Posted by
Alec Hill on Wed, Apr 04, 2012 @ 12:27 PM
When someone considers buying disability insurance, they can see the importance but can be turned off by the added expense to their budget. Common excuses are that you can’t afford it or you don’t really need the coverage right now. It’s easy enough to say “I don’t need it right now” when you are healthy and functional, but all it takes is one second for that to change. What happens when you can’t work and the bills start building up? What happens when you can’t live the way you have grown accustomed to? What happens when you can’t go back to your old job due to the aftermath of a disability?
In hindsight most would agree that paying a little now can relieve a lot of stress and difficulty later. So how much can coverage cost? It really depends on how much insurance you need and what you do.
For example, a physician has an accident where they break their finger. A neurosurgeon will be affected by this more so than a family practice physician. A neurosurgeon’s hands are their lifelines to their job and therefore are at a higher risk for a potential disability claim because something as simple as a broken finger can cause a span of disability time. There are many other factors that also play in, but the idea is that because of the increased chance of a disability (meaning more illness/injuries could cause a disability) creates a higher cost for disability insurance. On the flip-side, a family practice physician doesn’t rely on their hands to perform surgery every day like a neurosurgeon does. If a family practice physician broke their finger, more likely than not they will be able to continue to do their job and see patients. This means that the family practice physician will get less expensive rates. Both physicians need disability insurance, but this explains what the disability companies consider when offering insurance to a physician and determining cost.
Our experts tell our clients to think about how much they are spending on their coverage compared to how much they are protecting. A common “rule of thumb” is that you are spending 1-2% of your income to protect roughly 80%-90% of your income. In those terms, is it that farfetched of a concept? Say you make $130,000 a year and you take home $100,000 after taxes. Isn’t it worth it to spend the 1-2% of your take home income to protect 80+%? It can be a pain at first but when you take the time to think about the reasoning behind it and what you are protecting, it makes sense.
It really doesn’t matter what career path you are in – disability insurance is important for all. Having something in place can cure a lot of headaches and problems for yourself and the ones you care about in the future. I like to refer to the old adage, you would rather have it and not need it, than need it and not have it.
From North Star’s perspective, disability insurance is protecting the things your money pays for. It protects your lifestyle, well being, and the investments you have made with your time. So when someone struggles with the question “can I afford disability insurance” one must ask can I afford not to protect not only my own investment in education and career path, but the ones I care about and depend on me?
If you are a dentist that employs dental hygienists, pay close attention to this article. If you are a dental hygienist, pay even closer attention to this article.
I’ve discussed in previous articles the importance of why disability insurance is imperative to one’s financial livelihood, but I will summarize those reasons once again for clarity.
1) Our greatest asset is not our home, our car, or even our retirement account. It is our ability to get up and go to work every day in order to earn the income that pays for all of these things. Disability Insurance protects your income earning ability by paying you if you are unable to work.
2) With medical advancements, we are more likely to survive and become disabled than we are to die from an illness or injury. Everyone knows about life insurance and probably owns something to protect their family, but what happens if you DON’T die. The money consumed during a disability is drastic—it’s what we call a living death.
3) If you are trained to perform a specific occupation, your health, intellectual capital, and ability to produce an income is worth a whole lot more than what Social Security Disability Income would pay you; that is if you even qualify for SSDI.
So why am I so adamant about Hygienists getting coverage? When you look at the breakdown of professions whom actually own disability insurance, physicians and dentists have the HIGHEST percentage of their occupation that owns disability insurance. Part of this has to do with the fact that they typically have fewer working years than most because of the time they spend in school or training, the other part is they have a lot to protect in terms of income potential. But what about the other professions that have similar skill sets?
For most Dentists, the fear of losing functionality of a hand or limb, the productive use of their eyes, or even their back and the ability to sit in a chair for an extended period of time is what drives them to look for disability insurance. But shouldn’t a dental hygienist have the same concerns?
The median expected salary for a typical Dental Hygienist in the United States is $61,801 as of this year (HR Reported data as of February 2012—Salary.com) As a 30 year old, assuming a 3% increase annually, that is an asset worth $3,910,516!
