If you’ve looked into disability insurance (DI) or received mail from the American Medical Association (AMA), you may have seen that they offer a disability policy. And for anyone who has researched DI, it doesn’t take long to realize that the AMA coverage is significantly cheaper than other policy options – sometimes as low as one-third of the cost of other carriers. But why?
The low premium is not just a perk of being a member of the AMA, and the plan is actually designed to help supplement individual, private disability policies, not stand alone as complete coverage. Keep reading to learn more about the policy and the importance of looking beyond the premium when choosing disability insurance.
ABOUT AMA DISABILITY INSURANCE
WHO OWNS THE POLICY?
The first thing to understand about AMA DI coverage is that it is a group policy owned by the association. If you’re not sure what this means, we encourage you to take a look at our other blog post on the difference between group and private disability coverage. Simply put – because AMA owns the policy, they control it. This means that the policy can be changed, canceled, or have premiums increased by the insurance company at ANY policy anniversary.
So, while the initial premiums with AMA are generally much lower than a typical private physician disability policy, that price only applies for the first year. In the second year, premiums usually increase by 15-35% and are scheduled to increase at regular intervals thereafter (typically every 5 years).
However, with true own occupation/private physician disability insurance, YOU control the policy and the premiums are locked.
DEFINITION OF DISABILITY MATTERS
The way disability is defined is a key factor when comparing disability insurance policies, particularly with group vs. private. The AMA policy does not use the True Own Occupation definition of disability, instead using Modified Own Occupation.
This definition of disability means that if you are able to work at all (even outside of your specialty or the medical field) while on disability, you will not qualify for your full benefits and they will reduce your benefits by the amount you earn doing something else. You will need to be completely disabled (unable to work in ANY occupation) for the entire elimination period (waiting period) to qualify as disabled and file any type of claim, even for partial disability.
For example: We had a client who was a surgeon and unfortunately developed ALS. His disability insurance policy was through the AMA and he assumed would cover him since he was no longer able to practice medicine. But because the disease had not progressed to a point where he was unable to work in any occupation (i.e. answering phones, taking orders) for the elimination period (90 days), he did not qualify for a claim under the AMA’s definition of disability.
This would not have been the case with a private physician disability insurance policy, which is why we recommend all physicians pick up individual coverage. Under these policies, even with a partial claim, you do not have to be completely disabled to be paid your benefit. Instead, a decrease in pay of 15-20% during the elimination period due to a disability would make a physician eligible.
A FEW THINGS TO NOTE
- The AMA future purchase option can only be used once within the first 3 years of the effective date and expires at age 40. With individual private policies, it can often be utilized each year until age 55.
- Mental/nervous and substance abuse disabilities are limited to 24 months with the AMA policy. Some individual plans give you the option to have no M/N exclusions.
- The AMA policy does not offer a Recovery Benefit. Ideally, once you recover and are no longer under doctor's care, you would continue to receive a loss of income benefit in order to rebuild your client base and revenue stream. However, the policy will not pay a residual benefit to help with your income loss. Individual policies will generally pay a partial benefit if your income loss is 15/20% (depending on the carrier).
- Typically, if you see something that is significantly cheaper than other carriers, it is likely for a reason. Anytime you come across a quote and are curious, we are happy to review it for you and let you know what difference the might be.
You’ve likely heard that if something appears too good to be true, it probably is. And with disability insurance, if you find a policy that is significantly cheaper than other carriers, there’s likely a catch. We are more than happy to review any quotes or DI policies and explain what the key differences may be.
If you are interested in a no-obligation comparison summary of all 6 insurance carriers that offer private policies using the True Own Occupation definition of disability as mentioned above, you can request a quote below.
If you have any questions about disability insurance, one of our experienced insurance specialists will be happy to help. You can also visit our definitions page here for clarification on several of the terms used when talking about disability coverage options.