Disability insurance for Doctors

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PostPosted: Mon May 03, 2010 10:44 am   Post subject: Disability insurance for Doctors  

I'm studying medicine and came across an interesting article that highlights the importance of disability insurance. I'd just wish to know if it's true that even the doctors should find some disability insurance for themselves. Do you think the doctors are really into a risky profession?


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Billyjones
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PostPosted: Mon May 03, 2010 10:50 pm   Post subject:   

Of greater concern to the doctor is not the risk of his profession but the risk of not being able to perform the duties of his profession. That's what we insure.



Let's see, the cost to complete college + post graduate studies to become an MD is what . . . $300,000? A first year physician in private practice might cashflow what . . . $60,000-$200,000? And that's after spending another $50,000 or more on an office and equipment? Or he goes to work on salary in a medical group or hospital for $60,000 - $80,000?



At 26 years of age, a person has a combined morbidity risk factor of 1.750 (1750 26 year-olds per 100,000 population will suffer an illness or injury before they turn 27). Not huge, but present.



But many doctors see the value in an "own occupation" occupational disability income insurance policy. Get hurt or sick, on or off the job, and if disabled for more than 30 days, receive 60%-70% of your pretax income at a cost of about $15.00/mo per $1000 of benefit.



Don't need to consult a neurosurgeon about this no-brainer proposition.



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PostPosted: Tue May 04, 2010 6:19 am   Post subject:   

Actually, the insurance policy should cover you under circumstances when you're unable to perform the substantial as well as material duties associated with your occupation. Your occupation has to be defined both as a physician as well as a 'specialty'.

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PostPosted: Tue May 04, 2010 8:02 am   Post subject:   

here in india we call it professional indemnity policy which by its name makes clear that what sort of coverage it provides................... the insurance company will indemnify the insured for any professional mistakes made during the work...........

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PostPosted: Tue May 04, 2010 12:38 pm   Post subject:   

Quote:
the insurance company will indemnify the insured for any professional mistakes made during the work




rikantsharma, you misunderstand the original question. It was about DISABILITY INCOME protection . . . not being able to perform one's duties due to one's own illness or injury.



What you may call "professional indemnity" in India is known as "malpractice" insurance in the US. That is designed to cover negligent acts of the physician/surgeon.



Quote:
unable to perform the substantial as well as material duties associated with your occupation.




Steven, that is precisely the definition used in an "own occupation" occupational policy.



The more common "any occupation" definition is unsuitable for physicians, lawyers, engineers, accountants, and other highly specialized persons, as is a "non-occupational" policy that would only cover non-work related disabilities. "Non-occ" policies are unsuitable for anyone who is self-employed, even if only on a part time basis.



Ideally, a DI policy for a highly-specialized worker/professional would not have language that changes the definition of disability from "own occ" to "any occ" after two years of continuous disability, which could result in the person losing their disability benefit at that time.


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PostPosted: Wed May 05, 2010 7:18 am   Post subject:   

First of all, thanks for sharing with me.. I was going through a website wherein it was clearly stated that if we're injured and not capable of working (in our specialty), then we'll be reimbursed by our disability insurance even under circumstances that we'd choose to go for a different occupation. Is it correct to describe it like that? (You might be the right person to explain it a bit!)

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PostPosted: Wed May 05, 2010 2:40 pm   Post subject:   

Steven . . .



In an "own occupation" policy, it may very well permit a person to continue working and collecting benefits from their disability policy. Some "own occ" policies change the definition to "any occupation" after 24 months of disability, which pretty much terminates the benefit for many insureds.



But a policy with an unlimited "own occ" definition would allow a surgeon who could no longer perform surgeries due to his disability to continue working as a physician and collect a disability benefit.



Surgeons, especially highly specialized ones, obviously make more money than non-surgeons, so many policies would limit the benefit to the difference between what the doctor currently earns and what his disability policy's benefit would be by itself.



