June 20, 2013 – By Kathy Mueller, CLU, ChFC, FIC, LUTCF
Insurance Adviser, Wisconsin Medical Society Insurance & Financial Services, Inc.
As a physician, you know the importance of insuring your most valuable asset: your earning potential. A disability insurance policy helps protect your future income; here are some key terms that you should understand when choosing the right policy.
Non-cancelable vs. guaranteed renewable – With a non-cancelable policy, the insurance company cannot change the policy language or the premium. With a guaranteed renewable policy, the insurance company agrees to renew the policy without making changes; however, the company can increase the premium.
Definition of disability – For many physicians, especially surgeons and sub-specialty physicians, it is very important to have an “own specialty” definition of disability in their policy. If your policy has an “own occupation” definition and you cannot perform surgery but can still do consults, you are not considered totally disabled (because you are still working in your occupation). Because definitions of disability can vary from company to company, it is important to confirm the definition of “own specialty” or “own occupation” in your policy. In addition, make sure your “own specialty” definition is for the lifetime of the policy, not limited to two or five years.
Residual disability – This is an important rider to add to your policy. If you are able to perform some but not all of your work duties because of a disability and have a reduction in your income, a residual disability rider may pay a partial disability benefit. Some companies require that you be totally disabled before paying a benefit. Look for companies that do not require total disability before selecting this benefit. This rider also will pay a partial benefit if you can complete all of your duties, but only on a part-time basis, due to a disability.
Business overhead expenses – This rider will pay the expenses of running your practice if you are partially or totally disabled. Expenses it will pay for include leases, employee salaries, telephone costs, accounting fees and insurance. This does not pay your lost income.
Retirement disability – If you are disabled, you will be unable to continue to contribute to your retirement plan because of your reduced income. With this rider, the insurance company will deposit the amount of money you would have contributed into a non-qualified retirement account.
As with all insurance policies, please read the policy carefully because language differs between companies. Disability insurance can protect you against financial loss; however, work with your insurance agent to help you ensure sufficient coverage.
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