Do You Need Disability Insurance?

My former employer offered short-term as well as long-term disability insurance to all of their physicians. Many doctors still purchased their own supplemental disability policy at the time of getting hired, or they had it carried over from residency. I want to answer the question of whether you need disability insurance. It’s important to discuss, especially given how expensive a solid policy can be.

I am opposed to carrying insurance just in case. Insurance is a cost, a liability, and as such it should be considered from a financial and not emotional perspective.

DISABILITY INSURANCE OVERVIEW

Most of us are familiar with short-term and long-term disability, not so suitably named, STD and LTD. The former covers you for a few months in hopes that your disability may resolve, while the latter covers you for several years after your disability and often up until age 65 or longer.

Most jobs will offer you STD coverage that’s pretty solid and will offer you a group LTD policy that’s generally a bit anemic.

My employer is large enough that they underwrite their own STD. They combine FMLA, sick leave and vacation to get you paid through the STD period which is 6 months. After that you will get automatically bumped into the LTD, underwritten by a large independent insurance company, The Hartford.

Qualifying for long-term disability based on your medical problems isn’t terribly hard, if there is a valid enough reason and you have independent physicians or other healthcare professionals confirming the need for disability then you are good to go.

LTD pays somewhere in the ballpark of 60-80% of your pre-disability wages. If you made $10k/month of gross income then you would get $6-8,000/month of gross income from the LTD insurance company.

My policy has a maximum monthly payment of $10,000 per month. It’s important to take this into consideration because I am easily taking home $18,000 per month when I work full-time. Would I want to pay an extra $700/month for an individual supplemental policy to get a potential income of around half of my income?

IS YOUR JOB’S GROUP LTD POLICY ENOUGH?

For the most part, the larger medical groups offer you fairly decent policies but a group policy will always be more barebones than an individual policy. 

The more specialized your work, the more likely that a group policy will fail you. In these circumstances, a supplemental individual policy might make sense which could set you back at least $500/month.

You can review the policy your job provides you with a disability broker and they will let you know what other riders you might need, usually for a free consultation.

The things that cost the most are the things that are often left out or left as “vague” in workgroup policies.

For example, as an urgent care doctor, I need to do a fair bit of procedures which I probably couldn’t do well with severe carpal tunnel syndrome. But because my employer or my industry could have me to telemedicine or family medicine using dictation software then I may not be eligible for LTD. This is the “own occupation” rider that many of you have heard about.

The next popular one that group policies skimp out on is the cost of living adjustment, COLA. If you are disabled for 20 years and you are still getting $6,000/month in your disability payments then the purchasing power of that money is drastically reduced due to inflation, which rises with time. A COLA rider helps increase your monthly premiums in accordance to annual inflation rates.

Depending on the policy you have, it’s important to assess whether you need your own supplemental individual policy in order to be adequately prepared for a potential disability from work.

No matter how many articles you read, this is definitely a situation where you need to consult with someone in-person or on the phone to make sure you have all your bases covered.

WHO NEEDS DISABILITY INSURANCE

If you can’t afford to pay for your lifestyle which is supported by your employment income, then you need disability insurance. Suffering from a short-term disability is quite common, LTD is not as common according to labor statistics – unfortunately the latter can be devastating if you didn’t consider it.

You are more likely to suffer a disability as you get older, perhaps this is a good argument for focusing more on building up a retirement stash early in your career. Furthermore, you are able to access your retirement accounts without penalty if the disability is going to be permanent.

If you have a family to support, debt to repay and a household to run, then a disability insurance policy can help you continue living the lifestyle you are accustomed to should disaster befall you.

Some private student loan issuers are now discharging your debt in case of total and permanent disability (TPD)- oh, and some are even discharging your debt in case you die… because who wants Navient knocking on your grave asking you to pay up.

Federal student loans have had this system in place for some time and will discharge your federal student loan debt in case of total and permanent disability.

WHO DOESN’T NEED DISABILITY INSURANCE

If you have another spouse that earns income or are able to downsize your lifestyle enough that you can get by on one person’s income then you may not need disability insurance.

