For many healthcare professionals in the early years of practice, professional skill and its resulting future income is a primary and oftentimes fragile asset. Understandably, a healthcare career path may begin with tens or hundreds of thousands of dollars of debt; the first of several factors that can work toward a delayed start to investing for the future. Early on, these young doctors may appear to lag behind their peers from a financial standpoint. However, healthcare professionals typically will earn higher than average compensation and amass more assets by mid- and late career. Nevertheless, during the early years the biggest financial risk lies in a reduction or loss of income.
What is Disability Insurance?
Disability insurance is a risk management product designed to protect from loss of income after a disabling event. Disability insurance pays a percentage of the policyholder’s income for a set period of time if unable to work or experiencing a reduction of income from a disability. SYM Financial Advisors does not sell or receive profit from the sale of disability insurance or any other product, insurance or otherwise.
Who is at Risk?
According to the Social Security Administration (SSA, 2018), 56 million Americans, that’s one in five, currently live with some type of recognized disability. The SSA goes on to estimate that for today’s 20-year-olds, more than one in four may become disabled before reaching retirement age.
Disability can occur as a result of trauma or health events: back injuries, cancer, mental illness, and vision loss are just a few common causes. As a healthcare professional diagnosing and providing treatment, these statistics probably ring true to you. Unfortunately, healthcare professionals are not excluded from the likelihood of a disabling event, and they also may not observe the financial impact that disability can have on an individual.
Should I Rely on Group Benefits and Social Security?
Group benefits are a great start to disability insurance, and healthcare professionals can reasonably expect to receive group or employer-provided coverage within their benefits package. It is common to be offered both shortterm and long-term disability insurance policies that cover 60% of earned income, though check to see if the payout amount is capped, resulting in a payment less than 60%. Additionally, disability insurance paid for by an employer is taxable to the employee at the time benefits are received which reduces take home pay. It may be prudent to consider purchasing supplemental coverage, which can be obtained through an individual policy.
Later in life, Social Security may also provide disability benefits but only under very specific and limited circumstances. First, the recipient must work for a certain amount of time to qualify for disability income under Social Security. Additionally, Social Security has a very strict definition of the term disability, making it difficult to qualify for benefits even when truly disabled.
What’s the Best Way to Protect my Income?
There are several options for even graduating residents to be sure their future income is protected in the event of disability. Some providers offer disability insurance to future graduates with a signed employment contract. Graduating dentists, physicians, and other health care professionals may be able to purchase a unisex policy with a base coverage that can increase with their income. Because many of these introductory policies don’t require medical underwriting, it is always wise to consider accepting this coverage when offered. Once you are denied coverage for medical reasons by one provider, even guaranteed issue policies can exclude you from future qualification.
Because coverage types can vary drastically, consider these essential factors when choosing a policy: the policy’s definition of disability; stated elimination periods; policy riders; and benefit periods. Be aware of your options for upping your coverage when your income changes, and also consider policies with an “own-occupation provision” that protects your ability not just to work, but to work in your chosen specialty.
The role of an independent financial professional is to assist in identifying your existing coverage and current and future insurance needs, then working with (or referring to) a reputable insurance provider to obtain supplemental insurance if deemed necessary. Ensure you choose a financial advisor with a strong understanding of the healthcare industry and a specialization in financial planning for healthcare professionals.
Policyholders can typically expect to spend up to 2% of their annual income on group and supplemental disability insurance. In trade, a properly written and understood policy will ensure that a temporary or permanent loss of income due to a disabling event will not have a destructive financial impact to add to the health challenges you face. Though certainly healthcare professionals in particular, SYM believes that all income-earners will be best served when they are diligent about obtaining and maintaining proper disability insurance coverage.
Ready for an evaluation of your disability or other insurance coverage? Reach out to your SYM Financial advisory team to schedule a discussion, or visit www.sym.com to learn more about SYM.