Find out how much your colleagues are making
Some Dental Hygienists might have a form of group disability insurance through their employer, which in most cases is fair at best. Here are a few things you can expect to see in a group disability policy:
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Social Insurance Reduction- this will help save cost for the group plan; some individual policies might have this as an option as well. What it means is that if you receive any form of workman’s comp, Social Security Disability Income, or other social insurance, the benefit will be reduced. In most cases, qualifying for these types of public insurances require a fairly severe disability.
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Taxable Benefits- this is one of the biggest downfalls of a Group Policy. When an employer pays for the group plan, they get a tax break by expensing the cost. However, this means your benefits will be taxable when you go on claim reducing the amount of benefit you will receive. The benefit is that you don’t have to pay the premiums.
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Non-portable- Most group plans do not have a portability feature that allows you to take your policy with you if you ever leave the practice. In fact, the policy can even be cancelled at any time if there ever is a dispute between the employer and the insurance company.
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Definition of a Disability- I have seen various types of definitions in group plans, but the most common is an ANY OCCUPATION definition. Typically these plans will protect your specific occupation for a maximum of 2 years, but after that you must be disabled from working in ANY occupation (even if that occupation pays you less and requires less training).
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Rehabilitation Benefits- most group plans have this built in because the ultimate goal is to get you back to work. This is a good feature to have but it is there for a purpose, the company wants you to come off of claim.
Obviously there are many benefits to having a group policy, especially if you cannot obtain an individual policy because of health issues you may have had in the past. Group Plans are unbiased and will take everyone in the group so long as they meet the employment requirements. By insuring both the healthy and unhealthy, the company is able to provide coverage by pooling the risk of multiple individuals together. This also drives costs up. That means most group plans have to sacrifice useful features in order to stay within the budget of the employer. Another concern might be the criteria needed to obtain benefits. A lot of dental hygienists might be working at multiple practices sharing hours, so there is no full-time status at any one dental practice and hence no benefits.
Private individual disability insurance is going to fix the majority of those problems that most people encounter with their group plan or if a group plan is not available. The challenge is actually getting coverage on your own. There are three things that you must prove before an insurance company will offer you insurance:
1) Occupational Underwriting- What is your actual occupation and duties. The higher risk occupation you have, the higher your rates will be.
2) Financial Underwriting- In order to obtain coverage, they need to know you have the income to justify the amount of coverage you are asking for. This includes your normal income, bonus income, unearned income, and any other forms of disability insurance already in force.
3) Medical Underwriting- Your health history including conditions, medications, and treatments will be reviewed and possibly result in exclusions, increased premiums, or even a decline.
Individual coverage is a good option if you are young and healthy because that is when your cost of insurance is at its lowest. Even though we typically have the mentality that “it won’t happen to me” when we are young and healthy, the important thing is that you get it while you still can. Rates will lock at whatever age you apply at and the policy can never be taken away from you unless you fail to pay the premiums.
It is important to speak with a professional about what options you have as a Dental Hygienist and determine what works for you and fits within your budget. Most people feel they have to purchase as much as they can right away, but sometimes we can only afford so much. A good way to determine how much you need is to look at what your household income would be if you were to become disabled, and then analyze what your expenses are and determine if there is a shortage. Typically you want to give yourself a little buffer room in the event of some unexpected costs.
There are thousands of stories out there about people experiencing an injury or illness and we’ve all seen the stress it can put on a family as well as the recovery process. Unfortunately, a logical decision such as protecting yourself against an injury or illness becomes an emotional one that ultimately prevents us from making the right one.
The Financial Side of Your Life: RDH Magazine
Today, someone showed me an article related to disability insurance from a blog on MSN money dated back to August 2008. I thought it was well written and easy to follow so I wanted to share it with our readers as an added resource.
Disability Insurance Can Save Your Life
Disability insurance IS the forgotten risk.
There is a section on the article that discusses Social Security Disability Coverage. It gives you a link to go to in order to receive an estimate. To help save some time, the average monthly Social Security Disability Insurance (SSDI) benefit is only $1,064. Source: 2010 CDA Long-term Disability Claims Survey.
