What is Disability Insurance?

Disability insurance is an insurance policy that will cover much of your salary if you are unable to work. Money is necessary to live, so this type of insurance will give you some income. It basically protects you financially if you become disabled.

Why do you Need Disability Insurance?
You do not want to think about becoming disabled, but there are a large number of people in this country who cannot work because of a disability. Having disability insurance can keep you from having severe financial hardships in the future. If you do not have disability insurance, there are many reasons as to why it could really cost you:

1. Loss of Income: Paid sick leave only goes so far. The cost of the diagnosis, treatment and recovery can be significant. You also need to make sure that you have the money to pay monthly expenses. You might have the necessary medical insurance to cover your medical bills, but the other expenses can leave you in a financial bind. When you cannot work, you will not receive any income, but your bills continue. If you have disability insurance, you will be receiving some money to help offset your loss of income.

2. Medical Expenses: Even though you might have medical insurance, the cost of heath care is increasing. Even with medical insurance, there could still be a significant cost for your treatment and recovery. You might need specialists or even physical therapy to aide in your recovery. The gas money also adds up. You will need to travel to the hospital or doctor’s office while you are recovering.

3. Miscellaneous Expenses: If you are not receiving income, you cannot do the things that you enjoy. In other words, your quality of life would decrease. You cannot go out to dinner or rent a movie. You could not spend money on your family at Christmas time or for their birthday. It would be a very boring and stressful way to live.

Types of Coverage
There are basically two types of disability insurance coverage:

•Short Term Disability: This type of disability is coverage that does not last long, usually for about a year. If you are not able to work because of a disability, you need to return to work within that year. This is usually less expensive.

•Long Term Disability: Long term disability is insurance that will take longer than a year. You have a serious problem in which you cannot recover from within 52 weeks. Long term disability insurance usually begins after your short term insurance has expired. Some employers provide short or long term disability benefits. Other employers offer it as a payment option. It is a needed benefit if you do not want to go without income because of a disability.

Advantages of Disability Insurance
Since you will not receive a paycheck from your employer, you will receive income through your disability insurance provider. You will need money to pay your monthly expenses, such as utilities, mortgage, groceries, etc. Having a paycheck could even prevent you from facing foreclosure. Normally, disability insurance is a percentage of your salary. The amount that you will receive depends on your type of insurance plan. It might be half of your income, or it could be up to 3/4 of your salary. Although it will not be all of the income that you are accustomed to receiving, it could keep your head above water during this difficult time.

Getting Disability Insurance
If your employer does not provide disability insurance, you can purchase it on your own. You need to search around to find the best options for you. An insurance quote comparison site is your best option when comparing policies. There are a few things that you need to look for when getting disability insurance:

• Get one that cannot be cancelled: This is a contract that will secure you a rate for a certain amount of time, and your provider cannot cancel it. Another non-cancelable plan is a renewable plan that does not allow your provider to drop you. However, they could raise their fees.

• Know their definition of “total disability”: There are terms, such as own occupation and any occupation that you will want your insurance company to clarify. Own occupation normally means that you will get benefits if your disability does not allow you to do the job that you were doing before your disability occurred. Any occupation means that your disability will need to be so severe that you will be unemployed and not work at all.

• Look for Insurance Riders: Make sure that you read the terms and conditions of your plan. Riders are terms put into your policy that allows you to make changes at some point in the future.

The primary reason to consider purchasing Disability insurance during medical residency is pertaining to the idea that during this time, you are young and likely very healthy. This is an interesting concept however, because all 25-30 year olds are certainly still young, and more importantly feel that their health will remain the same for years. So although you know you should consider protecting your income now, it becomes very easy to procrastinate and hold off on purchasing coverage for weeks, months and years.

The factor of age is simple – every year you delay purchasing Disability insurance will cost you about a 4% increase in premiums. In other words, the cost of coverage will increase by about 3-4% each year you wait. If a Disability policy will cost $1,000 per year today, in three years your premium will likely be about $1,125. Since Disability insurance can be designed to maintain a level premium for the duration of the policy life, it is beneficial to purchase coverage at a young age in order to secure a lower premium, for your entire professional career.

The factor of health is a bit more complex than the average person would believe. The biggest risk a medical resident will run in not purchasing coverage today, is the discovery of an illness that may prevent him/her from qualifying for it in the future. However, there is also the risk of simply discovering a smaller medical condition that still allows one to purchase a Disability policy, but requires an exclusion. Exclusions are used by insurance companies to remove a specific pre-existing medical condition from the disability contract. This means that you will not be covered in the case of a disability caused by the pre-existing condition or any complications that are a result of the pre-existing condition either. Although having a Disability income policy with exclusions is still better than not having a disability policy at all, most people prefer a policy without exclusions if at all possible.

A third reason why residents should consider purchasing Disability insurance during medical residency is in relation to the quality of coverage available on an individual basis versus that available with group coverage. Although it may be your good intention to purchase individual Disability insurance once you leave residency and become an attending, you may no longer qualify for as much individual Disability insurance as during residency. If the hospital or clinic you work for provides you with a group Long-Term Disability program, you will only be able to purchase enough individual Disability insurance to supplement what the Group coverage does not provide – perhaps half as much, if not less, than that which is available during the last year of residency.

Although this may not seem important since you will still have Disability insurance in either circumstance, the quality of each contract is significantly different. By this point you have spent nearly a decade, if not longer, training to become an attending in your specialty. Most physicians prefer to protect their hard work and unique specialty with a Disability insurance contract that will pay them when prevented from performing the duties of their specialty. Unfortunately group coverage does not typically provide this level of protection and once you are already employed and provided group Long-Term Disability, the amount of Physicians Own-Occupation Disability insurance you can purchase will drastically be reduced.

If you are interested in obtaining quality Disability insurance that truly provides income protection for your medical specialty, start by researching information about what to look for in a policy. Read articles that can be found online, but do not solely base your judgment on these. The value of reading articles and websites is to learn about the differences that exist in the various contracts available today. There are many websites providing additional resources and information about Disability insurance for medical residents and young physicians. Take advantage of the resources available over the web, find an experienced agent and work with them to find the best option for you.