The completion of dental school (or residency) brings a whole bunch of changes and new responsibilities. As this blog has made clear many times before, there are several financial changes a new grad must deal with. One of those financial questions new grads are often confronted with revolves around disability insurance. While not exhaustive, I’ll attempt to give a few tips on disability insurance in this article.
Disability insurance (DI) is one of the most important insurance policies you will purchase. It pays you a monthly benefit in the event you become too sick or hurt to work. DI tends to be one of the more expensive insurance policies that a dentist will own over the course of their career. If you are issued a policy, it’s generally not a good idea to get rid of it or replace it with a different carrier. So unlike car insurance that you can change each year, you may end up owning your same disability insurance policy for 35 years or more! So it’s really important to make a good decision on the policy you purchase. It is always better and usually premiums are less expensive when you are young and healthy. Here are a few considerations.
- Can the insurance company change things? Some policies give the insurance company leeway to raise rates, remove benefits or stop covering you all together. While this is more common with employer provided coverage and association policies, it’s still a good idea to make sure you are aware if this is the case. These policies are typically much less expensive but they give the insurance company much more flexibility (which may not be good for you).
- What is the definition of being “disabled”? – This is the most important feature of the policy and this can vary by the issuing company and/or by the policy(ies) they are offering. If you can’t perform surgery but you can still teach dentistry, does that mean you are disabled? The answer depends on your policy language. So make sure you ask about this and have a clear understanding. Most advisors recommend a “True Own Occupation” definition of disability. This means that as long as you can’t practice your occupation e.g. dentistry, then you are considered disabled even if you decide to go back to work at another occupation e.g. teaching dentistry- and you will still get paid your full benefit. Other examples of disability definition include: Modified own Occ, Medical Occ definition and Transitional Occ definition- all of which are generally considered to pay less money in less circumstances than True Own Occupation definition.
- Is there a mental nervous limitation? Some carriers automatically limit paying benefits on any disability due to mental nervous disorders like depression and anxiety. Make sure you are aware if your policy has a limitation. Ideally, you will have as few limitations as possible on your contract.
- Can you get a discount? Some schools have set up programs with the insurance company to help you get a discount on your disability insurance. Usually you have to apply within a certain amount of time graduation, like 60 days. So make sure you look into this before you miss the opportunity.
- What Riders and Features are available? There are too many to explain here, but know that you will have to make decisions about what features you wanted to have on your policy. Some of those include the ability to buy more coverage later on without medical underwriting, cost of living adjustments, lifetime benefit periods, partial disability benefit riders and even insurance for your student loans.
Hopefully that helps you make better disability insurance decisions.
~Ryan Schulte, financial advisor
Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. This material contains the current opinions of the [author/presenter] but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS).OSJ: 750 B Street #2740 San Diego, CA 92101 ,612-746-2200. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. WestPac Wealth Partners, LLC is not an affiliate or subsidiary of PAS or Guardian. CA Insurance Lic. #0F03557 | Guardian and its subsidiaries do not endorse or have any direct or indirect responsibility with respect to this activity | 2016-23862| exp 05/18
Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of The Guardian Life Insurance Company of America (Guardian), New York, NY. Product provisions and availability may vary by state.
About Ryan Schulte
Ryan Schulte is a financial advisor who focuses his practice on Dentists. He works with young dental professionals that are transitioning in their careers and helps them manage their student loans, understand the insurances they need and how to design them, how to investment money without speculating and gambling, what it means to be an independent contractor and a business owner, understand their tax situations and a variety of other issues unique to dentists. Ryan lives in the mountains near Yosemite with his wife and 5 boys on 4 acres that they affectionately refer to as the “The Schulte Farm.” Ryan serves on a community development council dedicated to redeveloping an industrial zone in Madera County. He also coaches little league and enjoys hiking, brewing beer, playing softball and soccer. His contact info can be found at www.ryanschultecfp.com.