Disability Insurance for Residents

Did you know that during or right before residency is the best time in your life to get disability insurance? When you’re a busy doctor-in-training with a demanding schedule, shopping for disability insurance may not be at the top of your priority list. But it’s well worth taking a moment to protect your ability to earn income to support yourself and your family. 

Our PearsonRavitz co-founder and CEO Stephanie Pearson, MD, FACOG, is a disabled physician who sustained a career-ending injury at work. Her mission is to share her expertise with residents, fellows and attendings to help them avoid the mistakes she made. Above all, you want to make sure that your policy covers exactly the medicine you were educated and trained to practice.

Like medicine, resident disability insurance is a complex topic with a lot of jargon, but we’re here to help. This guide is a result of our thousands of conversations with residents like you. It covers all you need to know before you speak to a broker to protect your income and peace of mind

What Is Disability Insurance?

Disability insurance is income protection. It covers a portion of your income if you can no longer work due to a long-term illness, a debilitating injury, or cognitive challenges. Once coverage is triggered by a health event, you receive a specific amount of money every month. 

Medical residents are constantly taking care of others, and you need all of your faculties to do so. Disability insurance exists so that you can take care of yourself and your family. In the event that you could no longer practice the profession you were educated and trained to perform, disability insurance would help you meet your expenses and continue your standard of living with as little financial disruption as possible. It provides you and your loved ones financial peace of mind during a time when finances should be the least of your worries.

Why Is Disability Insurance Important for Residents?

As a resident physician, your career and livelihood depends on your performance of specific tasks to deliver care and service to your patients. To fulfill your duties for those in your care, you need all of your faculties. An injury or illness can severely affect your job performance. It can also have a major impact far beyond your career, on your personal life as a parent, traveler, or athlete. 

Unfortunately, becoming disabled is a very real possibility that happens all too often.

A short-term or long-term illness or injury could jeopardize your ability to cover basic financial needs for you and your dependents. Consider how long your savings would last your family if you ended up in this unfortunate situation. The Federal Reserve reports that,

As a resident physician, you may also have outstanding debt from your medical education you would need to cover.

Learn about the potential challenges on the path to obtaining disability insurance in our blog article,  4 Key Roadblocks to Securing Disability Coverage, and empower yourself with insights to navigate these obstacles.

Key Disability Insurance Terms and Riders

Riders are the building blocks of your policy, and their details are vitally important. You must understand what they are to make sure your medical resident disability insurance meets your specific needs. 

Just as in medicine, the disability insurance industry has a lot of confusing terms. The most important thing to know is that there is no standardization of language in insurance. Different carriers may define the same term in different ways, or different terms similarly. You are not necessarily comparing apples to apples when you shop for policies from different carriers. In addition, the industry is constantly changing. For these reasons, it is best to speak to a broker to confirm the details of your policy.

Below are key components to know about disability insurance for physicians:

1. Own Occupation/Specialty Specific: This is the most important and essential rider for resident physicians. It means if you cannot perform what you were specifically educated and trained to perform, you qualify as disabled and are therefore entitled to receive benefits regardless of whether you are gainfully employed in another occupation. Different carriers use different terms to mean the same thing—please make sure you have the correct language. Be aware that many group disability policies switch from “own occupation” to “any occupation” after two or three years. Often, group policies will define total disability as the inability to do your job and not be gainfully employed. All medical residents should get policies that have an own occupation definition.

To understand how this specialized coverage can offer crucial protection tailored to your specific role, read our blog post, What Is Own Occupation Disability Insurance?

2. Future Purchase Option: This rider is an absolute must for medical residents to protect your future earning potential. It allows you to increase your coverage as your salary increases or you change jobs without having to undergo additional medical underwriting. This rider also goes by many different terms.

3. Residual or Partial Disability: This benefit provides for circumstances that cause you to work part-time because of injury or illness. When you have lost a certain percentage of your income or time (depending on the policy), a benefit will be triggered. Annually, more partial disability claims are filed and paid than total disability claims.