Disability Quotes
Of the many insurances that you can find online, disability insurance is one that is nearly impossible to show the consumer their options instantly. At a bare minimum, at least seven variables need to be taken into account to show someone an accurate rate. These will include:
- Gender
- Age
- State
- Occupation and duties
- Income
- Group Benefits
- Health History
Other variables would include the needs and wants of the consumer including the various riders and options that might be available with a policy. Without knowing these facts, it can be difficult for anyone to offer complete and accurate information. Sometimes, assumptions can be made to give a starting point. Assumptions like a clean bill of health or a common amount of group coverage can help provide a baseline for the amount of coverage you qualify for.
One of the other challenges with providing quotes for disability insurance instantly is that each carrier will offer different benefits depending on what state you live in and what “occupation class” you fall under. This can make showing an apples-to-apples comparison quite difficult and usually requires some explanation as to why one carrier might be much cheaper than another.
Sometimes, just knowing what a company offers for benefits and which company is the most cost efficient based on the top five variables listed above will give you a good understanding as to what your options really are. It is always a good idea to get a baseline for what options you have, then evaluate how the top three company options might fit your needs and your budget.
Connect with a Disability Specialist-- Click Here to chat with a Disability Insurance Specialist
Be sure to talk with our disability specialists to find out how individual disability insurance can be coordinated with the benefits you already have as well as which companies have the options that you want in your policy.
Thankfully, we have created a one-of-a-kind tool that can help you get information instantly. Click on the button above to get an instant quote by providing just a few short pieces of information. You can also contact one of our specialists if you have specific concerns.
Among all professions, Physicians are often more frequently aware of their need for disability insurance. This could be for a few reasons:
1) They see horrible things happen to good people every day
2) They want to make sure they protect their ability to earn after years of school and loans
3) They are approached by insurance agents regularly because of the first two
When it comes to owning a disability insurance policy, most physicians understand why they might need it. The challenge is, knowing what to own and through which carrier. Insurance companies are constantly competing to improve their products to get a leg up on their competitors in the market place, even if only temporarily. It’s almost impossible to keep up with all the changes in products, riders, regulations, and pricing unless you work in the industry. Here are a few tips to help you wade through some of the noise as you search for what is best for you.
Own Occupation vs Any Occupation
As a physician, you have a specialized skill set that you’ve spent anywhere from 11-15 years or more training for. An Any Occupation Definition of Disability is just that, it will protect you from doing Any Reasonable occupation based on education and skills. An Own Occupation definition will generally increase that protection by protecting your board certified specialty, so if you are disabled cannot perform the material and substantial duties of your occupation then a benefit will be paid.
There are varying degrees of Own Occupation and the legal language in some policies leave room for interpretation by the insurance company, so be sure to consult your advisor as to which options are best for you. For reference, you will typically run into True Double-Dip Own Occupation, Transitional Own Occupation, and Modified Own Occupation.
Residual or Partial Disability
Most disability claims occur in the form of a partial disability. Basic DI plans will pay if you are “totally disabled” according to their definition; because so many claims are partial, you want to make sure you have this option added to your policy if one is not built in. Most companies will allow these types of partial claims to be paid out for the life of the benefit period, but if yours doesn’t then the longer this benefit can be paid out, the better.
Future Insurability
A physician’s income will increase dramatically from training to new in practice and possibly more so as their career progresses. Having the ability to purchase more benefit to protect your growing income in the future is critical because your health is constantly changing and you are not getting any younger. Some companies will also allow you to lock in your rates if you received a discount while in training. As for the amount to lock in--- just make sure you have a good idea as to what your future income potential will be and get it as close to that number as possible with some buffer room.
Cost of Living Adjustment
This is an adjustment for inflation while you are on claim. This will come as a rider and becomes less important the closer to retirement you get, however, this addition to your policy can help keep your income in line with your growth potential if you become disabled for a long period of time early on in your career.
I’m the sole breadwinner, so what happens if my spouse gets disabled?
This is becoming a major concern for couples with a stay-at-home spouse. The role of a stay-at-home parent is more important than often given credit for and if he or she were to become disabled it can take time away from work for the other spouse or add other expenses for child care. If the spouse has an individual policy from a previous job, usually it will require the disability to be fairly significant in order to receive benefits because the occupation would have been changed to “Homemaker” and thus would require a severe disability. If the stay at home parent does not have an individual policy in place then getting a critical illness policy might be a good option. In most cases, just getting something to protect against the critical illnesses that could put strain the family such as Cancer, Heart Attack, or malignant tumors will help keep you focused on fighting the illness and not money.
