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What Every Physician Should Know About a Disability’s Financial Impact

Disability income insurance is a necessary part of every physician’s financial portfolio. It’s especially important for young physicians who have not had time to accumulate financial resources and are often carrying heavy student loan debt.

With good long-term disability protection, physicians and their families can help avoid the disastrous financial setbacks of long-term illness or accidents.

Long-term Disabilities Are Far from Rare.

According to the Council for Disability Awareness, one in four workers will experience a disability at some point in their career.[1]
  • While injuries account for some disability claims, diseases such as arthritis, heart conditions, and cancer generate 90% of disability claims.[2]
The average disability claim lasts 34.6 months, nearly 3 years.[3] 
  • Few people, especially those early in their careers and burdened by student loans, could afford to lose even part of their income for that period of time. Just 40% of Americans say they have resources to cover living expenses for less than a tenth of that time—90 days.[4]

[1] Council for Disability Awareness, Disability Statistics, last updated September 30, 2021.

[2] Ibid.

[3] Kiplinger, Are You Underestimating Your Need for Disability Insurance? September 9, 2020

[4] Ibid.

Are there other resources you can access? 
  • Yes, they include paid sick leave, Social Security Disability Insurance (SSDI), and workers’ compensation. However, there are caveats with each of these.
  • If you are an employed physician, you will likely have some paid sick leave as part of your benefits package. But it may be measured in days or weeks rather than months. Among all workers who have paid sick leave, the average number of days is eight. Even if you also have short-term disability insurance, it might leave you exposed to income loss for years.

Can You Count on Government Benefits?

You may be eligible for SSDI. but be aware that benefits are limited. In 2022, the average monthly payment for a breadwinner with a spouse and child is $2,383.[1] Additionally, these Social Security benefits are only available to those who expect to be disabled for at least one year, and not all applications are approved. In a recent year, 2017, just 28.8% of applications were approved.[2]

Worker’s compensation only applies to illnesses or injuries incurred on the job or resulting from a job. Without adequate disability coverage or sufficient personal assets, the individual could be faced with some difficult choices, including but not limited to reducing standard of living, increasing reliance on the earnings of a partner or spouse, tapping savings or retirement accounts, or relying on family or friends for help.

If you have long-term disability insurance as a part of your employer’s benefits package, it behooves you to take a close look at the provisions of the policy.

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.

Review Your Coverage with a Physician Insurance Specialist.

By now, you may be concluding that you may need to purchase physician disability income insurance or supplement the coverage you already have. If so, it’s time to talk with an insurance specialist who is thoroughly familiar with the special insurance needs of physicians and their families.

A well-trained specialist will walk you through the options available to you and will explain how each would affect your premiums and benefits. The goal: coverage that protects what you’ve worked so hard and long to achieve.

Once Is Not Enough.

One final note: The disability coverage that works today, may not be your best choice forever. As your life and family change, you may find that your disability protection needs change, so it’s a good idea to review your coverage annually or any time there are major changes in your professional or family life.