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Disability Insurance 101 for Residents

Disability Insurance 101 for Residents Why After Match Is the Best Time to Sign Up?

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Disability Insurance 101 for Residents
Why After Match Is the Best Time to Sign Up

Disability Insurance 101 for Residents
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At this point in your life, you’re familiar with the importance of having health, car, and homeowners’ insurance. As you enter residency, you also need to think about protecting your most important and hardest-won asset—your ability to earn income to support yourself and your family.
As a disabled physician who sustained a career-ending injury during a difficult patient delivery, I’ve learned a lot about disability insurance the hard way. One little-known but key lesson: Right before residency is perhaps the best time in your life to get an individual disability insurance policy. You have some free time now, before life as a resident takes over. Here’s what you need to know before you talk to an insurance broker.

Why is After Match the Best Time to Buy Disability Insurance?

Residents typically qualify for “starter package” policies, offered by insurers at a significant discount. These discounts are only available before or during residency, and the rate lasts throughout your career. This means you can save thousands of dollars over the life of your policy.

If you wait until later to apply for individual disability insurance, your age, health, and other factors will likely increase the cost or limit the coverage of your policy. The younger and healthier you are when you apply, the lower your cost. My advice: Lock in a quality policy at a discounted rate today. That way you’ll get the most coverage for the best rate, and you won’t have to worry about it in the future.

A note to people who plan to get pregnant: If you can, I encourage you to get coverage before the first time you try to get pregnant, as insurance companies tend to look for any reason not to cover future pregnancies.

What Is Disability Insurance?

Disability insurance is income protection. It covers a portion of your income if you can no longer work due to a long-term illness, a debilitating injury, or cognitive challenges. Once coverage is triggered by a health event, you receive a specific amount of money every month. 

Why Do Residents Need Disability Insurance?

As physicians, we are constantly taking care of others and we need all of our faculties to do so. Disability insurance exists so that we can take care of ourselves and our families. In the event that you, like me, could no longer practice the profession you were educated and trained for, disability insurance would help you continue your standard of living with as little financial disruption as possible.

What Are the Types of Disability Insurance Policies?

There are two main types of disability insurance you need to know as a resident: group long-term, and private individual.
Group Long-Term Disability Insurance is typically paid by your employer and covers a percentage of your base salary for as long as you remain in your position. These types of policies typically have significant limitations on what they cover and have inferior language. Most are not portable, so you cannot take the benefits with you to your next job. If your employer pays for the policy, the benefit comes to you as taxable income, which reduces your monthly benefit income. Overall, while a long-term group benefit is nice to have, you should not rely on it as your sole means of income protection. It is always a good idea to have a knowledgeable broker review your group insurance policy to address any gaps.

Private Individual Disability Insurance offers the most comprehensive coverage with the strongest language. Because this policy is obtained by and paid for by you, it stays with you throughout your career. A private policy is specifically tailored to your unique needs and can take into account all sources of income. Because you pay for this plan with post-tax dollars, the policy’s benefit is tax-free. The riders, or building blocks of the policy, create the total package tailored to your needs. See below for details.

How Much Does Disability Insurance Cost?

Men can expect to spend about 1 to 3 percent of their gross income on a quality disability insurance policy, whereas women should expect to pay about 2 to 6 percent. The reason women pay more is because they tend to leave the workforce because of illness or injury more often than men. Keep in mind that rates are less expensive across the board for residents due to the available discounts.

Secure your future with tailored Disability Insurance for Residents!

Key Disability Insurance Terms and Riders

Riders are the building blocks of your policy. Their details are vitally important because they determine exactly what you are covered for. You must understand what they are to make sure your disability insurance meets your specific needs.

Just as in medicine, the disability insurance industry has a lot of confusing jargon. The most important thing to know is that there is no standardization of language in insurance. Carriers may define the same term in different ways, or different terms similarly. You are not necessarily comparing apples to apples when you shop for policies from different carriers. In addition, the industry is constantly changing. For these reasons, it is best to speak to a knowledgeable broker to confirm the details of your policy before you buy.