4. Cost of Living Adjustment: This rider, also known as the COLA rider, helps offset the risk of inflation. On the anniversary of your claim, the carrier increases your monthly benefit based on the language in your policy. The COLA can have simple or compound interest moving forward. Benefits range from up to 3 to 6 percent of the monthly benefit. Some carriers have a fixed percentage increase, while others are tied to the Consumer Price Index and therefore have a range. This rider is most beneficial to residents and younger physicians, who stand to sustain the greatest cost of living increase from an early injury or illness

5. Catastrophic Injury Rider: This rider (also known as the CAT rider) offers extra protection—in addition to a standard monthly benefit—from the financial impact of a more serious injury or illness. For most individual policies, if you are unable to perform two or more of your activities of daily living or are severely cognitively impaired, you would qualify for an additional benefit.

6. Non-Cancellable, Guaranteed Renewable: This means that the insurance carrier cannot cancel, increase the premiums, or add restrictions to your policy once they have made an offer and you pay the premiums. Even if they stop offering the type of policy you own, as long as you continue to pay your premiums you will receive the same coverage. We recommend all medical residents have a non-cancellable, guaranteed renewable disability insurance policy.

7. Benefit Period: This is the length of time that your claim would be paid. Carriers typically offer options that will pay out until the insured turns 65 to 70 years of age.

8. Elimination/Waiting Period: This is the time between something happening to you and you getting paid. Most resident disability insurance policies require that a person be disabled for a certain period of time before they begin receiving disability benefits. The most common length is 90 days; however, there are shorter and longer options available.

To learn more about insurance coverage enhancements by reading our informative blog post,  What Are Insurance Riders for Disability Insurance?, and discover how these optional add-ons can provide tailored protection.

When Is the Best Time to Apply for Resident Disability Insurance?

In a word: now. Residents typically qualify for “starter package” policies, offered by insurers at a significant discount. These discounts are only available before or during residency, and the rate lasts throughout your career. This means you can save thousands of dollars over the life of your policy. Right before residency starts is an excellent time to get an individual disability insurance policy, because you have some free time before life as a resident takes over.

A note to people who plan to get pregnant: If you can, we encourage you to get coverage before the first time you try to get pregnant, as insurance companies tend to look for any reason not to cover future pregnancies. 

Disability insurance rates are based on several factors: age, gender, health, occupational classification, riders, monthly benefit amount, elimination period, and benefit period. The younger and healthier you are when you apply, the lower your cost. But there is no set enrollment period for resident disability insurance, so now is always the best time to sign up. 

A note to people who plan to get pregnant: If you can, we encourage you to get coverage before the first time you try to get pregnant, as insurance companies tend to look for any reason not to cover future pregnancies. 

How Much Does Disability Insurance for Residents Cost?

Men can expect to spend about 1 to 3 percent of their income on a quality resident physician disability insurance policy, whereas women should expect to pay about 2 to 6 percent. The reason women pay more is because they tend to leave the workforce because of illness or injury more often than men. Keep in mind that residents often pay less because they are eligible for discounts.

Disability insurance rates are based on several factors:

To gain insights into how premiums are determined and how you can secure financial protection, explore our recent blog article on the The Cost of Disability Insurance for Physicians

The “Big 5” Providers

Virtually every other area of insurance offers a laundry list of providers. Some are household names, others are more boutique. But when it comes to disability insurance for residents, you might be surprised to learn that there are only five companies that provide specialty-specific coverage for individual disability insurance for physicians.

How Much Disability Insurance Do Residents Need?

Most residents and fellows qualify for about the same amount of disability insurance coverage. When you’re in training, the application process is more generalized. Insurance carriers typically don’t look at how much money you make, and they don’t worry about what group benefits you already have. Everybody qualifies for about the same amount of coverage. It’s the carriers’ way of getting and keeping you as a long-term customer.