In 2013, I noticed tingling in my hands during long procedures. In November of that year, I had simple carpal tunnel surgery on my left hand. I suffered permanent nerve damage that day. After a series of hand surgeries, my days as a successful general dentist were over. Despite being fairly knowledgeable, financially speaking, I discovered that my personal disability policy was not exactly what I thought.
After this experience, I vowed to become an advocate to help other dentists understand disability insurance. Too often, dentists feel safe from getting sick or injured. Also, we were often not well informed about the pros and cons of different policies. Not all policies are the same. There are many disability insurance providers, but only a few rise to the top in terms of strength of contract language.
Here are the most important elements of any policy:
This is perhaps the most important element of a policy. “Own occupancy” is defined differently by each provider. “Own occupation” can essentially be generalized to mean that, if a person is unable to perform the material duties and obligations of his profession (or to which he is reasonably educated), he will receive consideration for the initiation of payment on a font. In addition to this, there are other terms that are sometimes used. Some are: ‘own specialized profession’, ‘lucrative profession’ and ‘any profession’.
“Own specialized occupation” is more specific, in that payment may be considered if a person is unable to perform the exact job duties for which they were routinely engaged and/or received specialized training . “Own gainful occupation” can mean many different things. It is often interpreted as a person’s ability to perform any job within the scope of their training. “Any occupation” is just that… the ability to hold any work. One must be extremely vigilant in understanding the definition they read. If you already have a policy in place, do you know what your policy says regarding occupancy? In my opinion, the own specialty profession should be the gold standard for dentist policies.
Non cancellable/renewable guaranteed
This is part of a policy in which the insurance company cannot cancel its policy, for any reason (other than non-payment), and it is guaranteed to be renewed each policy year. There are two aspects to this: a medical component and a police support component.
Generally speaking, a medical and pharmacological examination is required upon the initial purchase of a disability insurance policy. Guaranteed non-cancellable/renewable policies will not require the policyholder to submit another medical examination (after the first), for the duration of the policy.
Many association and group contracts do not fall under guaranteed non-cancellable/renewable obligations. Recently, a large association changed operator and policyholders were forced to switch from one operator to another.
This is where a large percentage of claims are actually made. Some statistics show that as many as one in four policyholders will file for disability insurance at some point in their career. The overwhelming majority of these temporary illnesses/injuries surround where the dentist will return to work within 12 months. The wording in carrier contracts varies widely, as to how and when payment will be made, as such. Many dentists believe that if they become ill or injured they will automatically receive the maximum monthly benefit amount provided in their policy. This is often not the case. A sick or injured dentist can usually come to work.
Take the example of a dentist who injured his thumb or knee while skiing. They are unlikely to be considered completely incapable of working in any capacity in the dental practice. To simplify, if they are able to work 50% of the time (or earn 50% of their income), the carrier will likely provide 50% of the total monthly benefit. As mentioned, some carriers will consider the actual dollar loss and may/may not pay the benefit at a level greater than 50%. In other words, the formulation of the policy is crucial.
Monthly benefits and waiting periods
What a dentist typically buys into a disability insurance policy is a monthly benefit, if they get sick or injured. This is the amount they should expect to receive when making a claim. Various insurer policies can be acquired with benefit periods that last two, five or 10 years, up to age 65, 67 or 70. The amount of the benefit depends on the dentist’s income. Most carriers will let you earn 60-70% of their current revenue. (Tax forms are often requested.) For dental students/residents, carriers know that there is currently no income. However, they will offer a certain amount of benefits for purchase. Often this is available to students at the start of the D4 year. There is a waiting period before payment begins. The most common waiting period is 90 days, but there are waiting periods that last 30, 60, 120, 180, 360 and 365 days (sometimes even longer).
Different policies have different scenarios regarding waiting periods. Some require the days to fall in consecutive order; Others don’t. Here is an example scenario: A dentist has a wrist injury and initiates a claim. Day 1 of the waiting period begins. After 30 days, the dentist thinks she might be ready to go back to work to see if she is able to practice. She tries to see patients, but it’s too early. Some carriers will require that dentist to start the waiting period again. Others will give “credit” for the first 30 days and count cumulative, non-consecutive days. This is something that may seem like a small aspect of the contract/policy, but can have big ramifications.
This is the amount the insured will have to pay for the policy. Policies can generally be paid for in two ways: progressive or fixed/fixed. Often, young dentists purchase graduated policies that initially start with lower payments, but become more expensive over time. Fixed/fixed policies have a price that remains constant for the duration of the policy. By adjusting for inflation, these policies essentially become cheaper over a long period of time. The break-even point for a graduated and fixed/fixed policy is around 8 to 10 years with many disability carriers. Thus, over the life of a disability insurance policy of 20-30+ years, it is often considered the best financial choice to purchase a fixed/flat policy. A font that was originally purchased as graded can often be converted to fixed/flat at a later date, depending on the contract. However, the new fixed/flat rate is usually higher than it would have been initially.
A word of warning: many association and group policies have graduated policies, with no possibility of conversion. Perhaps one of the most important things to consider is how premium payments will be made. Generally, it is considered to be in one’s best interest to pay premiums with personal after-tax dollars. This way, if a claim is made, the monthly payments will generally not be subject to income tax. If the office pays the policy (and writes off the expense), personal income tax would generally have to be paid if a person receives disability insurance income.
These are the extras, or add-ons, to a disability policy. Depending on the carrier, there may be several choices. The most common riders are Cost of Living Adjustment (COLA) and Future Increase Option (FIO). The COLA will help all benefits paid to keep pace with inflation, with respect to monthly benefits, if the disability policy is put into effect. This can be factored as a fixed amount, CPI (consumer price index) adjusted or compound. The FIO allows the policyholder to add an additional monthly benefit to the contract, usually without a medical examination. Proof of increased income is generally required to exercise the FIO option.
Student loans/personal debt
Some policies allow you to purchase an additional monthly benefit, above the authorized amount, to cover things like a student loan or personal debt. Also, separate disability policies may be purchased by some carriers to help pay student loan debt, in particular.
The financial strength and long-term viability of the insurer are not things most dentists think about when buying a policy, but it can be very important. If you have a policy with a company for 10-20+ years, but the company folds, you may find yourself without a policy at a time when you need it most. Pay particular attention to the company that offers a policy.
Many dental service organizations (DSOs) and hospitals offer dentists a group policy while working in their facility. Group policies are often not transferable after you leave that job. Often they will not last until age 65. They often have terms in the contracts that don’t offer the highest level of personal occupation or specialty of their own. In my opinion, a strong and solid individual disability insurance policy is superior to a group policy. It is very important to have an individual policy in place before acquiring a group policy. Carriers will typically extend the option to cover 60-70% of your revenue. Having an individual policy in place that covers this is ideal. When initiating work with an employer who offers a group policy, the group can be added, beyond the individual policy, covering even more income. However, it cannot be done in reverse. If a group plan is in place and a dentist wants individual disability, the group plan (which is generally not as robust as an individual policy) will be considered first for the 60% to 70%. This often leaves the dentist with the ability to acquire less individual disability than desired.
There are many more details that can be covered. However, this article has given a general overview of disability policies, what to look for and what not to look for in a policy. Feel free to email me at [email protected] with any questions.
Editor’s note: This article appeared in the July 2022 print edition of Dental economy magazine. Dentists in North America can take advantage of a free print subscription. Register here.