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Do You Know How Your Disability Insurance Defines ‘Disability’?

Disability Insurance 11 Types

Whether you have long-term disability insurance or you’re shopping for it, it’s important to know exactly how a disability policy defines “disability.”  Potentially, thousands of dollars of benefits are at stake.

“Any Occupation” vs. “Own Specialty”

Some policies define “disability” as a condition that precludes performing any occupation. If the insured person is deemed able to perform work of any kind suitable to your education level, benefits stop. This could mean you would have to work outside the medical field. You are likely to find this language in employer-provided disability plans that cover a number of occupations.

The “any occupation” definition is problematic for physicians, who typically have above average earnings and have invested years of hard work and thousands of dollars preparing for their profession.

Physicians are far better served by physician disability policies that include “own specialty”. “Own occupation” means that the disabled physician is eligible for benefits until he or she is fully capable of returning to the type of practice engaged in prior to the disabling event. A policy with this language recognizes the differences in the demands of various specialties.

Disability insurance offered by professional or specialty organizations most often includes “own specialty” language.

Review Your Policies Now

If you are not sure exactly how “disability” is defined in your policy or the policy you are considering, now is the time to find out. If you are not comfortable with the definition, consider replacing or supplementing your disability coverage.

Hopefully, you will never have to make a long-term disability claim, but disabilities caused by illnesses and accidents are far from rare. One of every four workers will become disabled at some point in their active lives.[1] If you were to be that one, the Definition of Disability in your policy will impact the benefits you receive.

[1] Council for Disability Awareness. Disability Statistics, updated September 29, 2021

How much does it pay?
  • Typically, 60% of base income is the maximum benefit, and if this benefit is paid for by your employer, it may be taxable to you as ordinary income.[3]
Will payments end when you are able to do any work?
  • Or will it pay until you are able to perform the requirements of your regular occupation, or better yet, your own specialty? This is an especially important question for physicians, who have invested so much time and money preparing for their profession.
Is employer provided insurance portable?
  • The answer, generally, is no. When you change employers, you will not take employer-provided disability coverage with you.

[1] Social Security Administration, Fact Sheet, 2022 Changes https://www.ssa.gov/news/press/factsheets/colafacts2022.pdf

[2] https://www.ssa.gov/policy/docs/statcomps/di_asr/2018/sect04.html

[3] Consult your tax advisor for specific information on your personal situation.

Consult a Specialist

A physician insurance specialist can help you make the adjustments you need to protect yourself and your family from the financial consequences of a long-term disability. Thoroughly grounded in the particular financial protection needs of physicians and their families, they work with top-rated insurance companies to present effective and economical solutions.

AMA Insurance Agency’s Physician Insurance Specialists are salaried rather than commissioned. They are committed to helping you build an insurance portfolio that protects your income and your financial future.