October 9, 2012
A new client recently asked me a question about disability insurance. I referred her to a that I had written a few years ago. But her question prompted me to revisit the inner workings of disability insurance, so I would like to share with you my latest thoughts and recommendations.
1. Purchase a policy that is non-cancelable/ guaranteed renewable. This type of policy cannot be changed by the insurance company. Policies that are not guaranteed are typically group policies.
2. Only consider purchasing what is called “own occupation”. In the event that you are disabled and cannot work as a dentist, with this type of policy you can earn income from other sources yet still be able to collect your full disability benefits. This is a more expensive policy, but if you don’t buy this type of coverage, income earned from other sources will be deducted from your benefits.
3. With “own occupation” coverage, you are basically insuring your career–all the money, hard work, and years of education that it took for you to become a dentist. Why wouldn’t you want to insure that to the fullest extent possible? In fact, with “own occupation” coverage, if you become disabled, you still retain the option of ownership of your dental practice
4. You want your policy to pay residual or partial benefits if you are still able to perform some duties as a dentist, but not all duties.
5. Be sure that mental/nervous disorders are covered. Most policies don’t cover this for dentists.
6. Keep coverage relevant to your current income–not what you were earning 5, 10, or 15 years ago
7. You absolutely must have an office overhead expense policy in addition to your disability coverage. Disability coverage is designed to cover your fixed personal expenses–mortgage, college tuitions, student and/or business loans, etc.
8. Avoid shopping for price. When you buy disability insurance, you are buying a promise. If it is cheap coverage, it is probably a bad promise.
According to everything that I read, it is not only possible–but probable–that a dentist will become disabled before the age of 65. That being said, it is so important to have the proper coverage. I strongly advise having a disability insurance expert review the contract language in the policy. These contracts can either be written in your favor, or in favor of the insurance company. Your choice!