So if a policy paid 60% of former pretax income to a limit of $12,000 per month, a surgeon earning $200,000+ gross would qualify for the maximum benefit. If, post disability, his income was reduced to $100,000, then his policy would pay the difference between $8333/mo and $12,000/mo, or about $3667 (total income = $12,000, same as the disability benefit by itself).



This would even allow the surgeon to completely leave medicine (aka: retire) and do something completely different, like become a fishing guide in Idaho. If his earnings as a guide were $5,000 per year, he would collect $139,000 from his disability policy, for a total of $144,000 per year.



That benefit could be to age 65 or lifetime, depending on the policy. Obviously, the more total benefit a person is asking for, and the easier it would be to qualify to receive it, the more expensive the policy will be.



The surgeon earning $200,000+ per year would probably not bat an eye at paying $10,000 per year for a lifetime benefit of $12,000 per month -- even if he paid the premium for 25 years, just two years of disability returns every penny he put into the policy, and a few more. But he won't collect it after age 65 if his disability does not occur before then.



More working folks need to consider their own need for disability income insurance.



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PostPosted: Fri May 07, 2010 11:32 am   Post subject:   

I guess it's important that the policy should meet any income loss while the insured is recovering. The insured has to be sure of the claim payment process and also know the chances of partial disability upon his return to work.

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PostPosted: Fri May 07, 2010 2:08 pm   Post subject:   

Most policies will provide a "partial disability" benefit. Contract language may limit the benefit to 50% of the full disability benefit or to the percentage of partial disability, which ever is less.



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PostPosted: Fri May 07, 2010 9:06 pm   Post subject:   

Max, define "most". I deal with lots of white collar disability insurance. I don't know of a single company in this market that limits partial disability to 50%.


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falruwaof
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PostPosted: Fri May 07, 2010 9:28 pm   Post subject:   

You misread my post. I said most policies provide a partial disability benefit. Then I wrote contract language may limit the benefit to 50% of the disability benefit. If that's not your experience, wonderful.



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PostPosted: Sat May 08, 2010 12:20 am   Post subject:   

Max, I did misread your post. I apologize.



However, I still don't know a single carrier who markets individual coverage to white collar employees who limit it to 50% or the percentage whichever is less for partial.



Many will do 50% or the percentage, whichever is greater for a period of time, but none limit it they way you are describing. If you know of an exception, please let me know so that I can apologize and learn.


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PostPosted: Sat May 08, 2010 10:28 am   Post subject:   

Guys, whenever any of you are applying for the group physician disability insurance you'd better be a bit careful.



I'd advise you to go through the definition of 'disability' when it comes to group plans. I guess you'd receive any benefit under these plans only when you're completely disabled.

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PostPosted: Sat May 08, 2010 1:57 pm   Post subject:   

falruwaof . . .



We could be discussing apples and oranges, too.



An agency I used to work for a few years ago administered a group DI policy in conjunction with a non-qual deferred comp plan for one of our clients. Carrier, I believe, was Unum. The max benefit was $12,000 per month. If one of the executives was disabled (own occ), they would receive 60% of their pay up to the limit. Pretty standard. But there were several execs who earned well in excess of $20,000/month.



The policy had a provision that if the exec was able to return to work with a continuing, but temporary disability, half time or more, their benefit would be 50% of their regular benefit or 60% of the difference between their full time pay, which ever was less (prevents morale hazard). In other words, a 20% disability would not result in a 50% benefit if 20% of their full time pay meant a payment of more than $6000 per month.



If determined to be a "residual disability" (one that would permanently affect their ability to work), then the benefit was a straight 50% of the standard benefit, as compensation for a permanent disability. Contract did not revert to "any occ" definition after 2 years.



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PostPosted: Sat May 08, 2010 6:58 pm   Post subject:   

Max, we are talking apples and oranges. I was talking about individual policies. You are talking about group policies. In general, group policies stink. They are designed to be as inexpensive as possible.


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