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. Getting a disability insurance quote means that you are covered in the event that you are involved in a life-changing accident or illness. 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