Uh Oh! Dangers in Your Disability Policy

Debra A. Shute

Disclosures

July 24, 2019

Limits or exclusions for "mental/nervous" conditions, which include substance abuse disorders, have been commonplace in group policies for decades, notes Yerington. The incidence of related claims has been climbing steadily since about 2000, so the actuarial science has increasingly forced companies selling private policies to do the same. "You can't insure a known risk," he says.

Best Ways to Save Money on Disability Insurance

Physicians who don't buy disability insurance say they don't want to spend the money, Fawcett says. "You need the most coverage early, when you haven't saved things yet; you've got a lot of debt, you're just getting started. If you became disabled right then, it would be devastating to your family," he says. Although a physician can buy a disability policy at any career stage, the quality of the coverage available to doctors declines as they age.

You need the most coverage early....If you became disabled right then, it would be devastating to your family.

Moreover, women in all professions are charged much higher rates for disability insurance at any age due to the statistical prevalence of autoimmune disorders, pregnancy, and pregnancy-related complications. The workaround for this disparity for women is to request a gender-neutral or unisex rate structure, says Keller. "Everything about the coverage is exactly the same. The only thing different is the cost," he says. "It's likely to save them 30%-50% or more."

Other tactics Keller recommends to keep costs down include:

  • Consider a policy with a "graded," gradually increasing premium. "A graded premium allows you to buy the same coverage for a lower initial cost. It goes up each year, but you always have the ability to convert from a gradually increasing rate to a level rate," he notes.

  • Forego the cost-of-living adjustment (COLA) rider. "Remember, the COLA rider only kicks in after the disability has lasted for a year. So if I qualify for a $12,000 per month benefit but can only afford to buy $10,000 with the COLA rider, I'd rather have the $12,000 without it." This omission is usually good for 10%-15% savings, according to Keller.

  • Extend the waiting period. Going with a six-month waiting period versus three months can likely reduce the cost by 10%.

  • Reduce the monthly benefit.

  • Consider a combination of two or more of these suggestions.

A more recent development is that several insurance companies now offer disability policies for part-time physicians who work 20-29 hours per week.

"Professionals who work part time have never really been able to get disability policies unless they bought them when they were working full time and kept them," Keller says. Now, physicians have the option to pay for a policy commensurate with how much they work.

Overall, the advice from experts is that as you're planning your overall future, make sure to include a review of your disability coverage.

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