An employed physician’s disability benefit coverage may not offer complete income protection.
Most graduating residents and fellows assume that when they accept a position as an employed physician they will receive a level of income protection that will allow them to maintain their standard of living. Unfortunately, due to the shortfalls inherent in the group Long Term Disability (LTD) coverage provided by most employers many physicians find themselves significantly underinsured.
How much monthly benefit does your coverage provide?
All group policies will provide an insured with a pre-determined percentage of income replacement (typically 60%) up to a pre-determined maximum monthly benefit. In many instances the maximum monthly benefit is set at a level that doesn’t provide an adequate level of protection, especially to highly compensated specialties.
As an example, a physician earning $240,000 with disability coverage providing 60% of income up to a $5,000/month benefit will only insure 25% of the doctors income. Essentially, the greater the income or the lower the maximum monthly benefit, the worse the impact would be.
What sources of income are covered ?
Many group insurance policies will only insure a physician’s basic monthly earnings. In recent, years practices and institutions have begun to introduce compensation models that have a productivity-based component. In many instances these non-salary sources of in income are not included in a contract’s definition of insurance and the resulting benefit will be significantly lower than anticipated (or needed).
Benefits are often taxable!
If an employer pays for your long term disability coverage the benefits you would be entitled to receive during a claim may be considered taxable income. Given the tax brackets most physicians find themselves, the resulting net benefit is may not be enough to maintain their standard of living
Group LTD benefits offer little portability
Unless a physician secures a position where they will spend the rest of their career, it’s important to evaluate if and how the coverage can be maintained if they leave their employer.
While many group policies will contain provisions that offer some degree of portability , the monthly benefit is extremely reduced, the definitions of what constitutes a claim is highly restrictive (no own occupation definition) and the coverage will most likely not be available if your new position provides any level of coverage.
Individual Coverage can fill in the gaps
An individual disability contract can be used to address the limitations of a group contract. These policies provide tax free benefits, raise the percentage of income to as much as 80% and raise the amount maximum monthly benefit to more than $30,000/month and guarantee the right to maintain protection throughout one’s career.
Request a proposal today to determine how an individual and portable policy can better protect you and everyone you care about, throughout your practice years.
