If you’re a doctor or dentist, you’ve likely heard about the need for disability insurance. And working in the medical profession, you understand why. But how much disability insurance do doctors and dentists really need?
As a medical professional, you have invested a lot in your career and the income it will provide. Disability insurance helps protect that income. If you become disabled, how much of your income would you want to protect? Some people may think 60 percent is enough. But consider if you were asking the same question about homeowner’s insurance. If your house burned down, how much of it would you want to replace? Sixty percent, or all of it? Chances are, you’d want to replace all of it.
The same goes with disability insurance. Very likely, you’ll want enough coverage to replace as much of your income as possible. Below, we answer some frequently asked questions about disability insurance for medical professionals.
HOW MUCH DISABILITY INSURANCE CAN I GET AND WHEN CAN I GET IT?
Many doctors first buy disability insurance when they are in residency. When you’re in residency, you may be able to get a policy that will pay a monthly benefit that would replace a little more than you’re making. That’s because your salary is likely to increase substantially. As you make more, you’ll likely want to increase your disability insurance benefit as well. With that in mind, it’s a good idea to get a policy that offers an additional purchase benefit, which will allow you to buy more disability insurance without having to take another health exam.
HOW WILL YOUR POLICY WORK IF YOU MAKE A CLAIM?
In addition to considering how much disability insurance to get, it’s important to consider how your policy will work if you need to make a claim. Not all policies are alike.
First, make sure your policy defines disability based on your medical profession — believe it or not, some policies will only pay you if you can’t work in any profession. Then, ask how many pathways there are to qualify for total disability. Many policies define total disability only one way. But some offer two paths, which can give you more options, particularly in a situation where a disability prevents you from doing a portion of your job, but not all of it.
WILL YOU OWE TAXES ON YOUR BENEFIT?
When you’re considering how much disability insurance to buy, a key consideration is whether you’ll owe taxes on your benefit. If your benefit is taxed, which typically happens when your policy is part of a work benefit, you’ll obviously want a high enough benefit to pay the taxes and still bring home similar take-home pay. If you have an untaxed benefit, which you usually get with private insurance that you buy outside work, you only need a benefit large enough to cover your take-home pay, not your full salary.
HOW MUCH WILL YOUR COVERAGE COST?
Another factor to consider when you’re trying to figure out how much disability insurance you’ll need is how much your policy will cost. Ultimately, the cost is based on things like your health and the amount of coverage you get. But you have some options that can affect how much you’ll pay. If you want to save money now, you can get a policy with premiums that increase over time. That allows you to pay less up front in exchange for paying more in later years. If you want more certainty in your payments, you can get a policy with level premiums. Initially you’ll pay more, but in later years, you’ll save money.
When you’re ready to talk to someone about your disability insurance, one of our financial advisors would be happy to walk through options that make sense in your situation and show you how disability insurance connects to your larger financial plan.