How Much Disability Insurance Do Physicians Need?

As a physician, you have many people relying on you – your patients, family, nurses and support staff. What happens if you experience an unexpected disability that makes you unable to work?

Disability insurance is a crucial risk management strategy that every physician should have in place. It provides an income stream should you be unable to work due to an accident or sickness. But, how much disability insurance do you actually need? The answer depends on several factors.

#1 – Income replacement needs – What percentage of your income would you need to replace if you were unable to work? Consider all of your expenses –mortgage, student loan payments, medical expenses, car payments and transportation expenses, groceries, bills, children’s school tuition, etc. Your coverage amount should be adequate to cover these monthly expenses. If you have lower monthly expenses, you may only need to replace 60% to 70% of your income. If your expenses are higher, you may require greater coverage.

#2 – Existing coverage – Consider any additional coverage offered by your employer or other sources. This can help lower the amount of additional coverage you need. Remember, however, that many group policies only provide coverage for a limited amount of time. You may need additional disability insurance to provide income replacement for a longer period.

#3 – Emergency savings – Disability insurance is intended to provide supplemental income should you become unable to work. The amount you hold in emergency savings can impact how much income you need. If your emergency fund is inadequate to cover three to six months of living expenses, you may need a higher level of coverage than someone with more savings.

#4 – Future earnings – If you are in the early stages of your career and expect your earnings to increase over time, it’s important to ensure your disability insurance is adequate to meet your future income needs.

#5 – Retirement savings – Keep in mind that if you’re not working, you’re likely not contributing to your employer-sponsored retirement plan or IRA. Retirement savings is an important part of your long-term financial health, so consider choosing a disability coverage amount that allows you to continue making regular retirement plan contributions.

#6 – Waiting period – Another important consideration is you disability policy’s waiting period, or the amount of time it takes for benefits to kick in after you become disabled. While a longer waiting period can result in lower premiums, you’ll want to ensure you have adequate emergency savings to cover your expenses before your benefits kick in.

Regardless of the coverage amount, it’s important to have “own occupant” coverage in place. An own occupant policy provides benefits if you can no longer perform the functions of your job, even if you’re capable to working in another field.

It’s also important to have specialty-specific coverage in place. For example, if you are a transplant surgeon who becomes disabled and unable to perform transplants, specialty-specific coverage will kick in, even if you’re still able to perform other types of general surgeries. Without this specialty-specific coverage, you may be ineligible to receive benefits since you’re technically still able to operate.

Insurance, much like estate planning, is not a topic many of us like to consider. No one wants to think about a potential career-ending accident or sickness, especially physicians who have worked so hard to get to where they are today. However, there’s no better time than now to ensure you’re properly covered. Unfortunately, once you have been involved in an accident or become seriously ill, it’s often too late to implement coverage. Don’t wait to protect yourself, your family and your practice with a disability insurance policy that meets your needs.

Could you use some help getting started? Contact me to schedule a complementary consultation. I look forward to helping you implement disability insurance coverage to protect your future.