Below you can find definitions for the many terms that may be used when discussing disability insurance or found within your comparison summary.
Definition of disability: The inability to perform the material and substantial duties of ANY occupation for which you are suited by training, education, or experience. This includes the ability to pick up a phone, so as you can imagine, this is one of the broader definitions of disability.
Length of time that the disability carrier will provide you protection. This is also the length of time that you could be on a disability claim and receive your monthly benefit. In most cases, we set up our policies with a benefit period to age 65. This means you will have protection until age 65, so if you were to go on claim and continue to be unable to perform your occupation, you will receive your monthly benefit until age 65.
Another word for Insurance Company. Given that we are independent, we work with all of the major carriers for each of the insurance products we help with. On the life insurance side, we have access to hundreds of carriers. Based on your needs and particular situation, we will help match you with the right carrier for you.
On the disability side, there are ONLY 5 carriers that offer the true double-dip, own-occupation definition of disability.
If you have heard of a carrier and they are not listed, it’s because they only offer a variation of that definition of disability we look for.
If you experience a disability/injury that results in time away from work or loss of income, you will want to file a claim with the disability carrier. We are not allowed to be part of the claims process, but we will help you get the process started and update you along the way. You should file your claim as soon as possible to start the elimination period.
Cost of Living Adjustment (COLA)
The COLA feature allows your monthly benefit to keep up with inflation while you are on a disability claim. There are varying levels of COLA (3%, 0-3%, 0-6%, 2-6%). At a minimum, we typically add 3% COLA to every disability policy. This means that once you go on claim, your disability benefit will increase 3% per year to keep up with inflation (allowing you to buy the same amount of “stuff” with your disability benefit as things around you get more expensive due to inflation).
The amount paid to a beneficiary upon the death of an insured person.
Definition of Disability
This is one of the most important aspects of a disability insurance policy. The definition of disability is what determines whether you are considered “disabled” under the contract, and therefore if you are eligible to receive the monthly disability benefit. There are several definitions of disability out there including True Own-Occupation, Own-Occupation, Modified Own-Occupation, Transitional Occupation, Regular Occupation, Total Disability, Catastrophic Disability, etc.
As a physician, there is only one definition of disability you should be looking at - True Double Dip Own-Occupation. This is the strictest definition of disability for physicians offered by ONLY 5 carriers. The definition goes beyond your specialty and protects your daily duties at the time of disability, regardless of if you are able to do something else.
The Double-Dip element within the definition of disability is what allows you to still earn an income while on disability claim. For example, if you could no longer perform your regular daily duties, but you wanted (and were able) to re-train for another specialty or work in another occupation altogether - any income you earn will NOT offset the monthly disability benefit you are receiving.
Essentially, if you choose to do something else, you are NOT penalized by the disability insurance company for earning other income.
Enhanced Medical Own-Occupation
As a physician, if more than 50% of your income is earned from Hands-on Patient Care or Surgical Procedures, you will be considered totally disabled even if you are gainfully employed in your practice or another occupation so long as, solely due to injury or sickness, you are not able to provide those Hands-on Patient Care or Surgical Procedures.
Hands-on Patient Care - Meeting with a patient in a clinical setting for the purposes of providing medical advice, evaluation, diagnosis, or treatment, that you regularly and personally provide during the 12 months prior to your disability.
Surgical Procedures - Medical interventions involving an incision with instruments performed by you in a clinical or hospital setting normally involving anesthesia and/or respiratory assistance, that you regularly perform, during the 12 months prior to your disability. These procedures can be performed on either an inpatient or outpatient basis. Providing hypodermic injections, in itself, is not a surgical procedure.
After we apply and go through the underwriting process, carriers will come back with their offer. Most of the time the only changes from what we apply for are exclusions. Exclusions are a specific body part or circumstance for which the disability carrier would NOT pay out a disability benefit.
For example, let's say 3 years ago a doctor broke their elbow and had to have surgery with plates and screws. When that person applies for disability insurance, they may get approved for coverage with a left elbow exclusion. This means that the disability carrier will cover any and all disabilities, except those arising from said left elbow. In most cases, carriers will also allow a reconsideration period. This means that perhaps in 3 years if no further issues arise from the left elbow, the physician can apply to get the exclusion removed from my policy.
A common misconception with disability exclusions is that they will not cover a previous injury (like the elbow in the previous example) under any circumstance. What if the person was in a car accident? Would the left elbow be covered? The answer is likely yes, the elbow will then be covered. The exclusion is only placed on the left elbow for problems that are related to the original injury. If the person were to later be in a car accident that likely would have broken anyone's elbow, they would be covered.
Future Purchase Option
This rider can have a couple of names depending on your disability carrier, but it refers to the ability to increase your disability monthly benefit in the future with NO medical questions asked. This is important because it gives you the ability to secure coverage when you are younger (and likely in better overall health), and increase in the future regardless of if you have had a change in health.
Insurance carriers can only insure you to a certain amount based on your income. Most disability carriers will allow you to increase your disability benefit up to $20,000/month (tax-free).
At Twin Oak Advisors, we will follow up with you to help increase your policy when the time comes. The most popular time to increase your disability policy is when you transition from training to practice in order to protect your new, higher income.
Every disability policy that we look for is guaranteed renewable, meaning that the insurance carrier can never cancel the policy or change the terms of the contract as long as you continue to pay your premiums (cost).
Lock Current Rates for Future Purchase
If at the time you pick up disability coverage, your policy has a discount attached to it (like a training discount of 20-30%), when you go to increase coverage after training, the insurance carrier will add your discount to any additional coverage you pick up in the future.
