Don't Be the Typical Disability Insurance Story

It is not unusual to find that when physicians begintheir careers, they generally purchase some form ofgroup disability insurance. Down the road, manyfind themselves in new positions with other partners,groups, or on their own. In many cases, the group disabilitycoverage they have had for years is not portableand often lost. At this point, physicians are older, withoutdisability coverage, and perhaps even uninsurable.What many physicians come to realize is that theiryouth is a valuable commodity.

The cost of an individual noncancelable disabilitypolicy at younger ages warrants investigation. Therates, unlike group disability, are locked in and guaranteedto age 65, and the coverage can be maintained foras long as the physician is working—even for life.

For those doctors who learn the hard way later on inlife, this is a rude awakening. They realize the need toprotect their income with disability insurance, but nowfind themselves paying more for the same coverage.An example of the rates for a male physician in afamily practice at age 35 is the following:

•Monthly benefit: $5000 with a 90-day eliminationperiod and benefits payable to age 65.

•Annual premium: $2146. If he were to purchasethe same policy at age 50, his annual premiumwould be $3948.

It is important to consider that there is no better timein your life than now to purchase individual disabilityinsurance. Limits, both issue and participation, forphysicians have increased. But regular occupation ormedical specialty coverage is available now for all specialties.So if you have access to group insurance, youmight want to consider purchasing an individual policyfirst and supplement it with group insurance.

To further protect yourself, you might consider thefuture purchase option (FPO) rider on the individualpolicy. This will allow you to increase your monthlybenefit down the road as your income increases. Therider also only requires proof of income, not insurability.So as an example, the same 35-year-old physiciancould purchase an additional $5000-per-month FPOrider for about $200 per year. Now, if you lose yourgroup coverage, you have access to the additionalmonthly benefits available under your FPO rider. If therider is exercised, the amount of monthly benefit purchasedwould be a separate policy, and the rates forthat policy would be at the insured's attained age. But,remember, your physical insurability is guaranteed.

In comparing group coverage to individual noncancelableand guaranteed renewable coverage, mostwill agree that the provisions, clauses, and overall coverageare indeed superior with the latter two. Manychoose to purchase all the protection under the individualpolicies. They simply like the fact that nothing canchange in the future, and they own the policy asopposed to renting it. The fact is, we all get older, andsituations do change. Just think if we could purchaseour medical benefits under the same type of guarantees.

Disability insurance is the most primary of needs.After all, you might only get one chance. Look at it inthe simplest way: Think about being disabled for 1year. Now imagine all the premiums you pay to a companyfrom your current age until you reach age 65.Normally, those premiums will be much less than whatthe carrier will pay you for a 12-month disability.

Ron Cohen, RHU, has specialized in disability insurance for physicianssince 1969. He has authored many articles on this topic,served as a guest speaker for insurance companies and professionalorganizations, and consulted with many companies in thedesign of their disability products for physicians. Mr. Cohen welcomesquestions and comments at ron@roncohenrhu.com. For more information,visit www.roncohenrhu.com.