Updating or Investing in Disability Policies Key to Protecting Future Earnings

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While no one expects to become disabled, whether through illness or injury, it happens all too often, which is why it’s important for wage earners to carry disability insurance. This is especially true for medical professionals, who stand to lose a substantial amount of income as the result of a disability.

“Doctors, as a profession, are probably more aware of the need for disability insurance than most other professions, so most have some level of coverage,” said Wes Caldwell, disability and benefits specialist at Danna-Gracey, the largest independent medical malpractice insurance agency in Florida. “The problem is that those who are making higher incomes are likely the most underinsured professionals out there.”

Just like individuals in other fields, doctors may avoid getting this insurance or not carry enough insurance because they don’t believe that they will become disabled. But the fact is, the chances of becoming disabled during one’s earning years is about three times that of a premature death.

“When you’re talking about a surgeon, it doesn’t take much to rob them of their ability to perform surgery; something like a hand injury, or being unable to stand for a long period of time, or a tremor pretty much takes them out of their specialty,” said Caldwell.

“Most of these doctors, especially surgeons, are living on all of their income; they spend most of their money,” he added. “If they are unable to generate an income, and only have 30 percent of their income covered, they may be able to make it, but a lot of things will go away.”

Considering that a specialist might earn more than $15 million over the course of his or her career, it’s important to protect those assets.

“If you owned a $15 million office building, you wouldn’t insure just one floor—you would insure the whole thing,” said Caldwell. “For a 45-year-old physician making $750,000 a year who plans to work until age 65, it’s the same thing.”

He added that many doctors are not aware that, regardless of the level of income, disability insurance can cover close to 100 percent of net income due to the tax treatment of disability benefits.

He adds that one challenge for physicians is finding the time to obtain the coverage because disability is one of most difficult insurances to get approved. “These policies require extensive medical underwriting along with financial underwriting,” Caldwell explained of the need for a medical appointment, phone interview, and two years of tax returns, among other obstacles.

“While a trip to the chiropractor might seem benign, it could result with a full back waiver on their coverage,” he added. “Counseling for mental health issues can result in a full-out decline.”

To this end, Danna-Gracey has negotiated programs with carriers to bypass these underwriting requirements and to make it easier to obtain coverage. Caldwell also works with those who already have coverage to make sure that when they have a claim, it is processed correctly to avoid payment delays.

“A lot of physicians avoid getting disability policies because they believe that it will be difficult to get carriers to pay their claims,” he said. “For anything else, like an auto accident, you can call someone to help you, but disability doesn’t work that way. The carrier sends a packet of forms that needs to be filled out, during a time when the disabled person is not at their best to address it.”

To date, Danna-Gracey’s doctor clients have received more than $20 million in disability benefits.

For those who do have policies, Caldwell recommends reviewing coverage amounts every three to four years, especially as the individual begins to earn more money. This is an especially opportune time to review coverage, he adds, citing COVID-19 concerns.

“With more and more healthcare professionals dealing with issues as a result of COVID-19, it’s important to note that disability policies have not excluded it as a covered illness,” he said. “We are actually seeing more awareness of this type of insurance now because of the pandemic; doctors are being exposed to something that could take them out, which is making it more of a reality for them.”

Along with financial security, disability insurance can also provide peace of mind.

“Having the proper amount of disability coverage allows one to focus on recovery from the illness or injury that took them out of practice,” said Caldwell.