After transitioning from a medical school into medical residency, there are new considerations to weigh with your newfound residency income. For example, you might wonder whether carrying certain insurance policies, like disability insurance, makes sense.
If you’re curious about whether you should get disability insurance as a resident, here’s what you need to know about this type of insurance.
1. What is disability insurance coverage? 2. Should I get disability insurance as a resident? 3. Bottom lineWhat is disability insurance coverage?
A disability insurance policy is designed to help replace a portion of your income if you become unable to work due to illness or injury.
How “disability” is defined depends, to some degree, on your insurance company. However, you might be able to claim benefits if you’re ill or injured to the point that you can’t perform your job duties.
There are two main types of disability insurance, both of which generally replace up to 60% of your monthly income:
- Short-term disability. In general, you can draw benefits for up to a year with this type of disability insurance. In some cases, you might receive this coverage as part of a group disability insurance policy through your employer.
- Long-term disability. For illness or injury that lasts longer than a year, one of these policies can make sense. It can also cover total disability wherein you’ll receive payout until you reach retirement age.
Understand, too, that long-term disability insurance may or may not cover partial disability. Additionally, you might need to look into insurance products like own-occupation coverage and any-occupation coverage.
Own-occupation coverage
With own-occupation, the disability coverage kicks in if you can’t work in your own profession. This includes true own-occupation coverage, which pays benefits if you can’t work in your own job, even if you can still work another job.
Transitional own-occupation disability insurance makes up a difference in salary if you move to a new occupation as a result of your injury or illness.
Any-occupation coverage
Any-occupation disability insurance coverage only covers you if your injury or illness prevents you from working in any job. This type of disability insurance is more restrictive, and could result in you not getting any payout, especially if you could work a different, low-paying job.
Make sure you understand the optional riders, terms of the insurance plan, how it impacts your future income, and the specific own-occupation definition as well as other definitions.
Related: Best Disability Insurance Options for Student Loan Borrowers
Should I get disability insurance as a resident?
As you decide whether it makes sense to buy disability insurance while you’re a resident physician, consider whether adding insurance premiums for a long-term disability insurance policy aligns with your monthly budget.
Below are some considerations.
You might get disabled
The main reason to get disability insurance is due to the fact that you could potentially end up disabled during your time as a resident physician. There’s always the risk of long-term illness or injury that keeps you from doing your job — and receiving monthly income.
With disability income, you can better manage some of your costs, including making student loan payments, if necessary.
The younger you are, the cheaper the coverage is
When insurance companies do their underwriting for policies, they consider that a younger person is less likely to be injured or ill for long periods of time.
Getting disability insurance now can make sense because you’re likely to have a lower premium. This can establish you for disability insurance without too much of an expense.
Individual disability insurance is more portable
Although you might receive some disability coverage as an attending physician or get short-term disability insurance through work, it might make sense to still get an individual policy. In some cases, group insurance policies don’t have the same level of coverage, and you might not be able to keep it if you change workplaces.
Consider getting an individual disability insurance policy as a portable solution while supplementing it with a group policy or other types of coverage.
Larger benefit to income ratio during residency
In general, you can expect disability insurance to pay out about 60% of your income as a monthly benefit. However, a resident can get up to $5,000 a month as a benefit — which might actually end up being up to 100% of your income as a resident.
When you have a higher monthly income in the future, there’s a good chance that your physician disability insurance won’t offer the same benefit.
Watch for insurance premiums based on medical specialty
Don’t forget to take into account whether you could end up with a higher premium due to your medical specialty. You might have a higher premium if you’re a surgeon as opposed to being a psychiatrist, for example.
Consider whether it’s worth paying the premium in exchange for some help paying your expenses if you become too ill or injured to work for a period of time.
The answer to the question, “Should I get disability insurance as a resident?” has a lot to do with your individual situation. You might not even qualify for much coverage, but getting it now — while it’s cheaper — might still make sense. Many policies also offer a future increase option that you could lean on during your career.
Remember: even though health insurance can help you cover healthcare costs if you’re injured or sick, it won’t replace your income. If you’re concerned about keeping up with bills and making sure you still have income in the event of disability, getting insurance might be a good idea.
Depending on your goals, disability insurance coverage can work with other strategies like income-driven repayment or a group policy at work and keep you afloat when the unexpected happens.
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