Disability insurance: Protection at a cost

Personal Finance. By Katherine Vogt, AMNews staff. March 14, 2005.

For Ira Fenton, DO, the decision to buy an individual disability insurance policy was a no-brainer.

"If I couldn't function, couldn't go to the hospital any more, or could only do teaching, I would still be able to keep my earnings and get my disability," said Dr. Fenton, 51, a rheumatologist in Vernon Hills, Ill. "I know if I was disabled I would have income ... for the rest of my life."

But that kind of peace of mind doesn't come cheap, and isn't easily attained by some physicians. Dr. Fenton pays up to $8,000 in annual premiums for his policy, which includes some of the most protective provisions available with disability insurance. He bought the insurance 15 years ago and said he's not sure he would be able to find such a comprehensive plan now.

Financial experts say good disability insurance policies are out there but a lot of physicians aren't buying them. Part of the reason may be cost. Another reason is a lack of understanding of what the plans do, said Scott Simmonds, president of Insurance Consultants of Maine Inc.

For example, Simmonds said 35-year-olds are seven times more likely to become disabled in the next year than they are to die. "But everybody is talking about buying life insurance. Well, disability insurance is probably more important for most working people because that's the event that takes somebody out," he said.

Not everyone needs disability insurance. Those who are retired or who live off investment income or are otherwise independently wealthy would see little benefit. But Simmonds and others in the industry say that anyone who is dependent on his or her working income should have disability insurance because it protects one's earning capacity.