Disability Insurance for Self-Employed: A Guide for Physicians and Dentists

As a physician or dentist, you help your patients lead a healthy life — taking care of others is second nature in your profession. Though the job may be challenging, it can also be rewarding. But it’s important to also take care of yourself as well, especially financially.

That’s why it’s important to consider disability insurance for self-employed people if you’re a physician or dentist with your own practice. Find out why business owners in this field should protect themselves and how to get started.

What is disability insurance?

Disability insurance is a type of insurance that helps cover part of your income in the case of injury, illness or disability. Although many people might think of a physical disability when it comes to insurance, mental health issues aren’t ruled out. In fact, depression is one of the top causes of disability worldwide, according to the World Health Organization.

In other words, if you’re experiencing a physical or mental health issue that’s preventing you from doing your job, disability coverage can help.

What types of disability insurance are available?

According to PKA Insurance, an individual disability policy may cover up to 55% to 65% of your income tax-free and costs up to 1.5% to 3% of your income. There are different types of disability insurance coverage that you should consider as a self-employed physician, dentist, or medical professional.

The Insurance Information Institute (III) states there are two types of disability insurance policies:

1. Short-term disability insurance, which covers up to two years of benefits.
2. Long-term disability insurance, which covers up to several years or as long as the duration of your life.

You might also be able to get two protection options including:

• A noncancelable policy, which can’t be canceled by the insurer unless you fail to make monthly premiums and keeps your rate the same.
• A guaranteed renewable policy, which allows you to renew your policy and not have it canceled however the insurance company may raise rates.

If you’re looking for disability insurance for self-employed individuals, review these options and choose a policy based on your income, expenses and risk factors. Your annual income, current health, health history, smoking status, age and other potential risk factors play a role in how your premiums are calculated.

For a custom quote for self-employed physician or dentist disability insurance, fill out your information in the form below, and we will get back with you ASAP.

Why disability insurance for self-employed individuals is important

According to the Centers for Disease Control and Prevention, 61 million adults in the U.S. live with a disability. That means about 1 in 4 adults in America face everyday life with a disability.

If you think that can’t happen to you, because you’re healthy and happy, consider this eye-opening statistic. According to the Social Security Administration (SSA), more than 1 in 4 20-years old will become disabled before hitting retirement age.

Self-employed workers such as physicians, dentists, medical professionals or health care providers, freelancers or independent contractors may be more at risk if something were to happen.

For example, as a doctor or dentist you may have high business expenses, a hefty student loan debt amount to manage, and require a high income to pay for your lifestyle.

If your ability to earn an income is compromised, it could potentially have devastating effects. On one hand, Social Security Disability Insurance (SSDI) may provide some disability benefits.

However, as of 2019, the average monthly amount for disability benefits paid out by the SSA was $1,234, which is pretty close to the poverty level. That’s a small amount and getting additional disability coverage can help.

On top of that, depending on your business structure, you may not be able to tap SSDI funds. Many self-employed individuals pay self-employment tax, which includes 15.3% for Social Security and Medicare.

But if you’re an S corporation, or S-corp, you may forgo paying self-employment taxes and miss out on being able to collect SSDI.

Related: Tax Planning for Physicians: What Are the Benefits of Using S-Corp Tax Strategies?

In either case, having a safety net on your income can benefit you and your family and ensure you’re protected should something happen. That’s why a long-term disability insurance policy is a much-needed income protection for all small business owners.

What self-employed medical providers should know

If you’re a self-employed doctor or dentist and have your own thriving medical practice, you want to take steps to protect yourself and your business. If the business can’t run without you or doing so would be extremely difficult, disability insurance for self-employed individuals is something to consider.

Some employers offer disability insurance but if you’re self-employed, you need to look into coverage yourself and get an individual plan. To get approved on your own, you might need:

• A minimum of two years being in business and profitable.
• Two years of tax returns.
• Year-to-date income statement.
• Any current job contracts.

Getting disability insurance for self-employed individuals requires providing more paperwork to provide proof of income. The main difference is that you may need to include various documents that illustrate your income, earning potential and financial health as it relates to your business.

Typically, group discounts on disability insurance policies are for those employed at a hospital or part of an average-sized group practice. However, PKA Insurance offers discounts for members that are part of the American Medical Association or other regional associations. Student Loan Planner also works with PKA Insurance to provide a discount for doctors as well.

Consider a policy that’s referred to as “own occupation” coverage. If you’re unable to work in your own occupation, you’ll likely be covered under the disability insurance policy. If you chose an “any occupation” coverage policy, you might not be eligible for disability benefits.

For example, if you can physically perform another job, like a customer service specialist or consultant, you’d be ineligible for disability insurance payout. That’s why it’s important to get a policy that is “own occupation.”

Where to find disability insurance for self-employed

Student Loan Planner partners with PKA Insurance to offer disability insurance for self-employed doctors, dentists and health care professionals at a discount. If you have your own group practice of a certain size, you can also see if you qualify for group rates or discounts.

You can see about getting the best rates and coverage to protect yourself. In addition to looking into an individual policy, you might want to explore additional coverage options to protect your business. This might mean looking into:

• An overhead expense disability policy, which can cover overhead expenses.
• Business loan disability policies, if you took on business debt.
• Key person disability policies (e.g. for key employees or if there are multiple owners).
• Disability buy out policies, if there is more than one founder and the other can buy-out the disabled partner.

When determining the amount of coverage to get, consider your living expenses. For example, you want to include mortgage/rent, food, utilities, transportation, and any debt payments (though if you have student loans, you may qualify for disability discharge). You want to make sure you can cover your basic needs if you’re no longer able to earn an income.

Additionally, there might be riders you can include in your policy that relate to cost of living and inflation, increases in the future, and partial disability. But the key thing is to compare own-occupation versus any-occupation options, and decide what works best for you in the long run.

Be sure to understand what qualifies as a disability and how long you’re covered under the policy. In other words, how long is the benefit period? It could be five years or more or the rest of your life.

There’s also something called an “elimination period” which is the gap in time between when your disability starts and when the disability insurance coverage benefits can be paid out. This waiting period may be several weeks or months, but it’s something you want to know ahead of time.

The bottom line

Getting an individual disability insurance policy can be a smart move for physicians and dentists. You can get a policy with PKA Insurance or look at other providers. Each company has its own underwriting, eligibility requirements, and application process.

The overall cost of disability insurance can vary depending on many factors, but being covered with a disability insurance plan can help you rest easier knowing that you’re protected from one of life’s unexpected and unfortunate events. So, fill out the form below to get started with a custom quote!