Avoid Adding Insult to Personal Injury

The problem:

Doctors put themselves and their medical practicesin jeopardy when they don't have disabilityinsurance. Many doctors mistakenlybuy only a group policy for their practice.They don't realize that it's just as important to have anindividual insurance policy. Group insuranceoften falls short when you need it most.

In addition, most people, including doctors, thinkthey can prevent disability by taking precautions. Thetruth is, disability is far more common than peoplethink. According to a recent Gallup survey, most peopleestimate that they have only a 16% chance ofbecoming disabled during their working years. Buthere are the startling facts:

• Men have a 43% chance of becoming seriouslydisabled during their working years.
• Women have a 54% chance of becoming disabledduring their working years.
• Workers under age 35 have a 1 in 3 chance ofbecoming disabled for at least 6 months during thecourse of their careers.
• Workers are 4 times more likely to become seriouslydisabled than to die during their working yearsonce they reach age 42.

Terms to Learn

The right disability insurance policy can help supportyour household, even if you suffer a long-term disability.But before you begin shopping for an insurance policy,you need to know what features to consider and a fewimportant definitions. Following is a list of insuranceterms you'll need to know:

• Noncancelable. To avoid the possibility of losingyour coverage when you need it the most, choose a policythat is noncancelable and guaranteed renewable toage 65, with guaranteed premiums until age 65.
• Conditionally renewable for life. Although thepremiums may increase after age 65, your policyshould be guaranteed renewable for life, as long asyou are working full-time.
• Own-occupation. This coverage defines totallydisabled as being unable to perform the material andsubstantial duties of your own occupation, even if youare working in a different job. Doctors need genuineown-occupation coverage to ensure they are eligiblefor benefits if, for example, they teach instead of practicemedicine. Group coverage is rarely genuine own-occupationcoverage.
• Residual disability. Through a rider, a good individualdisability insurance plan can provide protectionagainst the income loss a doctor may suffer as a result ofpartial disability. This type of residual coverage is notavailable with many group plans.
• Riders. Riders offer additional coverage, such asfuture increase options, automatic increase options, andcost-of-living adjustments.

Physician Protection

As a physician, you must protect the source of yourincome—your practice. Special policies offer practiceprotection while a doctor is recovering from a disability.For example, a professional overhead expense (POE)policy can help you meet office expenses during therecovery. Benefits reimburse your practice for rent, electricity,and utilities, as well as for the interest on businessdebts and lease payments on furniture and equipment.

Physicians who are partners in a group practiceshould consider purchasing a disability buy-out (DBO)policy. In much the same way that life insurance benefitscan be used to fund a buyout, a DBO policy is designedto fund the healthy partners' purchase of the disabledpartner's share of the business. In combination with thedisabled partner's individual disability income coverageand POE policy, a DBO policy allows the business tocontinue generating an income for the healthy partners.The disabled partner is supported by the benefits fromtheir individual policy. Any continuing share of the businessexpenses is reimbursed by the disabled partner'sPOE policy until the buyout is affected.

Susan M. Baker is manager of disability sales andmarketing for Berkshire Life Insurance Company,a subsidiary of The Guardian Life InsuranceCompany of America. Ms. Baker has been in theinsurance industry since 1971 and has specializedin disability income for much of that time. She welcomesquestions or comments at 413-499-4321.