You may have enough in your savings and investments that you could cover your monthly overhead without needing to pay for a monthly disability premium. This is the concept of being able to self-insure.

Your household expenses might be so low that social security disability insurance (SSDI) payments might cover it. You can apply for federal disability through the social security website. Quite often, even if your LTD kicks in, they will require you to apply for SSDI and cut your LTD payments according to however much you will get from SSDI.

You can review how much disability payments you would qualify for by logging on to your my-social-security account online.

I DON’T NEED DISABILITY INSURANCE

There are several reasons I no longer need disability insurance. The main being that I am financially secure enough that my savings and investments should allow me a comfortable lifestyle even with zero income. My current investments can make me enough money to support my lifestyle.

I also have other means of generating income in case of partial physical disability. As doctors we have seen many of our patients present with various disabilities as I will list below. Few are totally disabled.

I can also apply for SSDI which will pay me $2,420/month (as shown in the screenshot above) based on my previous earning history. This income is generally not taxed and it comes with the benefit of qualifying for medicare.

HOW HARD IS IT TO QUALIFY FOR DISABILITY?

There is a big misconception out there that it’s damn near impossible to get approved for disability, that most don’t qualify and will spend their remaining years fighting their cases in and out of court.

The answer to the question in the heading is “The first time you apply you most certainly gonna get denied”. I wouldn’t recommend applying for your disability yourself, this is the few times when a lawyer is well worth the initial investment, particular if you think your disability will be a long-term situation.

Private insurance groups are much less likely to fight you on a fairly legitimate disability claim, though they can request an independent medical evaluation.

When it comes to SSDI, you can apply and get rejected, request a second audit review and still get rejected, and finally apply again for a judge to hear your case – at this point it’s quite unlikely to get denied.

ANECDOTAL PATIENT DISABILITIES

I have very few patients on disability in my Portland, Oregon medical group. I’m one of those weirdos who asks “who do you live with at home? How do you spend your day being productive?”, so I have a good idea of what my patients do for work or income.

In San Diego, California I had an absurd number of patients on disability. I’m sure it had to do with easier access to shady lawyers who can get a professional athlete approved for disability and the higher competition for jobs in that State. The conditions I recall most are as follows:

• back pain
• diabetes
• hand numbness
• carpal tunnel syndrome
• migraines
• depression
• schizophrenia
• obesity
• knee arthritis
• rheumatoid arthritis
• seizure disorder
• blindness
• cancer
• COPD
• fibromyalgia
• chronic pain
• chronic fatigue syndrome

There is an even more exhaustive list on this site. The point here is that a disability is completely subjective and it’s the supporting documentation and circumstances which make the case.

THE INSURANCE GAME

I want to briefly touch on this because I think it will become a bigger issue in the future. Currently, insurance companies are some of the most powerful lobbyists and create an insane amount of revenue.

The simple reason is that a lot more people insure themselves out of fear for the unknown but end up never having to call upon their insurance company to pay out.

The roadblocks in getting an insurance company to pay are overlooked by most of us simply because we are most often on the paying end of the debate and not the receiving. They deter you by having complicated and vague legal documents, tons of jargon, a tedious application process and they block you by denying your claims.

My personal experience with insurance in the past has been:

• broke a cell phone which I had insured – denied
• stolen bicycle part which was supposed to be covered because I used my visa credit card to make the purchase – denied
• taking my insured furry one to the vet – basics covered, everything else denied
• years of dental insurance payments – most claims ended up being minimally covered by the insurance company (<20%)
• auto rental liability insurance which I had through my credit card – at first dissuaded after reading lengthy legal wording, applied anyway, got full payout!

Insurance companies – 4, Dr. Mo – 1.

In my lifetime it has become mandatory to have auto insurance and now it’s now mandatory to have health insurance. It’s for our protection, of course, not because there is money changing hands.

And though there are ways to get around mandatory auto insurance and even health insurance, it’s a game that’s best played by those with a lot of free time and keen attention to detail.

If disability insurance becomes the next mandatory insurance to carry it’s best to start learning about it now and setting yourself up to forgo it if you absolutely don’t need it.