Why Doctors Need Own-Occupation Disability Insurance
Andrew Holloway
July 15, 2019 (MDMag.com) – Most physicians and surgeons are well-aware of the importance of disability insurance, but the key differences between employer-provided group plans and own-occupation insurance can be easy to overlook at first glance. These distinctions, often buried within subtle contractual language, can be the difference between comprehensive protection for your future and disastrous gaps in coverage.
Understanding the essential differences between these two most common types of medical disability insurance is critical to making an informed choice to protect yourself financially in the event of an injury or illness.
The Basics: Own-Occupation vs. Employer-Provided Disability Insurance
Choosing a comprehensive own-occupation insurance policy is one of the most important financial decisions that a new doctor can make.
Own-occupation insurance, also known as regular occupation insurance, is provided by independent insurance carriers and provides individualized protection that follows doctors throughout their careers. This type of insurance is designed to protect your personal earning potential with regard to your specific occupation. The coverage provided by own-occupation plans is complete and continuous, regardless of changes in employer and other career transitions
Employer-provided group disability insurance is the default plan offered and often encouraged, by employers such as hospitals or medical groups. As the name suggests, group disability plans are intended to provide generic, one-size-fits-all disability coverage to large groups of employees within an enterprise, rather than coverage that is tailored to protect your specialization. While employer-provided group plans can be useful as supplemental disability coverage, or as a temporary stop-gap solution, they simply can’t provide adequate coverage to protect earning ability throughout a doctor’s career.
Defining “Disability:” The difference is in the details
While own-occupation plans allow you to claim benefits if you are no longer able to perform your specialty, employer-provided disability insurance can refuse to pay out if you’re “not sufficiently disabled.”
A key difference between types of disability coverage is how the plans precisely define “disability” and to what extent a policyholder must be disabled in order to receive benefits. One of the biggest pitfalls of group insurance plans is that they typically use a highly restrictive “any-occupation” policy to define disability. Under an “any-occupation” clause, you are not entitled to receive benefits unless your disability renders you unable to perform any function of your current occupation. If you’re able to work at all, even if it’s at a reduced capacity or a lower-paying position, your insurance won’t pay out benefits to supplement your lost income.
For example, if you are a cardiothoracic surgeon and a hand injury prevents you from practicing your specialization an “any-occupation” clause could deny you benefits with the justification that you can still perform consultations or teach in a medical college. Moreover, if a degenerative condition reduces your ability to take on a full workload, you can suffer years of income loss without receiving benefits because this is deemed only a “partial disability,” rather than “total disability.”
By contrast, own-occupation plans offer coverage if you are not able to perform the material functions of your specific occupation. If any disability, partial or total, prevents you from executing substantial aspects of your current occupation, you will receive benefits to supplement the lost income. If that same injured cardiothoracic surgeon had an own-occupation plan, she could receive benefits while also earning income from a new position in the medical field.
Unfortunately, many doctors with group insurance plans don’t realize until it’s too late that despite years of paying premiums, it is nearly impossible to qualify for “any-occupation” disability benefits. Own-occupation plans use a much broader definition of disability as it relates to your specific practice, and therefore, offer the most complete protection for your income.
The Own-Occupation Guarantee: Consistent coverage throughout your career
It’s common for young physicians to change employers within the early years of their careers. During these transitions, employer-provided coverage doesn’t move with you to your new job and you may discover that your new employer doesn’t offer a group plan, forcing you to purchase a more costly individual disability insurance plan later in your career. Furthermore, if you are covered by an employer’s group plan at the time you become disabled, you risk finding yourself uninsurable when you transition to a new employer.
Even if you remain with the same employer, group plans fail to offer the same guaranteed coverage as own-occupation insurance policies. Insurance companies can change the terms of employer-provided group plans at any time, or even cancel the plan altogether. That means that even if your specialty is initially covered by an employer’s plan those terms are subject to change, leaving you exposed at any time.
And don’t count on low premium rates either. From our team’s experience working with physicians, we’ve seen that every 5-7 years many employers tend to change up the company that provides their group benefits plans, which could result in less or no coverage.
These gaps and uncertainties in a group plan coverage are impossible to anticipate, even for the employers themselves. The effectiveness of a physician’s disability plan can hinge on intricate language that the average insurance broker or human resource worker doesn’t fully understand. It takes a professional disability income specialist to fully anticipate potential risks and create a plan that can transition with you over the years.
Takeaway
Investing in a comprehensive own-occupation plan early in your medical career allows you to guarantee affordable rates of coverage and plan for your financial future. By ensuring rates and terms of coverage, an own-occupation plan protects your income and anticipates your needs at every phase of your career.
New physicians have many options to weigh when they begin their careers, but few choices have a more serious long-term impact than the decision to purchase an individual own-occupation insurance plan.
With a heavy workload and student loans to repay, young doctors can’t afford to lose out on income due to incomplete or unreliable disability insurance from an employer-provided plan. Own-occupation disability insurance offers maximum coverage and unparalleled peace of mind for doctors throughout their careers, with protection that is both specialized and complete.
Andrew Holloway is a Wealth Advisor to Physician Households at Physicians Thrive. He presents to physicians across the United States on a regular basis discussing topics like physician employment contracts, disability insurance, and personal finance.