Should You Get Disability Insurance as a Resident? Yes, Here’s Why

After transitioning from medical school into a 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.

As a resident, you may want to compare options you can secure yourself on the open market, policies available through your residency program, as well as options through your professional association. Most insurance agents will not mention an option that does not make them money, which is why you need this article. If you’re curious about whether you should get disability insurance as a resident, here’s what you need to know.

What does disability insurance for doctors cover?

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. One of these policies can make sense for illness or injury that lasts longer than a year. It can also cover total disability, wherein you’ll receive a payout until 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, 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.

If you're a resident physician, you should only consider policies with true own-occupation specialty coverage. We still have more to cover, but if you're looking for a quick quote for own-occupation coverage, SLP Insurance can help. Just fill out the quote form below and our partner agents will reach out.

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.

The difference between own-occupation and any-occupation is not always black and white. Some companies have stronger language than others. Another consideration is that workplace and professional association plans often have weak language that might not cover you in many health situations.

For resident physicians, we definitely do not recommend any-occupation coverage that does not include an own occupation rider.

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.

The short answer is it's probably a better idea to save less and have a good disability insurance policy than to forgo one to have a higher savings rate.

Your primary investment in residency is your human capital (i.e., future earnings).

The vast majority of physicians buy their own disability insurance policy. Physicians and dentists understand that their livelihood depends on being physically able to practice.

Even with a tight budget, you can purchase policies with options to buy a lot of additional coverage later without a medical exam.

Below are some considerations when thinking about buying disability insurance as a resident.

You might get disabled

The main reason to get disability insurance is due to the fact that you could 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 typical disability lasts for a few years. Losing income for that long period could result in you being unable to pay your mortgage, cover daycare bills, and more. Physicians often have larger monthly fixed expenses, and disability insurance helps cover these important expenditures.

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'll likely have a lower premium. This can establish disability insurance coverage without too much of an expense.

Residents often get a large discount for still being in training.

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.

Most physicians change their jobs within 5 years of practice. That means group coverage attached to your employer is inadequate for 100% of your coverage.

Related: Can I Have Two Disability Insurance Policies?

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.

Know about options available through your residency

Many disability insurance agents prioritize telling you about policies where they will earn money. You need to work with an agent with a lot of experience in the own-occupation disability market and who does enough volume to send you somewhere else if there's a better deal out there for you.

I launched SLP Insurance to help physicians learn about their disability insurance options regardless of whether we get paid for it.

One example of this is Guaranteed Standard Issue policies available through residency programs. Sometimes a program will have a special deal with an insurance company to offer disability insurance to everyone in the program without subjecting everyone to normal medical underwriting.

This means you could get coverage even if you have a pre-existing medical condition.

However, if you submit an application through an agent who isn't an expert, he or she might eliminate your ability to qualify for a policy like this since you cannot have applied with another company to qualify for a GSI policy.

Residency disability insurance options sometimes have exclusive discounts not available on the open market.

Bottom line

The answer to the question, “Should I get disability insurance as a resident?” is YES. You might not be able to afford much coverage, but getting it now — while it's cheaper — still makes sense. You can add riders to a policy purchased as a resident that lets you buy a lot of additional coverage later when you're making more money.

Remember: even though health insurance can help you cover healthcare costs if you're injured or sick, it won't replace your income. Physicians often have mid-five figure monthly housing and childcare costs. You buy disability insurance to make sure you don't have to stress about meeting these expenses if you cannot perform your clinical duties.

If you're a resident or fellow, you might be surprised that the cost of disability insurance is less than you think.

If you want to work with an SLP Insurance partner agent, just fill out the form below. We pledge to find the best policy for you, regardless of if it makes us any money.