Considering disability insurance? Consider the facts.
- Your most valuable asset is your ability to earn an income. If you were unable to earn an income, do you have enough assets to cover your expenses? If not, it is important that you insure your income.
- Most student loans do not go away if you become disabled.
Group benefits vs. an individual policy
If you work for a large firm or company, you may be offered a group policy. Usually you are required to take the policy. Group policies typically offer a limited monthly benefit (60 percent of your income to a maximum amount). If your income exceeds $200k, the percentage of benefits replaced may start to reduce if you have maximum limits on the policy.
- Your group policy may require you to be totally disabled and not able to work in any capacity before you can receive any benefit.
- The benefit may be taxable income to you if the employer is paying the premiums.
- Your employer may cancel your policy at any time.
- Even if you have a group policy, it is still important to consider supplementing with an individual policy.
- Your individual policy is portable and you may take it with you if/when you leave your employer.
- The policy definitions on an individual policy are usually superior (own-occupation, inflation protection).
- If you are only partially disabled, your group policy may not pay you.
- Having an individual policy protects your insurability by purchasing increase options. If your health changes, you may still purchase more coverage in the future based only on financial underwriting.
Important Policy Language of a Disability Policy
It is important to ensure your individual policy has the following components.
- Own occupation definition. This means that if you can’t work due to sickness or injury, the policy will pay you a monthly benefit even if you are able to work in another occupation. Without this definition, you are at the discretion for the company to determine if you are able to work.
- Noncancelable, Guarantee Renewable language. This means once you have your policy, the premiums are fixed and guaranteed for the life of the contract. The company cannot increase your premiums or add exclusions.
Important Disability Insurance Riders
Riders are extra features that are optional that can be added to a policy.
- Residual rider. This will pay benefits if you have a loss of income of 15-20% or more in income. The policy would pay you a proportionate benefit. You would not need to be totally disabled to receive benefits.
- Increase options. This allows you to increase your benefits in the future without having to answer any medical questions.
- Cost of Living Rider. This rider will increase your benefits by 3-6% each year you are on claim to keep your benefits up with inflation.
Benefit Limits for Pharmacists
The amount of benefit you may purchase depends on your income and if you have a group disability policy through your employer.
- Pharmacists in their first year may purchase up to $4000/month benefit regardless of income.
If you are concerned about paying for your disability insurance while getting established, there are several things we can do to reduce your premium as much as possible.
- Some companies allow a “graded” or increasing premium. This is initially less expensive and your premium will increase each year. If you wish to lock it in at a later time, you may do so on any policy anniversary.
- You may choose to simply supplement what your group policy already offers and load up your policy with increase options. This will allow you to keep your premium low during residency and still reserve the right to increase it in the future without any medical underwriting.
For more information about pharmacist disability insurance, request a quote today!