Mental Nervous Benefit
A clause of the disability policy that will provide a disability benefit based on a mental nervous and substance abuse claim. These are claims based on depression, anxiety, bipolar, substance abuse, etc.
Most carriers will only cover mental nervous claims for 24 months, after which you need to be hospitalized in order to continue to receive benefits. A few carriers will cover mental nervous claims for up to the entire benefit period. If this aspect of the policy is particularly important to you, please let your risk management specialist know and we will point those carriers out to you.
The inability to perform the material and substantial duties of YOUR occupation at the time of disability, and not working in another occupation. If you do choose to work in another occupation, your disability benefit is offset by your new income.
One of the main drivers of the cost of disability coverage. Depending on your specialty when you originally apply for coverage, you will be placed in an occupation class with that carrier to help determine the price. This is why Carrier A might be much cheaper than Carrier B for essentially the same coverage. Each carrier has its own way of sorting occupation classes and specialties.
It is important to remember, that if you pick up coverage as an internal medicine resident, the price for your occupation class will be relatively cheap. But if you continue to specialize and become a Cardio EP physician, your daily duties and the definition of disability for your policy will change, but your occupation class will be the same based on when you originally picked up coverage.
For example, let's call the Internal medicine resident mentioned above who kept specializing Person A. If Person B waited to pick up coverage until their Cardio EP fellowship, they would have the same protection as Person A. However, since the occupation class of Cardio EP is more expensive than Internal Medicine, Person B will be paying more than Person A for the exact same coverage.
This is one of the many reasons why we suggest picking up coverage as a PGY1, and also touches on a common question we receive - "why does my colleague pay less?"
Partial (Residual) Disability
3/4 claims are considered partial disability claims, meaning you can still do most of your daily duties but are limited in terms of workload (think something like a back injury or severe migraines). If something occurs that results in a partial loss of income due to a disability, you will qualify for the same percentage of disability benefit - i.e. 50% loss of income = 50% of your disability benefit.
An important differentiation between most employer or association policies and private policies from the 6 carriers we look at is that a residual benefit does not require that you are totally disabled for the entire elimination period before qualifying for a partial claim. Most employer or association policies require that you are first totally disabled for 90-180 days, THEN you can qualify for a partial claim. This is a fairly significant difference.
The amount of money that you have to pay for your insurance policy. You can pay this monthly, quarterly, or annually. The less frequent the payments, the cheaper the cost (only slightly though).
Price Per $1,000
When looking at your comparison summary, it is sometimes easier to use the cost per $1000 to compare companies if companies are offering varying benefit amounts. Price per $1,000 means the cost per month per $1,000 of disability benefit.
Most of the time, this happens if an already practicing physician is looking to pick up coverage. The amount you qualify for is based on your income, employer coverage, and any private coverage you might already have in place. Each carrier will offer roughly the same amount, but they might vary slightly in benefit amount. Using the cost per $1,000 allows you to compare companies evenly, regardless of the benefit amount offered.
If you are still in training, this section might not matter much to you. While in training, all 5 carriers will offer the same $5,000/month of benefit, so there isn’t a huge need to compare based on price per $1000.
Often tied with the residual benefit rider, the recovery benefit rider continues to pay you a benefit once you return to work due to a continued loss of income until you are 100%. Oftentimes, when someone goes on a disability claim, they are eventually able to return to work, but in a limited capacity. Once you continue working, the recovery benefit will allow you to continue to receive a portion of your monthly disability benefit for the continued loss of income since you are not yet back 100%.
An added feature to your disability policy that enhances your protection. A few of the riders are automatically included in your disability policy, and others we add on. All of the riders that you see on your comparison summary from us and on the disability page are included in the cost.
The inability to perform the material and substantial duties of YOUR occupation at the time of disability, regardless of if you choose to work in a broader specialty or different occupation. Your new income plus your disability benefit may not exceed your pre-disability income. If your income plus disability benefits exceed or match your pre-disability income, your disability benefit will be reduced.
A non-obligation application that enables you to obtain a formal offer from the carrier that’s best for you. This offer is based on the quotes provided to you by your agent. You have no commitment on your end when applying, but you may only apply with one carrier at a time.
Your agent will provide you with an encrypted form that will contain the key pieces of information necessary to pre-fill a Trial Application.
True Double-Dip Own-Occupation
The strictest definition of disability for physicians and ideally the definition you should be looking for. The definition of “True Double-Dip Own-Occupation” disability is "the inability to perform the material and substantial duties of YOUR occupation at the time of disability, regardless if you choose to work in a broader specialty or different occupation". The double-dip portion refers to the ability to earn an income while on a disability claim.
Given that this is one of the most important aspects of disability policy, we have an entire blog post dedicated to it! Check it out here.
Once you choose which carrier is best for you and sign your application, you will move on to the Underwriting Process. Depending on what you are applying for (life insurance, disability insurance or long-term care), the process is slightly different.
Generally you will have to complete:
A tele-interview that should only take 20-30 minutes regarding your medical history.
Labs - we will schedule a 3rd party to meet you at your house or workplace to get this completed (no cost on your end). Depending on the disability benefit being applied for, you may not have to complete labs.
We will help you through the entire process and give you the numbers to call and schedule on your own time. If you have questions about the underwriting process, please don't hesitate to ask your specialist.
Waiting Period (Elimination Period)
The amount of time with a loss of income due to a disability that must pass in order to start receiving your monthly benefit. Options may include a 60, 90, 180 or 360 day elimination period.
Considering cost and risk, a 90-day elimination period is the sweet spot. Anything shorter than 90 days, you can reasonably self-insure by building up an emergency reserve, so no need to pay an insurance company for that. Anything longer, you would have to at least double your emergency reserve making the additional risk not worth the slightly cheaper price for a longer elimination period.