General Dentists are unique from your typical medical professional because they are oftentimes more than just a Dentist. They are business owners managing every aspect of their practice and rely on a lot of people to help keep the wheels turnings. Because of the dual nature of this career, there are different concerns that must be considered when putting together a risk management strategy.
When it comes to disability insurance, the first thing that needs to be looked at is protecting your individual ability to earn an income. After going to school and spending all that time and money to become a dentist, you want to make sure that you protect your ability to EARN like a dentist. In order to protect your specialty, you will want to look for a policy that has an Own Occupation definition. There are various types of this definition but all will protect your specific specialty. Some discounts are available while in dental school for this type of policy.
As the owner of a business, a dentist knows that the practice is the source of generating his income in the future once recovered from a disability. So if you become disabled, what 
happens to the practice when you can no longer work with patients? As a small practice, you might not be able to survive the disability because of the overhead expenses that need to be covered on a monthly basis. From salaries to equipment, these all must be maintained in order to prevent the business from going backwards or even from closing its doors. Most disability insurance carriers will also have what is called Business Overhead Expense coverage. This is a policy that will pay for the monthly expenses of your business while you are disabled. Ultimately, this buys you time… time to either return to work or time to find a suitable buyer.
If you are a part of a larger practice with many partners, it is likely the practice would survive if one dentist was to become disabled but it would still feel the effects. As a partner in the practice, it is important to protect your share in the practice in the event of your disability. Disability Buy Out is a provision typically included in a Buy/Sell agreement that is established between the partners. In the majority of these agreements Life Insurance is always considered but often disability is left out, though the risks of disability are statistically higher. A Disability Buy Out policy will pay your partners a predetermined amount in the event of your disability. This will in-turn allow your partners to buy your share of the practice after a predetermined time stated in the Buy/Sell agreement (typically anywhere from 1-2 years).
Lastly, it is typical to have a business loan of some sort when starting out in your practice. The loan could be meant to fund your buy-in of a partnership or to purchase property and equipment. This type of liability carries different risks because the amount of the loan is systematically and predictably decreasing over time. So as the loan continues to be paid down, the need for protecting it becomes less and less. To prevent from defaulting on a loan, some companies will offer a policy often called a Decreasing Term Disability policy or a Business Loan Protector. This will pay for the monthly loan payment while you are disabled and is typically very cheap due to the term the policy is held. Sometimes, a bank may require you to obtain this type of insurance.
Continued from previous blog post Disability Insurance: Is Group Insurance Enough? Part 1
Previous Topics: The Definition, Taxation, Benefit Cap
Types of Income Covered: Group policies, depending on the plan, will usually only cover your base salary. This excludes any bonuses, commissions or performance based pay. This can be a large portion of someone’s income depending on the occupation and having this protected is vital.
Social Insurance Benefit Reduction: This is probably the most overlooked feature of a policy because it can be difficult to understand. Basically, this clause states that if you receive ANY other benefits from sources such as Social Security Disability Income, Workman’s Comp, State Qualified Income Plans, or you receive contributions to your Employer Pension plan, these benefits will be reduced from your disability benefits through the group plan. To understand the gravity of this, you have to understand what it takes to receive those benefits. To get SSDI and many of the state funded programs, you have to be significantly disabled. This will likely mean there will be modifications to your lifestyle, your home, and your need for care. Right when you need the money the most from as many sources as you can get the group plan will reduce your benefit keeping you at whatever percentage it says in your contract.
Portability: A group contract typically is meant to be a benefit to incentivize you to stay with your employer. It's uncommon to find a policy that allows you to bring it with you to your new job if you were to decide to change employers, get laid off, or pursue a different career altogether. Leaving your employer could then open the door to risks such as not having good coverage or any coverage at all with your new employer.
Cancellable: A Group disability contract is actually a contract between the insurance company and the employer, not the insured. What this means is both the carrier and your employer could agree to change, reduce, or even discontinue your benefits. If you are paying for your premiums, then your premiums could be increased. These are all variables that are not in your control and can make a group policy more risky than owning one on your own.
