What is Physician Disability Insurance and Do You Need It?
Protecting your largest asset - your future income.
Becoming a physician requires many years of rigorous and expensive schooling followed by years of hard work. This is why it can be so disappointing to lose the ability to work due to a disability.
Sadly, one in seven doctors needs to turn to disability insurance to help them bounce back financially after a disability.
So what exactly is physician disability insurance, how does it work, and do you really need it? Keep reading for more insight.
What Is Physician Disability Insurance?
Disability insurance is a type of insurance policy that provides you with financial protection in the event you can no longer work due to a disability and physician disability insurance is a type of insurance designed for physicians.
Let’s say you get into an accident or experience an illness that makes it impossible for you to work and receive your regular income. If you have a disability insurance policy, you can receive income through your policy benefits each month.
You can purchase disability insurance through an insurance company, but it is also available through some employers and through the Social Security office. You can choose to purchase a short-term or long-term policy.
How Disability Insurance Works
Generally, disability insurance replaces 45% to 65% of your gross income. As we briefly noted earlier, some employers offer disability benefits as a part of their benefits package. If you already have coverage through your employer, you can choose to purchase additional disability insurance to supplement that coverage. This is a good idea because if you lose your job or decide you want to leave for a new opportunity (one that may not offer disability insurance as a part of their benefits package), you will no longer qualify for that employer group plan.
How Much Physician Disability Insurance Do I Need?
How much disability insurance you need as a physician might depend more on how much you can afford to buy. Residents, for example, might not be able to buy as much as they need and instead may purchase minimal coverage. The largest policy you can usually buy equates to two-thirds of your gross income, but you can choose to buy less. Most residents tend to buy $5,000 a month's worth of coverage and attending physicians usually upgrade their coverage to $10,000 or $15,000 a month.
How Much Does Physician Disability Insurance Cost?
How much you’ll spend on a disability insurance policy will depend on quite a few factors including how much you earn (the more you earn the more you pay) and how old you are. Your job can also impact how much you’ll pay. If you work in a role that places you at a higher risk of injury, that leads to higher premiums.
Let’s look at an example of how pricing can work. If a physician is healthy and in their 20s or 30s, they can expect to pay 2% to 6% of their monthly benefit as their premium. So, if their monthly benefit is $10,000, they can expect to spend $200 to $600 a month.
You only receive benefits from a disability insurance policy if an injury or illness prevents you from performing your job. The benefits you receive if you do ever need to cash in on this policy are tax-free as you use after-tax dollars to pay for your premiums.
Who Needs Physician Disability Insurance?
If you can no longer work due to a disability, a disability insurance policy can really come to the rescue. That being said, not everyone will find this type of insurance policy worth investing in. Only you can decide if you need disability insurance. If you’re not financially responsible for anyone else and feel you have enough savings to remain financially independent, you may feel comfortable skipping this policy. But if you have a family to support, or you are still growing your wealth, you may want to consider this option seriously.
All of that being said, after all the money and time you spent to gain your professional expertise, you deserve to have financial protection in the event a disability makes you unable to take advantage of your hard-earned skills.
If you’re still not sure of whether or not disability insurance is the right fit for your needs, let us chat about your options together!