There are several tools we can utilize to protect ourselves and our families financially in the face of catastrophe. To optometrists, having malpractice insurance seems like a given, as does life insurance for some of us, but what about disability insurance? This is an area I was not very familiar with and decided to investigate. This article will provide the basics of disability insurance for optometrists though, of course, it requires further individualization based on the health and preferences of each doctor.
What is disability insurance?
There is a greater statistical chance for any person to become temporarily or permanently disabled than pass prematurely. While these thoughts are quite morbid, we need to consider the financial implications of the aforenoted. Disability insurance offers a way to plan for financial security by counteracting lost salary due to inability to work. For example, if you are in an accident and unable to work for months or even years while you heal and rehabilitate, the insurance can provide up to 60% or 70% of your prior income. This can either be until you are able to resume working or indefinitely if you are unfortunately unable to do so.
Protecting your career
You have invested significant time, energy, and money into your career as an optometrist. An important specification to look for in a disability insurance plan is an occupational benefit, also known as “own occupation” or “specialty-specific.” This type of policy will cover you if a disability prevents you from performing your job as an optometrist. If this is not specified and you are no longer able to practice as an optometrist but can work in another capacity you would not be covered.
What are the different types of disability insurance policies?
Short-term disability insurance will replace lost income due to temporary disability and can exist on its own or to bridge a gap until long-term disability kicks in. Short-term disability is usually for a certain number of months; most commonly 6-12 months are covered. There are also short-term disability options available for women during pregnancy. Long-term disability, as the name implies, provides protection on a more permanent basis. Long-term coverage also incorporates a variable time of payout term and wait period (before the benefit kicks in). The terms can be from 2 to 10 years or “to age 65.” The waiting period can range from days to months to years.
Individual disability insurance plans can be purchased through an insurance company or broker while a group disability insurance plan is offered through your employer or professional organization.
What factors into the cost of disability insurance?
The longer the term of coverage and the shorter the waiting period, the more expensive the policy premium will be. These options, along with age, health status, and occupation will determine the premium cost. There are also add-ons called “riders” available to supplement the benefit. For example, cost-of-living riders allow for adjustments to the amount of benefit paid out based on inflation. A “future purchase” option would allow you to purchase more coverage without an additional physical exam at a later time. A “residual disability” rider allows for coverage of part of your salary if during recovery you can perform part but not all of your regular work-related duties; for example, teaching but not able to perform clinical care. Residents and newly graduated doctors may be interested in a graded premium payment plan. Rather than steady, even payments, it uses an increasing scale over time to coincide with salary increases.
How much disability insurance is enough?
Ideally, disability insurance would replace your entire post-tax optometrist income. This, however, may be quite difficult and expensive to achieve and so it is recommended that disability insurance cover at least 60-65% of your post-tax income (this is the amount that employer-based policies usually provide).
One difference to remember about individually obtained disability insurance versus a group or employer-provided insurance is the pre-tax and post-tax status. Individual policies are usually purchased with post-tax dollars, meaning the amount of coverage is at face value. The opposite is usually true of employer-based policies. This type is generally funded by pre-taxed dollars, meaning the taxes will be taken out upon disbursement and you need to purchase more to receive the desired pay-out amount. If an employer-based policy is available, another option is to utilize it and obtain an individual policy to supplement and make up for the remaining income dollars.
Are there limitations or exclusions?
If you already have an underlying medical condition you will likely need to look for the type of insurance that has a “guarantee issue.” This type of policy is commonly offered in the form of group insurance from an employer and offers guaranteed approval without requiring a physical exam. Rather than denying you a policy, some companies may create an exclusion clause of a pre-existing condition. This means that any claim of disability made in the future related to the pre-existing condition would not be covered. There may be limitations on certain medical conditions such as those in the mental health category or related to pregnancy.
The major hitch in an employer-based group policy is that you can’t transfer it if you change jobs. Experts recommend obtaining the available group policy while you apply for individual policies to either supplement or later replace the group policy; this allows for ease of portability throughout your career.
The purpose of disability insurance is to protect the income you rely on. This can mean taking care of yourself and your family or even making student or business loan payments that are due. For as long as you rely on your optometry income, this type of insurance is necessary. If and when you reach a point in life where your savings is sufficient and you no longer rely on your optometrist income to sustain a comfortable lifestyle—that is when the need for disability insurance ceases.
Where can I get started?
The AOA offers disability insurance for ODs that is occupation-specific and has multiple options for the term and wait period. Big insurance companies like Guardian (this is who I use) and MassMutual also offer “own occupation” plans for physicians with many policy options. Start by getting quotes from a few different companies. This will help you to compare and choose what’s right for you!
- “Understanding Disability Insurance for Physicians.” American Medical Association, www.ama-assn.org/residents-students/career-planning-resource/understanding-disability-insurance-physicians.
- “Disability & Life Insurance.” AOA, www.aoa.org/practice/professional-protection/disability-and-life-insurance?sso=y.
- “Mass Mutual Disability Insurance.” Doctor Disability, 10 Feb. 2020, www.doctordisability.com/insurance/companies/mass-mutual/.
- “Disability Insurance: How It Protects Your Income.” Guardian, www.guardianlife.com/disability-insurance.