Below are eight key disability insurance definitions to know:

1. Own Occupation/Specialty Specific: This is the most important piece of the policy. There are several terms used to mean your “own occupation.” Some carriers have it built in, whereas others will make you add it as a rider. This language means if you cannot perform what you were specifically educated and trained to perform, you qualify as disabled and are therefore entitled to receive benefits regardless of whether you are employed in another occupation.

2. Future Purchase Option: This rider is an absolute must for young practitioners to protect their future earning potential. It allows you to increase your coverage as your salary increases or you change jobs with different benefits without having to undergo additional medical underwriting. This rider also goes by many different terms.

3. Residual or Partial Disability: This benefit provides for circumstances that cause you to work part-time because of injury or illness. When you have lost a certain percentage of your income, time, or duties (depending on your policy), a benefit will be triggered. Each year, more partial disability claims are filed and paid than total disability claims.

4. Cost of Living Adjustment: This rider, also known as the COLA rider, helps offset the risk of inflation. On the anniversary of your claim, the carrier increases your monthly benefit based on the language in your policy. The COLA can have simple or compound interest moving forward. Benefits range from up to 3 to 6 percent of the monthly benefit. Some carriers have a fixed percentage increase, while others are tied to the Consumer Price Index and therefore have a range.

5. Catastrophic Injury Rider: This rider (also known as the CAT rider) offers extra protection—in addition to a standard monthly benefit—from the financial impact of a more serious injury or illness. For most individual policies, if you are unable to perform two or more of your activities of daily living or are severely cognitively impaired, you would qualify for an additional benefit.

6. Non-Cancellable, Guaranteed Renewable: This means that the insurance carrier cannot cancel, increase the premiums, or add restrictions to your policy once they have made an offer and you pay the premiums. Even if they stop offering the type of policy you own, as long as you continue to pay your premiums you will receive the same coverage.

7. Benefit Period: This is the length of time that your claim would be paid. Carriers typically offer options that will pay out until the insured turns 65 to 70 years of age.

8. Elimination/Waiting Period: This is the time between something happening to you and you getting paid. The most common length is 90 days; however, there are shorter and longer options available.

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Protect Your Future Physician Self Now

Because you can get the best value for the most comprehensive coverage, I believe that before or during residency is the best time to sign up for disability insurance.

Now that you are familiar with the basics of disability insurance for residents, you can ask informed questions to fully understand your policy options. So why not talk to a broker and get your policy in place today? Your future self will thank you. Start HERE.

By Stephanie Pearson, MD

Stephanie Pearson, MD, FACOG, is the co-founder and CEO of PearsonRavitz. After her career-ending injury as a practicing OB/GYN, she was no longer able to deliver babies or operate. Stephanie’s mission is to educate her fellow physicians on disability insurance so that they don’t make the same mistakes she did.

Dr. Pearson ensures the validity and precision of all information provided in this blog.

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New Accreditation Policy will begin in 2024

News & Updates

New Accreditation Policy will begin in 2024

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ECFMG wants to make sure that medical schools are accredited by a recognized agency.

What does that mean?

It means that your school has to be accredited by an agency recognized by either WFME or NCFMEA.

WFME or NCFMEA will not provide accreditation for medical schools themselves. On the other hand, they will grant ‘Recognition Status’ to individual accrediting agencies in your country that will accredit your medical school.

How much does it cost for an agency to become accredited by WFME?

There is a non-refundable application fee of $1,000. The fee for the full process of recognition is $60,000 (inclusive of the $1,000 assessment fee) plus paying for the travel and accommodation of WFME recognition team members.

When will this process begin?

2024 with no specific dates as for now.

What does this mean for me as a medical student?

The status of your school will be reported on the World Directory of Medical Schools in addition to your ECFMG status report. Since the majority of schools are not yet accredited, this will not have a significant impact for those applying to match 2024 or match 2025.

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Will I still be able to apply for USMLE exams and the Match?

Yes. According to ECFMG ‘The initial implementation will not affect your eligibility for ECFMG Certification’.

Where can I find more resources?

You can check out the ECFMG, WFME and NCFMEA websites for more info.

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