Uh Oh! Dangers in Your Disability Policy

Debra A. Shute

Disclosures

July 24, 2019

If a physician is catastrophically, totally disabled, most group policies will pay out up to a dollar limit or 60% of the physician's annual income. These benefits are taxed, however, and the policy ends if the physician leaves the employer.

Where group policies fall short is in the gray area when a physician is hurt but still capable of doing other work. "If you go do a minimum wage job, they just cut you off from all of your benefits," Yerington says.

You want to go do stuff with your life. You want to be purposeful as a human being, to look forward to things, to be autonomous.

And that's a huge disadvantage. "You want to go do stuff with your life. You want to be purposeful as a human being, to look forward to things, to be autonomous," he says. "And you can't do it because you'd have to hurt yourself and your family financially in order to be autonomous and purposeful."

Group policies are set up in this manner to keep costs down for the most people insured as possible and to create a disincentive to fraud, according to Yerington.

"In an ideal world, you really want to have both a group and an individual policy," says Keller.

Is 'Own-Occupation Coverage' the Answer?

When shopping for an individual disability policy, experts strongly favor "own-occupation" insurance for the physician's specialty. Own-occupation coverage generally costs about 10% more than disability policies without it, but it makes an enormous difference in a physician's earning ability following a claim.

However, it's essential to review the definitions of "own occupation" and "total disability" carefully.

According to Keller, the language should look similar to the following:

You will be deemed totally disabled if you're unable to perform the material and substantial duties of your occupation that cannot be reasonably omitted and still allow you to practice.

"Period. You don't want it to say anything after that. If you do, then you start to run into problems," Keller says. In particular, physicians want to ensure the definition does not append stipulations such as the following:

...and you are unable to perform the duties of any occupation of which you are suited to, based on your education, training, or experience level, or could become suited to based on your education, training, and experience.

Essentially, a physician wants to make sure the benefits will be granted even if he or she could practice medicine in another specialty or perform other work. In contrast to the group policy definition of "totally disabled," total disability under an own-occupation contract means that the physician is indeed free to pursue other work and still collect benefits.

"Because you've triggered the event—you can't do your own occupation—now you're getting paid," says Fawcett. "So you get that money, and you can still go out and do some other job. But your other job is going to pay much less than your original occupation."

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