What Physicians Need To Know About Disability Insurance

Disability insurance, like most types of insurance, is something you hope you never need. But if you weigh the risks of not being covered, you'll quickly realize it's a worthwhile expense.

As a physician, you’ve invested heavily in your career, and the prospect of not being able to practice, even temporarily, can be grim. Having disability insurance gives you peace of mind that you and your family won’t struggle financially due to a mental or physical illness that affects your ability to work.

This guide breaks down what physician disability insurance is, differentiates between coverage types, and explains why you need both short- and long-term coverage.

What Is Physician Disability Insurance?

Physician disability insurance is designed to provide financial compensation to a physician who can no longer work due to a disability. The amount of compensation — which may or may not be exempt from income and payroll taxes — depends on the policy, but it’s typically up to 70% of actual wages, according to the insurance company Guardian. Also, the definition of a disability varies widely by coverage type:

• With own-occupation coverage, you’re covered when you can’t perform the most important duties in your work as a physician, even if you are capable of gainful employment in another field, such as medical sales. To be covered for disabilities that prevent you from practicing within your speciality in medicine, you’ll want a narrower type of own-occupation coverage called speciality-own-occupation coverage.
• Any-occupation coverage kicks in only when you can’t work a job in an industry for which you have been educated or trained. General employer-provided disability coverage most often provides this highly restrictive type of coverage. However, many employers of physicians offer physician-specific disability insurance coverage that may be less restrictive. Unsurprisingly, any-occupation coverage is generally cheaper than own-occupation coverage.

Example: Dr. R, an interventional radiologist, is looking for disability insurance that will cover him if he can no longer perform the highly specialized surgeries that he’s been trained to do. He wants to avoid a situation where is forced to consider practicing a different type of medicine due to a disability that specifically limits his dexterity. Given his narrow coverage requirements, he’ll want a specialty-own-occupation disability insurance policy.

The primary purpose of disability insurance is to provide salary-replacing cash payments when you’re disabled. However, you can enhance your coverage through riders, which are paid-for add-on coverages that you tack onto your disability insurance policy. For example, you can add riders that will pay off your medical student loans or cover the cost of health insurance if you have to separate from your employer. So, if you have a student-loan rider, your insurance provider will replace your salary as well as cover the cost of your student loans.

Short-Term vs. Long-Term Disability Insurance: How To Choose

Once you’ve chosen between own-occupation or any-occupation coverage, it’s time to decide whether you want short- or long-term coverage — or both. Here’s a side-by-side comparison:

As you can see, short- and long-term disability plans serve different purposes. Short-term coverage keeps your coffers filled when a temporary injury keeps you from working. Long-term disability only steps in when a serious injury prevents you from working for an extended period of time. Both short- and long-term disability insurance are valuable, which is why many physicians take up both types of policies.

Join the discussion

If you’re covered by employer-provided disability insurance, what do you know about the coverage? Is it own-occupation or any-occupation coverage? And if you’re in the market for disability insurance, what else do you need to know to make an informed choice?