As residents search diligently to land a great position after completing their graduate medical education, it can be easy for them to overlook pivotal insurance decisions that can have lifelong effects should tragedy strike.
After spending a decade or more in medical school and residency acquiring the education, skills and training that make physicians such valuable contributors to society, what happens if a physician cannot practice due to an unforeseen disabling event, injury or accident? Will the doctor lose their income forever—or at least until they get better or develop another skill?
Disability insurance, also known as income-replacement insurance, protects individuals from lost income when they are sick or injured or otherwise prevented from earning income through no fault of their own, but as a result of a disabling accident or injury.
Earlier this year, AMA Insurance Agency Inc., an American Medical Association subsidiary, sponsored a webinar on understanding and shopping for disability insurance. The program offered useful advice for established physicians as well as resident physicians entering the job market, and was hosted by J. Michael Hegwood, assistant vice president of brokerage marketing for AMA Insurance in Chicago. He was joined by Matt Zelenik, who is vice president of Millennium Brokerage Group, an AMA Insurance strategic marketing partner based in Brentwood, Tennessee.
Job-hunting and insurance shopping
Hegwood recommended that residents shop for disability insurance as they job-hunted. In response to a question from a resident physician about whether the group disability insurance that residents typically get through their residency programs was sufficient, Hegwood called “it a big step in the right direction”—with some shortcomings.
“Your employer might be providing you with some coverage, and that coverage is typically going to cover your salary as a resident. Is it what you need on a more permanent long-term basis? No, probably not,” he said. “Will you have opportunities to convert that group coverage to an individual plan as you leave residency? Maybe, maybe not.”
He advised that residents and other physicians take a “layering” approach to insuring themselves against disability.
“If I'm young and I'm insurable, I like the idea of purchasing an individual plan now at a low price point. With the right plan, I’m then able to increase that coverage over time as my income grows in practice—without any additional underwriting. And if I’m fortunate enough to have group coverage through my employer, I can think about those two things kind of working together. That might be a really cost-effective way for me to get the coverage I want while I'm in residency and as I transition into practice,” Hegwood said.
Zelenik added that there is another advantage for residents who do take this approach of having both individual and group disability insurance coverage.
“If you were to purchase your own individual policy first, while in residency let’s say, the group coverage you have through the hospital system won’t count against the individual coverage you could purchase,” Zelenik said. “But if you wait and purchase your individual coverage after your employer’s group coverage is in place—it could limit what you’re able to buy through an individual disability plan. In other words, most individual plans will limit your total purchase to two-thirds of your income—and they will include any group coverage you have in place as part of that calculation. So as a resident, having an individual plan in place prior to finishing your training is always a good rule of thumb.”
Hegwood added that residency “is an interesting time to explore those options because it's probably the one time in your career that you'll be presented with the most options for the least amount of money, and with the most potential concessions around the underwriting process.
Zelenik chimed in to note that residency “might be the only time you could ever receive a guaranteed-issue offer, which is no medical underwriting.”
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“Own-occupation” details matter
After describing how the “elimination period”—or waiting period—can differ among disability insurance plans, Hegwood said another important difference is “when the benefits actually begin to be paid, and this is triggered around the specific definition that you have in your contract. With an any-occupation definition, you will not receive benefits if you can work in any other occupation. So, if you're disabled and you can work in any other occupation, you're not likely to receive benefits under that type of definition. Under an own-occupation definition, you'll receive benefits if you cannot work in your own specific occupation. As a result, professionals tend to lean more towards such a definition.
“Let's take a scenario where there's a catastrophic disabling event,” Hegwood said. “You're in a horrible car accident, you're bedridden for the next nine months. In an event like that, these two definitions would, in theory, pay out the same type of benefit.
“In other words, they would pay out full benefits because you're not able to work in either scenario,” Hegwood said. “However, let's take an example where there's a less severe disabling event. Let's say there's a carpal tunnel kind of situation for a surgeon who can no longer perform surgery. In that case, these two different definitions will pay out very different benefits. Obviously, the own-occupation would be something that would be much more beneficial to a surgeon in my example, because if they're not able to perform those duties as a surgeon, this definition would pay out a benefit.”
Disability insurance has other restrictions including terms that affect the renewability and cancelability of the policy, which is why most agents and brokers usually recommend that they review policies in advance of employment.
AMA Insurance offers a variety of physician-tailored disability insurance solutions from top-rated carriers. Their commission-free Physician Insurance Specialists can help assess coverage needs and offer personalized strategies—at no cost or obligation.
