Why Locum Tenens Physicians Need Their Own Disability Policy

Locum tenens physicians are like substitute teachers of medicine. They fill crucial gaps in healthcare facilities awaiting permanent staff. Although they can earn a higher hourly pay rate than their full-time counterparts, they face unique challenges as independent contractors. 

Particularly, locum tenens physicians miss out on employer-sponsored benefits like health insurance options, 401(k) plans and disability insurance.

Here’s why you need an individual policy for locum tenens disability insurance.

The difference between short-term and long-term disability insurance

Disability insurance protects your income if you can’t work due to injury or illness. It’s divided into two categories: short-term and long-term. Both types pay a monthly benefit if you suffer a covered disability that lasts longer than the waiting period. 

Short-term disability generally caps benefits at no longer than a year, while long-term can provide benefits all the way to age 70 in some cases. This insurance can replace up to 60% of your pre-tax income, providing financial stability when you can’t work.

Disability insurance is income insurance

Physicians have significant financial obligations, including fixed expenses like doctor-sized mortgages, car payments, and possibly private school tuition. Losing the ability to earn can have a severe impact. As the saying goes, “Mo’ money, mo’ problems.” 

Disability insurance protects your greatest asset, your income. If you could no longer practice medicine, what job could you feasibly do that still pays $400,000 a year? 

Why locum physicians should buy their own insurance

Locum tenens providers are typically self-employed independent contractors, not W-2 employees. This means you won’t have access to group disability policies provided by an employer. 

One notable exception would be some locums who work for Envision and might have some sort of group plan. However, even when a group disability insurance plan exists, it’s rare to have it fully cover a physician's income. 

A typical group policy might cover 60% of income, or $10,000 monthly, whichever is less. For a physician earning $400,000 annually, $10,000 a month falls short of 60%. So, even with a group policy, you’ll likely still need a supplemental individual policy.

Related: Locum Tenens Physician Tax Planning Essentials: Navigating Inconsistent Income

Where group coverage falls short

Missing out on group coverage can be a drawback, especially for those with preexisting conditions that make it nearly impossible to qualify for individual coverage. However, group plans don’t usually have the strong protection you’ll find in having your own plan. 

• Group policies rarely have a true own-occupation definition of disability. Own-occupation protection pays you a benefit if you can’t do your current job, even if you’re capable of working a different job. 
• Group policies may have shorter benefit periods. The length of the benefit period in a group policy might be only five years, compared to individual coverage that can last until age 65 or 70. 
• Group disability benefits are taxable income. When the employer pays the premiums, common for group disability plans, you’ll pay taxes on the benefit you get.
• Group plans cease the minute you leave for another employer. Group policies are only in effect so long as you’re with the employer offering coverage. But individual policies are portable and can go with you from one job to the next. Even if you stop being a physician entirely, your policy remains in force.

Travel considerations for locum tenens disability insurance

Disability policies generally cover you regardless of where the injury or illness occurs. It doesn’t even have to happen at work! 

One exception is that you must reside in the United States. Also, if you’re disabled, your policy might require you to stay in the U.S. or Canada for most of the year (depending on the disability insurance company). 

Visa holders may face additional challenges. For example, J-1 Visas may make you return to your home country if you’re disabled and unable to work. But it’s worth getting coverage now to lock down your policy rates in case you plan to establish permanent residency in the US.

Related: International Disability Insurance: What to Expect From Your Coverage While Abroad

Choosing the right locum tenens disability insurance coverage

There are five disability insurance companies, collectively called “The Big 5” (Guardian, MassMutual, Principal, The Standard, and Ameritas). I recommend going with one of these companies for income protection, but that isn’t the only thing to look for. 

Your occupation and specialty factor into your premium rates, and different companies assess risks differently. One insurance company might view cardiologists as a very high risk, while another might view them more favorably. The same can be said of preexisting conditions. That’s why it’s crucial to get quotes from multiple providers. 

Working with an independent insurance broker who understands the quirks of each company can make sure you get the best coverage possible for your situation.