Buying Disability Insurance in a Changed Market ...and why every physician needs it

by Scott Nelson-Archer CLU, ChFC, TMAIT Advisor

Until the mid 1990s, insurance carriers selling disability insurance looked at physicians as good business: high benefits, high premiums, and low claims … a great combination (for the insurance company).

As HMOs and PPOs began to flex their muscles, physicians’ incomes dropped and claims began a steep increase. Most carriers stopped offering disability contracts to physicians. Some of the largest companies merged with others just to survive. Of the companies that still offer disability policies to physicians, most have raised rates, added exclusions, increased restrictions, and decreased benefits. The results are that physicians pay more but get less than they did 10 years ago.

If you are shopping for a disability contract, here are some features to look for:

1. The definition of disability is the most important consideration. Three types of Own Occupation Coverage typically are available:

a. The best definition reads that if you cannot perform the material and substantial duties of your medical specialty, the company will consider you disabled.
b. The second best generally reads that if you cannot perform the material and substantial duties of your medical specialty, the company will consider you disabled as long as you are not engaged in another occupation.
c. The third best generally reads that you are considered disabled if you are unable to perform the material and substantial duties of your occupation. However, after a specified period of time, you will be required to take any job you reasonably are educated, trained, or experienced to do.

2. Non-cancelable provisions prevent the insurance company from ever changing, modifying, or canceling your contract, or raising your premiums.

3. Find a contract that will cover you for your entire claim. Most contracts have benefit periods to age 65, but some still have lifetime benefits available.

4. Future Purchase Options are great for people who want to have the right to increase their benefits without having to submit to another medical exam.

5. Cost of Living Adjustment allows for disability benefits to adjust annually for inflation increases. This benefit typically increases the premium substantially.

To summarize, always pay close attention to the carrier’s definition of disability. If you are applying for an individual contract, review the contract carefully, looking especially at exclusions, benefits, riders, and policy provisions. This way, you’ll know exactly what you’re buying.

—Scott Nelson-Archer, CLU, ChFC, TMAIT Advisor
If you have any questions regarding disability or other financial issues affecting your practice,
call TMAIT 1-800-880-8181 or email contact@tmait.org.