When it comes to disability insurance for physicians, it is important that you protect yourself if you can’t work in your medical specialty. As such, it is important that your individual disability policy has a rider or definition that covers you in your specialty or subspecialty. For instance, if you had numbness in your hand and could no longer perform surgery as a surgeon, you would be considered disabled even if you could retrain and work as an internist and would continue to receive benefits.
These definitions come in different variations and titles. This is referred to as own occupation, regular occupation, your occupation and transitional occupation.
A transitional occupation still covers physicians in their medical specialty even if they work in another medical specialty. Once the income elsewhere exceeds the pre-disability income, the benefits start to reduce. The companies that offer transitional occupation (MetLife and Principal) also remove any mental nervous restriction. True own occupation does not set a limit on the amount of income earned elsewhere.
A 2 year mental nervous limitation states that if you have a claim based on a psychological condition such as depression, anxiety or addiction, the policy will only pay benefits for up to 24 months.
So which is better? An own occupation policy with a 2 year mental/nervous limitation or a transitional occupation policy with no limitation?
According to the Council of Disability Awareness, approximately 9% of disability claims come from a mental/nervous disorder http://www.disabilitycanhappen.org/research/CDA_LTD_Claims_Survey_2011.asp and the number of mental nervous claims are on the rise. This may account for the addition of the mental nervous limitation being added to policies in the first place.
Let’s use our surgeon again who can’t perform surgery anymore and retrains and becomes an internist. Let’s say she was earning $350k as a surgeon (average income according to www.salary.com) and retrains to be an internist and earns $150k. With either the own occupation or the transitional occupation policy, they will receive the full benefits. The surgeon would need to be earning more than $350k elsewhere before the benefits were reduced. And if you were this surgeon and were earning more than $350k elsewhere, you would most likely be OK financially since is this is what you were earning prior to your claim.
Anecdotally, I have worked with thousands of physicians over the last 21 years. I have had multiple claims, including mental nervous claims ranging from depression, addiction, and other various mental illnesses. Conversely, I have never had a client who had a true own occupation claim that earned more income working in another capacity.
The reality is that you want an individual disability policy that will replace your income if you are too sick or injured to work. If your policy is paying you more than the replacement value, it is nice, but may not be necessary. Having a policy with a limitation could put you at risk, especially if your situation is ambiguous. The goal is to replace your income and to cover you in as many potential scenarios as possible.
Look at the analogy of purchasing a homeowner’s policy. Your house is worth $500k and 10% of claims are for fire. You would most likely make sure your policy had full fire coverage and that it would cover the replacement value of your house for $500k. This is analogous to the transitional policy with no exclusions.
The analogy to the own occupation with the 2 year mental nervous limitation is to cover your house for $750k and only $50,000 if there was a fire. This leaves gaps in your coverage for a statistically higher probability and would replace your home for more than it was worth.
For more information about physician disability insurance and the transitional, own occupation riders, the 2 year mental nervous limitation or to request a quote comparison, contact Set for Life Insurance today!
