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Protecting What Matters Most

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New Physician's Guide to Long-Term Disability

What is long-term disability insurance?

When unwanted illness or injury keeps you from practicing medicine for months or years at a time, a long-term disability insurance policy is designed to provide a benefit while you are unable to work.

RELATED: Long-Term Care vs. Long-Term Disability . . . What’s the Difference?

What do I get? And how much does it cost?

Long-term disability policyholders gain security against disability disrupting their incomes by receiving regular benefit disbursements. Insurance companies offer pricing tiers by age and other risk factors, charging higher premiums in exchange for larger benefits and shorter elimination periods.

For example, a policy that pays $7000 per month with a 30-day elimination period might cost a monthly premium of around $85 for a 35-year old physician; the same plan, but this time with full year-long waiting period, drops the monthly cost by over half to $40.

And the same two plans for a person age 45 might cost around $200 and $107 respectively.

Disability or life insurance: What’s more important for a young physician?

One isn’t more important than the other, and there important reasons to consider both. Of the two, however, you’re more likely to use your disability insurance while you’re young,

More than half of disabled Americans are of working age, whereas just 10 percent of deaths occur to those under age 65. According to the Council for Disability Awareness, over 1-in-4 of today’s 20-year-olds will become disabled sometime before retirement.

On average, long-term disability absences from work last more than two years, with 1-in-8 lasting five years or more; yet a whopping 90 percent of individuals underestimate their chances of being on the receiving end of a disability.

RELATED: 5 Things You Must Know About Long-Term Disability

If the chances of a young physicians becoming disabled are so small, why is owning disability insurance a good idea?

While it is true that there is only a small chance of becoming disabled while you’re young, if it happens to you the safest practice is to be insured. The real question to ask yourself is “how will you survive if you are no longer able to make a living?”

I have a dozen payments on top of my student loans (and I’m trying to save money and invest, too). Disability insurance is another bill; how important is it, really?

More important than you may think. Physicians who already bear significant burdens can find themselves underwater fast when their ability to practice is jeopardized. Although paying down a good portion of your education debt quickly is ideal, your disability premium ensures all your bills get paid under what might otherwise be catastrophic circumstances.

RELATED: Finances After Residency: 4 Strategies to Implement With Your First Paycheck

What preparation is required to apply for a long-term disability policy?

Insurance underwriters approve policies based on risk factors, a complex decision weighing several variables against one another. They may want access to detailed medical and financial information, including checkup records, tax returns and earnings statements.

What is the long-term disability insurance application process like?

There are typically a few steps:

1. Comparing your options: Speak with a TMA Insurance Trust benefits advisor or conduct your own research. Take the time to find your best choice before moving on with the application.

2. Completing your application: Choose your monthly benefit amount, waiting period length, the age at which your benefits will stop, as well as selecting additional options (riders) such as cost-of-living adjustments and future coverage increases.

3. Getting a paramedical exam: Blood, urine and physical measurements.

Once all your information is collected, it will then be sent over to the insurance carrier for review. Your advisor will generally have a response within 30–60 days.

RELATED: How to Choose a Long-Term Disability Policy in Under 20 Minutes

What is the elimination period of a disability policy?

A predetermined amount of time must pass before long-term disability kicks in, during which time policyholders can cover lost income out-of-pocket or through a separate short-term disability policy.

This elimination period is often as short as 30 days, but can also be as long as a year. Your choice of elimination period will significantly affect premium costs.

What activates a physician’s long-term disability policy?

You worked hard to become a physician; a good disability plan reflects that. Under a type of agreement know as an own occupation policy, a disability plan is triggered when a medical condition prevents a physician policyholder from performing the material and substantial duties of her specialty.

What happens if I have to make a claim?

File with your insurance company. Once it’s approved and the elimination period passes, benefits begin to disburse, usually monthly.

What features are important in a disability insurance policy?

The same dollar buys you less as years go by — inflation — and so your disability benefit should keep pace. To do so, make sure to include a cost-of-living rider in your policy.

Ask also whether the policy includes residual benefits, whereby payments are still made if you can work only part-time, or if you can return to work but continue experiencing a partial loss of income as a result of not being able to perform all of your normal job duties.

I work for an employer who provides disability insurance through a third-party carrier. Why do I need my own policy?

Employer-sponsored plans are typically paid for by the group, which means benefits are taxable income; in other words, you may not have as much coverage as you think you do. Also, employer-sponsored plans are not portable; you can’t take them with you if you change employers.

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