You as a Texas physician have a great deal to protect, and we at TMA Insurance Trust work hard to help you do so. Recently, we conducted a survey to find out what TMA members’ most common questions were with regard to disability insurance. After we reviewed these questions, we addressed some of the most pressing concerns.
Question: Do I Even Need Disability Insurance?
While it’s true that being a physician is not a particularly dangerous profession, it’s important to remember that most disabilities are the result of illnesses, not accidents. An estimated 80,000 physicians in the US have some form of disability. If you wonder whether you need disability insurance, think about more than just the physical risk of injury or illness. Consider the financial burden you will face as a physician if you have a disability and your income is not adequately protected.
You have invested heavily in a lengthy and expensive education. On average, physicians graduate with nearly $200,000 in student debt. Your student loans accumulate deferred interest, ballooning steadily over the 3 to 5 years of your residency. A serious illness or injury can put you at risk of default. Disability insurance can help protect against that risk.
For most of your career, much of your income will be consumed by mortgage payments, retirement savings, and your children’s education savings. At this point, if something as common as a car accident would leave you with an injured hand or back, the financial impact could be disastrous – unless you have disability insurance. The higher your income, the higher your exposure, and the more you need disability insurance.
Question: What is the Value of Disability Insurance to Me and My Family?
The value of disability insurance is in the peace of mind it provides. If you are unable to work because of debilitating illness or injury, disability insurance minimizes the financial impact to you and your family. The amount of the monthly benefit you would receive over the course of a disability is based on many factors.
It may be helpful to examine two examples so you have a better understanding of the value of disability coverage. In both examples, we will assume that these 40-year-old male physicians:
• are purchasing Own-Occupation coverage from a leading disability insurance company
• have a rider on their policy that allows them to increase coverage as their income increases, and
• have a rider on their policy that automatically adjusts their monthly benefits for cost of living (COLA) increases.
In the first example, a physician purchases additional disability coverage to supplement his existing group coverage. He supplements the coverage with a $5,350 monthly benefit. His monthly premium will be approximately $193 -- but his potential benefit payout to age 65 would be $1,588,950. Because he is a TMA member, he receives a premium discount of about $254 a year.
In the second example, a physician has no disability coverage and needs to purchase a primary policy. He is a high income earner, so he opts for a monthly benefit of $16,050. This physician’s monthly premium is $712 -- but his potential benefit payout to age 65 would be almost $7,800,000. Because he is also a TMA member, he enjoys a premium discount of over $945 a year.
In each example, the physician is receiving the appropriate benefit amount for his situation - but he also receives peace of mind knowing that he has a financial safety net in place. That sense of security is the real value of disability insurance.
Question: How Do I Know How Much Coverage I Need?
The purpose of disability insurance is to replace lost income. As a rule of thumb, a policy covering 60-65% of your gross income should approximate your after-tax income. However, physicians are in a unique financial situation, and the answer to the above question may not be so simple.
• The maximum amount of coverage disability carriers will issue is typically based on 60% - 65% of your salary. However some physicians receive bonuses, commissions, performance incentives, and other forms of income that would not be covered by this insurance, yet they depend on this income. If this is your situation, you should consider the maximum coverage allowed so that you are assured of replacing as much of your total income as possible.
• Employed physicians often have disability insurance from their employer. Yet these policies should not be your only source of protection because they are subject to taxes, are not portable, and may result in coverage gaps.
How can you be sure that you have a disability policy that is well-suited for your needs, providing you with adequate protection at an affordable cost? Trustworthy help is available.
TMA Insurance Trust was created by the Texas Medical Association to look out for your best interests, so you will receive quality, unbiased assistance. Our disability insurance advisors work for you, not for any insurance company. Since our advisors don’t earn a commission, there is no incentive to talk you into more coverage than you need. We are here to help - so call us today for a free, no-obligation consultation.
For over 60 years, TMA Insurance Trust advisors have been serving Texas physicians, their families and staff. TMA Insurance Trust prides itself on offering unbiased information and strategies to members, along with exclusive group rates on a range of the highest-rated plans in the industry.
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