The Danger of Not Understanding Disability Insurance

CRNA Disability Insurance

I often ask people what their greatest asset is.  Most of the time I get answers like my house, or my retirement account.  Many people are shocked when I reply that these assets pale in comparison to their true greatest asset.

So, what is it?

Your ability to earn an income is your single greatest asset.  Let’s take a hypothetical 30-year-old anesthetist earning $175,000 as an example. If we assume annual raises/ cost of living adjustments of 1.5%, that means their lifetime earnings can be $8,572,394!  That’s a lot of money.

Your income drives everything in your world.  Things like loan payments, funding of retirement plans, travel, education, raising a family, and anything else related to your lifestyle and standard of living would not be possible without your ability to earn an income.

As medical professionals, you have arguably invested much more time, energy, and financial resources into your career than any other profession.  It is important to protect those investments through proper disability income protection.  This should be the foundation of any solid financial plan.

Common Misconceptions

I am careful, so I’m not concerned about accidents

When we think of a disability that would potentially prevent us from working, we often think it would be something like a major accident. However, the reality is almost 90% of long-term disabilities are caused by illnesses not accidents. Think of how many illnesses could prevent you from doing your current job such as cancer, carpal tunnel and other joint disorders, spine and back disorders, MS, vision disorders, etc.

I have coverage through my employer, so I am protected

It is true that many employers offer Long Term Disability coverage as a benefit, but there are many things to consider.  In my experience, many employer plans commonly replace somewhere between 50-60% of your income potentially leaving you with a considerable gap in coverage.

Often, group plans may have a cap on the benefit amounts leaving higher income earners such as Anesthesiologists, CRNA’s, and CAA’s with even less percentage of their income covered. How would you make up for these gaps in income?  These plans vary widely from employer to employer. If you change employers your coverage could be very different from one to the other. 

It is important to work with a financial professional that is familiar with disability income protection to help determine what is covered in your plan and if any gaps exist. Lastly and maybe most importantly, most group plans only offer “own occupation” coverage for 2 years. Individual policies will give you TRUE own occupation coverage for the entire benefit period, to age 65, 67, or to age 70.   

I am covered by Social Security

In order to be considered for Social Security benefits you must have the inability to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment(s) which can be expected to result in death, or which has lasted or expected to last a continuous period not less than 12 months.

In other words, if you are able to earn a paycheck doing almost anything it will be difficult to qualify for this coverage. In my professional opinion, this is a very strict definition of disability.  If one does qualify for benefits, they might be substantially lower than income they were earning, again potentially leaving a considerable gap in coverage.

Important Considerations

When it comes to disability insurance, not all policies and carriers are created equal.  Small differences in policy language can make all the difference in the event of a claim.  It’s important to note that different carriers may specialize in coverage for different occupations.

Some carriers may specialize in coverage for physicians and other medical professionals while others may specialize in blue collar workers. An experienced financial professional can help you navigate this.  Here are some other important coverage options for medical professionals to consider.

Definition of Disability

It is important that you consider selecting a policy with a True-Own Occupation definition of disability specific to your occupation. Some carriers can also have specialty language for certain occupations such as surgeons. There are several widely varying definitions of what constitutes a disability between carriers.

Some policies will even continue benefits if you are disabled under the own occupation definition of disability, but are gainfully employed in another occupation, while others may not. How a disability is defined in these policies is a vital piece of disability coverage, so be sure to work with a financial professional that understands the different definitions.

Option to Increase Coverage in the Future

This optional feature is available with some carriers that allows an individual to add additional coverage in the future without having to undergo additional health underwriting.  We use this with a lot of our young professionals that may be just getting started after schooling or residency programs.

It’s understandable that cash flow may be tight, and income may start off a little lower in the early years, but this feature allows them to increase their benefits as their income grows throughout their career without the risk of not qualifying due to unforeseen changes in health.

Student Loan Protection

It is not uncommon for medical professionals to finish their education with substantial student loan debt. Oftentimes, this is one of the greatest expenses young professionals experience as they enter the workforce. 

An optional coverage is available on some policies that would help cover all, or some of your student loan payments in addition to your regular monthly disability benefits. This can be a significant benefit for many with high student loan debt.

Benefit Period

Long term disability coverage offers a wide range of benefit periods to choose from.  Typical benefit periods are 2 years, 5 years, 10 years, or to age 65, 67, or even age 70. You have likely planned on a long and prosperous career in your chosen field, so proper protection of your earning potential is key.

There are so many different things that go into a solid financial plan, but the foundation is proper protection of your income.  Saving for retirement, purchasing your home, getting that new car, and paying off debt would not be possible without your income.  You have invested so much in yourself and your career, so be sure to take the time to properly protect your investment.

About the Author: Nick Davidson, LUTCF is an advisor working to positively impact the lives of medical professionals nationwide.  He has over 14 years of experience in the industry and has served as a board member for the National Association of Insurance and Financial Advisors and served 3 terms as President in the Rochester, MN location.  He is also a designated representative for income protection and financial advisory needs for students in various programs at the University of Minnesota School of Medicine, School of Dentistry, School of Public Health, and school of Allied Health.  Contact info, 507-990-3139.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 920 2nd Avenue South Suite 1100, Minneapolis, MN 55402, (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 a wholly-owned subsidiary of Guardian. Foster Klima & Company is not an affiliate or subsidiary of PAS or Guardian.

This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice. Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The information provided is based on our general understanding of the subject matter discussed and is for informational purposes only.
2021-126675 (Exp. 9/23)

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