Broker Check
Do Physicians Need Both Long and Short Term Disability?

Do Physicians Need Both Long and Short Term Disability?

October 27, 2021

Disability insurance is a must-have for physicians because loss of income for any duration has the potential to cause significant financial hardship. Social Security Disability Insurance may come to mind, but nearly two-thirds of initial applications are denied and the average SSDI payment is only $1,259 a month. This type of income protection isn’t sufficient for physicians to make up for lost wages. 

The most common causes* of disability insurance claims are: 

  1. Musculoskeletal disorders like arthritis or carpal tunnel (27.6%)
  2. Cancer (15.0%)
  3. Injuries like fractures and sprains (12.0%)
  4. Mental health issues (9.3%)

Doctors are not immune from back injuries, arthritis, or other illnesses, and disabling events unfortunately happen every day. A simple slip off a ladder could mean that you’re out of work and not receiving a paycheck. Disability insurance exists to replace that lost income and protect yourself and your family. 

Short-term disability insurance coverage is often available through your employer, who may pay all or a portion of the cost for your coverage. Long-term disability insurance policies are also available through insurance companies or independent agents and can cover more of your income. But do physicians need both long and short term disability insurance coverage?

The Basics

A short-term disability insurance policy will start replacing your income sooner than a long term policy, with elimination/waiting periods usually around 7-14 days. These plans typically pay up to 50% of your income and the benefit period is generally around a year or less. This coverage might not be enough to meet your bills or the coverage might be too short to recover from an illness or injury, which is why you may want to supplement employer-based coverage with a personal policy. 

Supplemental, long-term policies may be purchased to cover up to 65% of your income. A long-term disability insurance policy has a waiting period of anywhere from 30 day to 1 year, with 90 days being the most frequently chosen option. Benefits can be paid for a set number of years, or until a certain age (like 65, 67, or 70). 

A big difference in employer-paid and individually-owned comes during underwriting. An employer paid group policy is usually Guaranteed Issue, while individually owned policies include medical and financial underwriting.

Definition of Disability

True own occupation disability insurance is essential for physicians, because it means your income is covered in your specific specialty even if you’re working another job. For example, if a surgeon injures their hand and can’t practice surgery, they would still be considered disabled and receive their full disability benefits, even if they started consulting or practicing tele-health. 

Employer paid, short-term policies almost never offer true own occupation for physicians, instead using a weaker definition of disability. This is a major reason many physicians supplement their coverage with an individual, long-term disability insurance policy. 

Taxation of Disability Benefits

When you purchase an individual disability policy, the benefit payments are structured to be income tax-free. If your employer paid for your coverage, then the income you receive generally will be taxable. If you paid for a portion of the employer-provided coverage, then the pro rata amount of the benefits you receive are structured to be tax-free.

Transfer of Benefits

An employer-paid short-term disability insurance policy often doesn’t move with you if you change jobs. Without an individual plan in place, you could fall into a coverage gap if you change jobs or lose the coverage completely if your new employer doesn’t offer disability insurance. Individually owned policies move with you from job to job, as long as you continue paying the premium.

Do Physicians Need Both?

If your employer pays for most or all of your short-term disability insurance policy, as long as take in the tax considerations, it's great to have that coverage in place. Those plans often miss the mark on true own occupation coverage, which is the most important feature for physicians. You should think about supplementing your short-term coverage with an individually owned, long-term policy to cover more of your income in a more specific way. 

If you are ready to talk about individually owned disability insurance for physicians, we’ve got you covered. We offer own occupation policies with discounts up to 20%, exclusive to physicians. Get your quote today, or reach out for questions or a no-cost review of your current policy.