FPO Disability Insurance: A Must For All Physicians and Dentists

Long-term disability insurance policies have many optional add-ons, called policy riders, that can enhance your coverage. One of the most popular disability insurance riders is the future purchase option (FPO). It allows you to increase your coverage later without additional medical underwriting. With rapidly increasing salaries and big life events on the horizon, all early-career physicians and dentists should buy FPO disability insurance. Here’s why.

What is FPO disability insurance?

An FPO guarantees you can buy additional disability insurance coverage as your income increases or your needs change without undergoing the medical underwriting process again. This holds true even if a medical condition has worsened since your original policy purchase.

FPO disability insurance can benefit physicians and dentists who haven’t reached their full earning potential. Therefore, residents, fellows and young attendings should include a future purchase option rider in their disability policy.

That said, there are several variations of FPO disability insurance.

Types of FPO disability insurance

FPO disability insurance allows you to increase coverage throughout the life of your disability policy. But the terms of an FPO rider vary by insurance carrier. 

Generally speaking, we can break FPO disability insurance into two primary categories:

• Future increase option (FIO). You’ll have the option to increase your coverage annually.
• Benefit Update (BU) or Benefit Increase Rider (BIR). Coverage increases are available every three years. But there are also “off-cycle” triggering events that allow you to buy additional coverage.

However, there are many names for this type of benefit rider, and the nuances of each will depend on the insurance company.

For example, Guardian offers a “Benefit Purchase Option” rider that allows you to increase coverage every three years until age 55. In contrast, Principal has a new version of FPO disability insurance that functions more like a BU rider in terms of being no-cost. However, increases are triggered by certain life events, such as the birth or adoption of a child or the loss of employer-sponsored group coverage.

Adding to the complexity, each carrier might offer several versions of FPO disability insurance, some of which might have stipulations that amount to “use it or lose it.” 

So it’s best to speak with a knowledgeable broker to discuss the pros and cons of each type based on your future earnings and insurance needs.

How does FPO disability insurance work?

When purchasing a disability insurance policy, you must prove your insurability as part of the underwriting process. This typically involves a health screening where you’ll answer questions about your medical history, lifestyle choices and medications. You’ll also complete a medical exam where a healthcare provider will take your physical measurements and collect labwork, including blood and urine samples.

The medical exam process can be inconvenient and may feel a bit intrusive. More importantly, it can flag health concerns that can become troublesome when buying additional disability insurance. 

With FPO disability insurance, you’ll skip another medical exam or health screening when you’re ready to increase your coverage. Therefore, your insurance premiums and eligibility won’t be impacted even if your health has gone downhill in recent years.

That isn’t to say you won’t have to pay more when your coverage increases. It just means that your premiums won’t suffer due to your initial good health declining with age or other circumstances.

How much does a future purchase option rider cost?

The cost of FPO disability insurance will vary according to the insurance carrier and the type of rider (e.g., FIO vs. BU/BIR). But overall, adding a future purchase option to your policy is relatively inexpensive.

For example, the future increase option rider will increase your premium. This type of rider is more flexible, allowing you to increase coverage annually. So, it’ll cost you. In contrast, a BU — or BIR — rider will have no additional cost, as it comes with predetermined intervals for increases.

Keep in mind that regardless of what type of FPO disability insurance you go with, your premiums are going to increase when you decide to exercise the option.

This is an aspect of FPO disability insurance that policyholders often misunderstand. For example, when our founder Travis and his physician wife bought disability insurance, they didn't understand that they would pay significantly more once they upped their coverage. So it was a bit of a surprise when their premiums jumped from the $100 to the $300 range after increasing their coverage.

FPO disability insurance doesn’t guarantee that additional coverage won’t be expensive. It only guarantees you’ll have the option to increase your benefits without another medical exam or health screening.

Why doctors and dentists need FPO coverage

A future purchase option rider is essential for physicians and dentists because your income is expected to rise at a fast rate after residency. But mo’ money, mo’ problems, right?

It’s easy to fall victim to lifestyle creep, especially when surrounded by other physicians who are also trying to keep up with the Joneses. Plus, you might decide to start a family, which is a whole financial beast of its own. Add inflation concerns, and you can easily see how you might need additional coverage as you progress through your career.

Let’s say you have disability income insurance with a benefit of $5,000 per month, which is standard for many employer group plans. It’s also a common amount for residents and fellows who want a basic level of coverage.

That $5,000 monthly benefit was enough while you were finishing training. However, since you now own a $1 million home with a $7,000 monthly payment, with the current disability insurance benefit amount, you’ll likely lose your house if you experience a long-term injury or illness. Therefore, $5,000 isn’t enough disability coverage to cover your mortgage payment, let alone your other fixed expenses and daily living costs.

So, you definitely want to increase your coverage as your financial situation changes. But that can become more difficult as you age and start experiencing health concerns that can put you in higher risk classifications. FPO disability insurance lets you dodge this problem by fast-tracking additional coverage without medical underwriting.

How to get FPO disability insurance

Regarding FPO disability insurance, the benefits outweigh the costs for most physicians and dentists. But it isn’t always a straightforward decision as this disability rider has many variations.

For example, an FIO-style rider will increase your monthly premium, but you’ll have more control when increasing coverage. In comparison, a no-cost BU- or BIR-style rider will have more strict guidelines on when you can up your coverage amount.

The right FPO disability insurance will depend on your career path and financial needs. Let SLP Insurance recommend a future purchase option for your own-occupation coverage based on your unique situation. For a custom quote from SLP Insurance, fill out the form below.