The benefit of having a group policy ultimately lies with the uninsurable. If you are amongst those that are not healthy enough to obtain a policy on your own, then a group policy is a safe haven that will protect your income without any concern over your previous health history (be sure to review the pre-existing clause in your group contract).
Ultimately, when a disability occurs you want to make sure you have the best policy in place that pays in the most scenarios and pays the most dollars. To have your group policy reviewed or to learn about options for supplementing your group plan, click the Our Experts tab and contact one of the National Experts.
Most employers offer benefits as a way to acquire and retain good employees. These benefits can include anything from retirement plans to group insurance benefits. One of these benefits might include group long-term disability insurance.
In one of our previous blog articles, we discussed the importance of having long-term disability insurance and how it helps protect your ability to earn a paycheck. Though many of us have group benefits, there is a good chance that we didn’t spend the time to actually read through what is actually being given to us.
Most group disability insurance programs have a few gaps that most of us aren’t aware of. Please keep in mind that this does not represent all group plans and you should visit with your advisor to hash out the details of your own group policy. Below we will discuss some of the most common features of a group policy. Due to length, we have broken this discussion into two parts. Part 2 will be provided in a separate posting later in the week… this is Part 1:
The Definition: One of the most important features to analyze in a disability policy is the definition of disability. The definitions can vary widely but these are the most popular. 1) Any occupation 2) Regular Occupation for 24 or 36 months.
1) This definition says your benefit will only be paid if you cannot work in any reasonable occupation for which you are educated and qualified.
2) This definition says your benefit will be paid if you cannot perform the material and substantial duties of your regular occupation. After a period of 24 months, you will then receive benefits if you cannot work in any reasonable occupation for which you are educated and qualified.
The issue with these definitions might not seem so clear at first, but for a highly trained professional this is very important. Your ability to do exactly what you do on a daily basis along with your intellectual capital is not protected in the first example. In the second example, it is protected only for a 24 month period. Ultimately, if your disability lasts for an extended period of time, you will be forced to work in another capacity even if that new occupation does not pay you as much.
Taxation: Most group benefits are paid for by the employer. Ultimately this will mean your benefits are going to be taxable once received. A typical group policy will pay anywhere from 40-60% of your monthly earnings in benefit. Let’s say, for example, the benefit is 60% of your $100,000 salary. This will result in a $60,000/yr benefit. However, this will be taxable at your normal income tax rate so the amount of income received will be less.
Benefit Cap: A group policy will typically have a Benefit Cap that will limit the amount of benefit you can receive. So if your annual income is $150,000 but your benefit is 60% capped at $5,000 then your benefits will be limited to $5,000/mo or $60K/yr, which then will be taxable.
Part 2 will be released on Monday, Oct 17th. For more information on group disability insurance or to receive instant quotes on private individual coverage, click below to
Most insurances seem to be pretty important, especially when they might be required (like Auto Insurance). Insurance is a great way to protect you and your family against the perils of life that could significantly impact you financially. Health Insurance can protect you against the catastrophic medical bills that you might incur, home owners insurance protects your home and its belongings from disaster. All of these things we protect are important, but we are often asked what insurance is the most important when putting together a protection strategy.
To answer that question, you have to understand what a person’s most important asset worth protecting is. Could it be our home? What about our retirement or pension? In all likelihood these assets are important but they are NOT your biggest asset. Your ability to earn a paycheck and show up to work every day, truly, is your biggest asset. Think about… if you couldn’t go to work and earn a living, would you be able to afford your house or fund your retirement?
A 30 year old making $50,000 a year (assuming a 3% annual increase) will earn just over $3 million before they retire. This doesn’t consider promotions, bonuses, etc yet this person is still worth over $3 million in their lifetime. (Courtesy of the Future Earnings Calculator)
Disability insurance protects your ability to earn a living even when you physically cannot. Whether due to illness or injury, if you cannot work for an extended period of time then disability insurance will protect not only your income but the things in life that your income represents. It will protect your dignity.
To learn more about disability insurance and its features, click the HOME tab. You will find 3rd party sources of useful information, Facts About Disability, educational videos, as well as instant quotes for your specific occupation.
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