Advising HNW Clients

The Income Protection Mindset

What healthcare professionals need to know

by Jeff Brunken

Mr. Brunken is President of MGIS, a leading national insurance program manager experienced in building and managing specialized insurance programs for healthcare professions. mgis.com

Most working adults would never consider going without a life insurance policy, but disability insurance is still an afterthought for many people. This is a sobering fact because a person is more likely to suffer a career-shattering disability than an untimely death. An actuarial study by the Social Security Administration found that one in four 20-year-olds will become disabled before reaching retirement age. Still, eight out of ten people don’t have disability insurance. Why does this significant gap in coverage exist?

Most people don’t understand the prevalence of disability in our society. According to the Council for Disability Awareness only one percent of people believe they will face a condition that would prevent working for more than three months. And more than 20% of people think they’re more likely to win the Lottery than to become disabled. This is an alarming mindset considering the actual statistics.

Healthcare professionals have a high risk of experiencing the consequences of disability-driven income loss. That’s why they must understand the need to be protected by adequate insurance.

Career As Asset

Why is it essential for healthcare professionals to have the right disability insurance?

There are two major reasons healthcare professionals should take disability coverage seriously. The first is that their higher incomes based on specialized practices are at risk. Because of their high-incomes and earning potential, their ability to work is usually their most valuable asset. Losing income would have a profound impact on their families’ lives and their financial futures. And it’s unlikely they can just stash away enough savings to make up for that type of loss.

Second, professionals must understand that they need the right type of disability insurance. A basic disability policy won’t fit the bill. Highly trained healthcare professionals need policies that consider their growing income, years of training, practice ownership, and particularly their specialization.

The average disability claim lasts 2.5 years

As already stated, most individuals don’t understand the likelihood of a long-term absence from work due to disability. On average, a disability claim lasts 2.5 years. That length of absence can mean significant losses.

Specialists are generally older when their careers get going 

After years of education, residency, fellowships, and training, medical professionals are often older when they reach their prime earning years. And it’s a proven fact that the risk of disability grows as we age. Some of the leading causes of disability are heart disease, cancer, or degenerative physical disease. As healthcare professionals age, their risk factors grow–along with their income.

Practice owners have unique income protection needs

When in private practice, other people likely depend on the practice partner’s business contributions. Whether considering partners who share equity in the business or loyal staff, it’s vital that healthcare professionals plan for the unfortunate event that would prevent them from doing their job as usual.

Healthcare professionals may have individual disability insurance (IDI) that they purchased early in their career, but most require a comprehensive group IDI supplement policy to achieve the targeted 60% - 70% of income replacement protection...

Building income protection into a practice’s business model is always a good idea. The particulars of the type of coverage they will depend on different circumstances. But a budget for disability insurance should be a necessity for:

  • Protecting partners and employees
  • Hiring a replacement
  • Maintaining practice overhead
  • Avoiding debt or bankruptcy

And if a partnership agreement exists, the terms should be clear about what happens in the event of a disability.

What questions should healthcare professionals ask about disability insurance?

Healthcare professionals may have individual disability insurance (IDI) that they purchased early in their career, but most require a comprehensive group IDI supplement policy to achieve the targeted 60% – 70% of income replacement protection. Although most people have the same questions when considering disability insurance, brokers should be prepared to answer the following questions in particular for healthcare professionals:

  • How much coverage do I need to maintain my family’s lifestyle?
  • How does this policy define disability?
  • Does this policy define disability using an “own procedures” definition?
  • Will I be considered disabled if I can no longer perform my CPT or CDT coded procedures?
  • Will my disability benefit grow with my income?
  • Are there policy riders I should consider?
  • What happens to my benefits if I can work part-time?
  • Will my disability insurer require that I return to work?

Getting clear answers to these questions is imperative.

Should COVID-19 play a role in whether healthcare professionals should consider disability insurance?

In our current healthcare landscape, it would be impossible to speak about disability insurance without considering how COVID-19 affects insurance decisions. With many healthcare workers on the frontlines, it’s crucial to understand how COVID-19 could affect coverage.

Only time will tell the number of people in the American workforce who will face long-term disability due to COVID-19; However, the Council for Disability Awareness has reported that the demand for disability insurance has increased since COVID-19.

I hope this guide will help you and your healthcare professional clients find the right type and amount of disability insurance for their needs.

 

 

 

Sources:
Disability and Death Probability Tables for insured Workers Born in 1997, Social Security Administration, Johanna Maleh and Tiffany Bosley https://www.ssa.gov/oact/NOTES/ran6/an2017-6.pdf
Only 20% of Consumers Own Disability Insurance Despite Almost Half Saying They Need It. Retrieved September 12, 2020, from https://www.lifehealth.com/20-consumers-disability-insurance-despite-almost-half-saying-need/
Infographic: The Disability Disconnect, Council for Disability Awareness.
https://www.infographicsarchive.com/infographic-disability-disconnect/
Disability Statistics, Council for Disability Awareness https://disabilitycanhappen.org/public_html/wp-content/themes/cdadev/images/disability_stats.pdf
Do You Have the 2020 Facts on Disability Insurance? https://blog.disabilitycanhappen.org/do-you-have-the-2020-facts-on-disability-insurance/
COVID-19 (coronavirus): Long-term effects
https://www.mayoclinic.org/diseases-conditions/coronavirus/in-depth/coronavirus-long-term-effects/art-20490351