Top Mistakes to Avoid When Applying for Physician Disability Insurance

Disability insurance is a crucial aspect of financial planning for physicians, providing protection in the event of a career-altering disability. However, many doctors make common mistakes when acquiring disability insurance, which can have significant consequences down the line. In this blog, we will explore the top mistakes doctors often make when applying for physician disability insurance and provide practical solutions to avoid them.

1. Failing to Purchase Disability Insurance

The most critical mistake physicians can make is not purchasing disability insurance at all. Your ability to earn an income is your most valuable asset, and not insuring it can lead to a financial catastrophe. Many doctors spend years investing in their future earning potential, only to face devastating consequences if they become disabled without insurance coverage.
Even if you are young and healthy, unforeseen medical conditions can arise. By obtaining disability insurance early in your career, you protect yourself from becoming uninsurable or facing exorbitant premiums due to pre-existing conditions. It is never too early to secure disability insurance.

2. Inadequate Coverage

Another common mistake is failing to purchase enough disability insurance coverage. Underinsuring can have severe consequences, leaving you with limited benefits that may not adequately cover your living expenses. A policy with a low benefit amount can significantly impact your financial stability, especially as inflation erodes the value of your benefits over time.
To avoid this mistake, ensure that your disability insurance policy covers all your living expenses and allows you to save for retirement. Additionally, consider purchasing a little extra coverage to account for unforeseen circumstances and additional financial goals.

3. Neglecting Medical Residency Discounts

Many doctors overlook the opportunity to secure disability insurance with discounted rates during their medical residency. Buying a policy as a resident, fellow, even if it is for a lower benefit amount, provides essential coverage at a lower cost. Waiting until after residency can result in higher premiums and missed opportunities for discounted rates.
It is crucial to take advantage of medical residency discounts and secure a policy during this time, even if it means starting with a lower benefit amount that can be increased later. Don’t postpone getting disability insurance until after residency; take action and protect your financial future.

4. Not Considering State Variations in Insurance Costs

Insurance costs vary significantly based on your state of residence. Failing to consider this variation can lead to paying higher premiums unnecessarily. If you anticipate moving to a different state in the near future, it is essential to consult an independent disability insurance agent to determine which state offers more affordable coverage.
By purchasing insurance in the state with lower premiums or switching policies when you relocate, you can save a substantial amount of money over the course of your career. Be proactive in researching and comparing insurance costs across different states to optimize your coverage and minimize expenses.

5. Overlooking the Importance of Partial/Residual Disability Rider

One of the most critical riders to include in your disability insurance policy is the partial/residual disability rider. This rider provides benefits if you experience a partial disability or as you transition back to work after a disability. It ensures that you receive financial support even if you can only perform part of your job responsibilities.
Make sure your disability insurance policy includes this rider to safeguard your income in case of a partial disability. Many reputable agents insist on including this rider due to its importance, so prioritize its inclusion when purchasing your policy.

6. Failing to Add Future Purchase Option Rider in Residency

Doctors in residency or those anticipating an increase in income should consider adding a Future Purchase Option rider to their disability insurance policy. This rider guarantees your ability to purchase additional disability insurance in the future, regardless of any medical conditions or risky hobbies you may develop.
While this rider may not be necessary for individuals purchasing insurance later in their careers, it is essential for residents or doctors with anticipated income growth. By securing this rider during residency, you protect your future insurability and have the flexibility to increase your coverage as your income rises.

7. Not Including Cost of Living Adjustment (COLA) Rider as a Young Doctor

Inflation diminishes the purchasing power of money as time goes on. As a young doctor, it is crucial to consider the long-term impact of inflation and protect your income accordingly. Adding a Cost of Living Adjustment (COLA) rider to your disability insurance policy ensures that your benefits increase annually to keep up with inflation.
While the necessity of a COLA rider may vary depending on the age at which you purchase disability insurance, it is particularly beneficial for young doctors just starting their careers. By including this rider, you secure your future purchasing power and maintain your desired lifestyle even in the face of inflation.

8. Choosing Unnecessary Riders Over a Larger Base Benefit

Disability insurance policies often offer various riders that provide additional coverage or features. It is crucial not to prioritize unnecessary riders over a larger base benefit. While these riders may seem enticing, it is essential to consider the cost-effectiveness of purchasing a larger base benefit instead.
Before adding riders such as student loan riders, retirement riders, or lump sum riders, evaluate whether investing in a larger base benefit would be a wiser choice. In most cases, maximizing your base coverage is more valuable than purchasing riders that have limited applicability or come with additional costs.

9. Overbuying Insurance as a Two-Doctor Couple

In a two-doctor couple, each partner can function as a form of disability insurance for the other. While it is reasonable to purchase disability insurance for both individuals, it is crucial to avoid overbuying coverage. The insurance needs of a two-doctor couple are different from those of a doctor married to a non-earner.
Consider purchasing disability insurance that aligns with the financial responsibilities and needs of a two-doctor household. Aim to spend a similar amount on disability insurance as a single-doctor couple or even less, as the risk and financial burden are distributed differently in this scenario.

10. Not Comparing Your Policy Options

When shopping for disability insurance, seeking the unbiased guidance of an insurance broker like LeverageRx is a no-brainer. A broker is able to check your policy options across all companies and will have in-depth knowledge of the discounts and policy options available to you.

Be wary of agents that only represent one company – these are called captive agents. Captive agents do not have access to the policy options that a broker does, and are often familiar only with the policies that their company offers.

Allowing a broker to shop your options and present them to you in comparable format is the best way to ensure that you are making an informed decision (and save money).

Key Takeaways

Purchasing disability insurance is a critical step in protecting your financial future as a physician. By avoiding common mistakes such as neglecting to purchase disability insurance, underinsuring, or relying solely on employer policies, you can establish solid financial protection in the face of potential disability.

Remember to work with an independent broker like LeverageRx experienced in working with physicians to secure the most suitable coverage. Consider the importance of riders such as partial/residual disability, future purchase options, and COLA to tailor your policy to your specific needs. By making informed decisions and avoiding common pitfalls, you can safeguard your income and secure peace of mind in your medical career.