower your rate. Most people tend to be in better health at younger ages; therefore, rates tend to be lower. Once a policy is in force, future changes in health will have no effect on the premium.
Are all policies created equal?
No. Many policies have different policy definitions. Some are more restrictive and some are more liberal. Make sure you understand the definition of Total Disability. Below are some tips.
No. Many policies have different policy definitions. Some are more restrictive and some are more liberal. Make sure you understand the definition of Total Disability. Below are some tips.
- The definition of disability can mean the difference between receiving benefits and not receiving them.
- Disability insurance is a complex piece of coverage. Please review your policy with a knowledgeable agent.
Which waiting period should I choose?
The 90 day waiting period is usually the most cost effective waiting period.
The 90 day waiting period is usually the most cost effective waiting period.
- There is a substantial savings in choosing a 90 day waiting period over a 30 or 60 day period. Going beyond 90 days does not affect the premium significantly.
I am a member of an association which offers disability insurance. It is less expensive than an individual policy, why not just choose the association plan?
Make sure you read the master association contract (not just the marketing piece they give you) so you can understand all of the contractual provisions.
Make sure you read the master association contract (not just the marketing piece they give you) so you can understand all of the contractual provisions.
- Association plans are very similar to group plans meaning their policy definitions will be more restrictive.
- The policy benefits and definitions can be changed without your consent. The policy is not non-cancelable.
- The premium is age banded. Every time you enter a new age band your premium increases.
- The definition of disability is more restrictive.