I touched upon disability insurance on my intro post of “Why do I need insurance?“

I think disability insurance is actually more important than life insurance from a risk management standpoint.

Warning, incoming morbid real talk about death and disability:

If you die without life insurance then someone has to pay for your funeral costs, burial or cremation, etc. This varies widely, but for the most part, family members can usually help out with this and you may have some small death benefit through your employer. That is pretty much it. Having a better policy to ease the transition for your immediate family (spouse and children) would be nice, but hopefully not burdensome.

However, if you become permanently disabled, like a traumatic brain injury (TBI) or paralyzed (paraplegia or quadraplegia) without disability insurance, things become much much more difficult for you and your family. You will require a significant amount of care AND likely be unable to work. Your employer’s  disability insurance probably won’t cover much. You and your family will feel the double whammy of you not being able to work but also requiring a significant amount of care. This will place a lot of strain on the family. Having disability insurance at least helps ease this by providing some degree of income to help take care of you.

Eesh, talking about disability insurance is so hard because no one likes to think about it.

In my previous post I said:

“Buy a non-cancelable, guaranteed renewable, own occupation (specialty specific) insurance policy with a future increase option by the end of residency at the latest.”

What does all that jargon mean?

Non-cancelable: 

Policy can not be canceled or changed without your consent,  and the premiums CAN’T be raised

Guaranteed Renewable:  

Policy can not be canceled or changed without your consent,  and the premiums CAN be raised  (that’s why you want non-cancelable and guaranteed renewable if you can)

Own Occupation (Specialty Specific): 

This defines your occupation as “Physician – Surgeon” or whatever. Any disability that prevents you from doing your job (not a “any job”) can be claimed. For example, as a surgeon, if you were to develop carpal tunnel or lose a finger or something that preventing you from operating that would almost certainly be grounds for claiming some level of disability. However, a claim for an “any job” (Any Occupation) policy would likely be denied. It is important to try to obtain specialty specific insurance as well because Surgeons are classified differently from Psychiatrists or Radiologists, etc. because their type of work is different.

Future Increase Option: 

This is important, especially if you are buying as a resident (which you should be). As a resident you will likely only be able to qualify for a $5000/month benefit because of your resident salary. However, once you become an attending and your salary increases you will probably qualify for close to the maximum of what is offered (usually $15,000/month benefit). You will want to increase your coverage once you make attending-level salary. The Future Increase Option allows you to do this, and you will naturally pay higher premiums to match your higher level of coverage. However, the reason for buying the original policy with a Future Increase Option is that there is no new physical exam or new evaluation. You just need to prove you are making more money.

Is it unlikely that you will buy your policy at 27 in residency and then develop a debilitating illness at 32 as a young attending? Probably. However, it doesn’t have to be debilitating. The major one is diabetes. If you develop diabetes between buying your policy and trying to increase your policy, you will be denied. 100%. Diabetes simply has too many risks for an insurance company to insure you anymore. If they could, they would take away the original $5000/month benefit policy they gave you. (but they can’t, because yours is non-cancelable, guaranteed renewable right?)

Other things to consider:

Does your policy cover psychiatric illness temporarily or permanently?

Some will pay 30, 60, 90 days, and a few will consider it to be a lifelong disability and pay till 65. Obviously, the latter policy is more expensive.

This is a personal choice. For me, I think it is worth it to have permanent coverage.

Cost of Living Adjustment Rider (COLA):

This is designed to help your benefit keep pace with inflation. However, this does not kick in until after you have been disabled for 12 months. This also kind of a personal choice, and is more helpful the earlier you use disability. It’s probably a better idea to make sure you your maximum possible monthly benefit you are eligible for before you add on a COLA rider. Should you decide to get a COLA rider, make sure it is compounded interest.

What do I do if I already have a chronic disease or was already denied disability insurance?

There are other disability insurances which do not require a physical exam or medical evaluation to purchase. The American Medical Association (AMA), with MetLife previously offered decent disability insurance for physicians without medical underwriting. Unfortunately, I think that partnership already ended. Try looking for “disability insurance without exam” or “without medical underwriting”. These policies do exist, but are more expensive for the same coverage. If you can find one with non-cancelable, guaranteed renewable, and is own occupation, but doesn’t require a medical exam, it is probably worth it (for you).

TL;DR

Trust. For Disability Insurance, do it right the first time:

“Buy a non-cancelable, guaranteed renewable, own occupation (specialty specific) insurance policy with a future increase option by the end of residency at the latest.”

-Sensei