Physicians like other high-level professionals pay attention to life insurance needs, but often fail to consider what would happen following a debilitating incident. In reality, professionals have a greater chance of suffering a disability that impedes their ability to work, than meeting a premature death. This is why physicians need disability insurance. Today’s insurance industry offers physicians many options when it comes to protecting their most valuable asset – their ability to earn income.
Disability Policies for Physicians
You can purchase disability insurance on an individual or group basis. Most insurance providers will offer you coverage equal to 60% of your earned income. An individual plan is typically purchased through an insurance agent. Group insurance is usually provided by an employer or purchased individually through a sponsoring professional association. Your disability insurance policy benefit may be taxable or tax-free, depending on who pays the premiums.
How Much Does Physician Disability Insurance Cost?
Disability insurance rates, like most other insurance, are based on factors like age, gender, monthly benefit, and occupational classification. The younger you are, the lower your insurance premiums. Your occupational classification assigned to a medical specialty by the insurance company will also affect your rate.
How Much Disability Insurance Coverage do Physicians Need?
Many experts recommend that a physician’s disability policies should cover 60-65% of their after-tax income. A physician earning $300,000 per year, generates a $25,000 monthly income and would need disability benefits totaling $16,250 per month. If a physician purchased an individual plan with a $6,250 monthly benefit, and supplements with an employer-group plan with a $14,000 monthly benefit they’d be covered.
The reason for the extra $4,000 is to cover the tax rate. It’s important to understand the tax implications of benefits paid when deciding on a plan.
Recovery Benefits – What to Know
Rebuilding a practice after a prolonged absence can take years. Your patients have moved on to new physicians and you need to rebuild your patient base. An unlimited recovery benefit allows you to continue receiving benefits until your income reaches a level close to your pre-disability income. For a self-employed physician, this can be the difference between financial survival or failure. Make sure to ask your agent about recovery benefits when choosing your disability plan.
Protection for Retirement Plan Contributions
Traditionally, disability insurance plans were only designed to replace a portion of current income, and not replace monthly contributions to retirement plans. However, a few disability insurers have implemented programs designed to replace lost retirement savings after becoming disabled.
Adding retirement protection disability insurance allows you to keep saving for retirement in the event of a disability. The policy pays a benefit in the amount of your retirement plan’s monthly contribution into a trust for your benefit. The money in the trust is invested at your discretion until age 65.
