Who’s Got Your Back Covered?
The 7 secrets to purchasing the best disability insurance for medical professionals…
 

by Julie A. Reenders, CLTC
This is an important question most medical professionals should
be asking themselves.  It’s easy  to buy disability insurance (DI)
when you are starting your career and to continue paying  the
premiums every year.  It’s even more convenient to let
your employer  provide your DI coverage and never look at
it closely to see if it provides enough income protection for
you and your family. Then when you need your  I you find a
gap down the back.  When is the last time you rviewed your DI?
Is it protecting what matters most to you?

The 7 Secrets to purchasing the best DI:
1.    The Insurance Agent is more important than the product.  
2.    Understand the definition of “total disability”.
3.    Aim for a non-cancelable contract.
4.    Buy residual or partial disability coverage.
5.    Get the appropriate riders.
6.    Compare the built in benefits.
7.    Make sure the insurance company is financially sound.

Secret #1: Your agent is more important than the product
The first secret is that your Insurance agent is more important that the product.  An experienced DI agent will save you from making the following mistakes:

“I can work but not in my profession, shouldn’t I receive my DI benefits?”

“I am not earning what I used to make but my DI has stopped paying, why?”

A knowledgeable agent will review the”7 Secrets of Purchasing the Best Disability Insurance” with you and make sure you have the right coverage to protect your income and explain all the features and benefits so you know without a shadow of doubt  that you are completely covered.

Secret #2:  Understand your policies definition of “total disability”.  

A medical professional’s DI policy should have a pure “own-occupation” definition of disability.  If you are disabled and cannot perform the principal duties of the job you currently have, you will get paid your disability benefit even if you can do some other tasks.  

Most people want to keep working!  The neat thing about own-occupation coverage is that you’re not penalized for working at the flower shop down the street or teaching at the University, even if you can’t yet go back to your full time job.

The most conservative definition of total disability is “any-occupation disability” under this definition you do not get a benefit unless you are completely unemployable and unable to do any work.

Many companies will define “disability” in shades of gray between pure own-occupation and any-occupation disability.  And some DI products will give you own-occupation coverage for a specified period, and then move to a modified plan, increasingly contingent on whether you can produce any income. An experienced agent will know the differences and be able to find your current definition. 

Take time today to review your contract, look in the “Definitions” section for the definition of totally disability.  It usually states, “You will be considered totally disabled if you are unable to perform the substantial and material duties of your occupation.”  If it goes further and adds “…and not working elsewhere, “or “…and not gainfully employed, “  then your policy is not a pure own occupation policy.

Secret #3:  Aim for a non-cancelable contract.

Next on your checklist is renewability, or whether your policy’s terms are subject to change over time.  There are three options: a non-cancelable and guaranteed renewable policy, a guaranteed renewable policy, and a conditionally renewable policy.

Insurance experts say the non-cancelable contract is by far the best of the three.  That’s because it locks in your rates and benefits.  The insurance company can’t make changes unless you request them.

A less expensive option is guaranteed renewable.  After you invest in a policy, your insurer doesn’t have the right to drop you, but they reserve the right to raise prices for specific reasons.

Finally, avoid conditionally renewable policies.  An insurer can put any condition on them or raise rates at any time.

Secret #4:  Buy residual or partial disability coverage.

Buying residual or partial DI coverage is important because as many as one third of the DI claims are for partial disability coverage.  Insurers pay partial disability benefits if you can only work at your job for a reduced period of time. 
After an accident, for example, someone might leave work for six months, and then work on a reduced schedule for the next year.  If working part-time meant the person lost a percentage of this income, partial or residual coverage would kick in and pay a proportionate benefit.  An experienced agent can review your existing contract and explain your residual coverage.

Secret # 5:  Get the appropriate riders.

•   Cost of Living rider
•   Future Increase rider
•   Catastrophic Disability rider
•   Automatic Increase rider

If you have DI coverage, you may not use if for decades—if ever—and $5,000 per month today will buy you considerably less tomorrow than it does now.  You might want to buy a rider that adjusts your policy for inflation, particularly if you’re in your 20’s or 30’s.  Another option to consider is called, a “future purchase option”.  It allows you to buy more coverage as your salary rises or your business expands.  This is especially good for people just starting their careers. 
An automatic increase rider increases the monthly base by a set percentage, usually 4% each year without requiring additional underwriting. Finally, other riders enhance your DI in the event of a catastrophic disability. A good agent will explain the riders and allow you to choose the features and benefits that protect you and your family.

Secret #6:  Compare the built in benefits.

•   Nondisabling Injury Benefit
•   Good Health Benefit
•   Presumptive Total Disability Benefit
•   Surgical Transplant Benefit
•   Cosmetic Surgery Benefit
•   Survivor Benefit
•   COBRA Premium Benefit

Many DI companies offer standard built in benefits.  When cost between two plans is similar, it makes sense to look closely at the additional benefits the plans offer.

Secret #7:  Make sure the insurance company is financially sound.

Look for company strength and longevity in the DI business.  There are maybe six major insurance companies left that still offer DI.  There are lots of smaller companies that offer DI too, but you should check their financial strength.  Make sure they look like they’ll be able to pay our claims as time goes by.

A good DI agent will explain your insurance company’s financial rating using an unbiased rating source.  There are several and you can check them too:  moodys.com, standardandpoors.com or ambest.com.

Price out your policy!
DI premiums will typically cost between 1-3% of annual income.  Prices will vary according to several main factors, including your age, gender, health history and occupation.  Other factors will add or subtract dollars to your premium like the elimination period and the benefit period.  An independent agent can price out your policy with more than one DI carrier and help educate you on which carrier will give you the income protection you need and the features and benefits you can afford.  Take time today to add care to your disability plan.  Make sure your backside is covered!

Julie Reenders, is the owner of Reenders Financial Services LLC located in West Michigan.  She is an independent agent and certified in long term care.  Her mission is to assist you in creating a personalized long-term plan that preserves your income and provides quality care choices while protecing the emotional, physical and financial wellbeing of your family.  Disability Insurance is a key component to that plan.  Her motto is:  “Plan to Live a Long Life Well!”