Disability Insurance

If you’re already read our Disability Insurance 101 Guide, you know why disability coverage is so important for physicians – especially during training. Now let’s go a step further and look under the hood.

This guide breaks down the mechanics of a disability insurance policy – from how benefits are triggered, to the riders that enhance your protection. Whether you’re just exploring coverage or finalizing your application, this walkthrough will help you make informed decisions with confidence.

We’ll cover:

✅ The core parts of every policy

🛠️ Key riders and what they do

💰 What a typical policy setup looks like

🤔 How to choose the right combination for your situation

Let’s start by understanding the basic building blocks of the policy.

Every disability insurance policy includes a few essential building blocks that determine when benefits begin, how long they last, and how much you receive. Understanding these terms is key to evaluating any quote or offer.

Elimination Period

Like a deductible, but in time – it’s the waiting period before benefits begin. Most commonly 90 days, though 60 and 180 days are also options.

Benefit Period

How long benefits will be paid if you remain disabled. Most physicians choose a benefit period that lasts to age 65, 67, or 70.

Monthly Benefit

The dollar amount paid each month during a disability. Most training physicians qualify for $5,000/month, and it’s usually tax-free.

Premium

The monthly cost to maintain the policy. Depends of age, specialty, gender, riders, and state.

🧠 Quick Example:

A 30-year-old OB/GYN resident buys a policy with:

• $5,000/month benefit
• 90-day elimination period
• Benefits payable to age 65.

If she becomes disabled, at 35 and can’t return to her specialty, she could collect up to $1.8 million in tax-free benefits over the course of the policy.

Riders are optional, add-ons that enhance your base disability policy. The right combination can make the difference between a basic safety net and true long-term protection. Below are the most important riders for physicians – especially during or just after training:

1.  True Own-Occupation Definition of Disability

Pays full benefits if you’re unable to work in your specific medical specialty – even if you’re working in another field.

 💡 Why it matters:

Without this rider, your policy might only pay benefits if you’re disabled and not working in another field. That could be a problem for high-skill professionals. True own-occupation protection ensures that your training and experience are protected.

🧑‍⚕️ Example:

A neurosurgeon develops tremors and can no longer operate but can still teach or consult. With true own-occupation, they still receive full disability benefits – even if they earn money in a difference capacity.

✅ What to look for:

• Policy must say or include a variation of the following: “you’re considered totally disabled if you cannot perform the duties of your own occupation, even if you are gainfully employed in another occupation.”

⚠️ Without this rider:

The insurer could deny benefits if you decide to go and work in another field that is different than your specialty.

2.  Enhanced Residual or Partial Disability Rider

Pays partial benefits if you’re not fully disabled but suffer a loss of income or time spent at work due to an injury or illness. Usually starts at 15 or 20% loss.

💡 Why it matters:

Not every disability is black and white. Many conditions reduces hours, productivity, or patient load without fully removing you from the workforce.

 🩺 Example: 

A cardiologist with chronic fatigue syndrome can now only see patients three days a week. Income drops by 40%. The residual rider pays 40% of the monthly benefit, helping maintain lifestyle and savings goals.

✅ What to look for:

• “Loss of income” trigger (normally 15-20%)
• No requirement for total disability first
• Benefits that continue until income recovers or policy ends.

⚠️ Without this rider:

You may receive nothing unless you are 100% unable to work.

3.  Benefit Increase Rider

Lets you increase your coverage later without needing to requalify medically – as long as your income rises.

💡 Why it matters:

Your earning potential will increase dramatically as you finish training. This rider locks in your insurability even if your health changes.

📈 Example:

You buy a $5,000/month benefit during residency. Three years later, you’re making $300k/year. You want to increase coverage to $15,000/month. 

With the increase rider, you can do that without reapplying or answering health questions.

✅ What to look for:

• Increase opportunities or “option windows.”
• Advanced opportunities for life events (i.e. graduating from residency/fellowship)

⚠️ Without this rider:

If your health declines, you might be unable to increase your policy – or may face exclusions, surcharges, or denials.

4.  Cost of Living Adjustment (COLA) Rider

Increases your monthly benefit while you’re on claim, to help offset inflation over time.

💡 Why it matters:

If you become disabled for many years – especially early in your career – the value of a fixed benefit will erode due to inflation. COLA keeps your benefit aligned with real-world costs.

🧮 Example:

You start with a $5,000/month benefit. After 10 years on claim with a 3% COLA, your benefit has grown to $6,720/month – over $20k more per year in added income.

✅ What to look for:

• Annual increases of 3% or tied to the CPI (Consumer Price Index)
• Compound interest vs. simple
• When increases start (immediately or delayed)

⚠️ Without this rider:

Long-term claims lose purchasing power – especially if you’re disabled in your 30’s or 40’s.

🚨 Some policies will cap the increase at the previous year’s CPI or 3%, whichever is lower. Others will increase by 3% automatically.

While the core riders provide a solid foundation, certain supplemental riders can offer extra financial protection – especially if you have student loans, dependents, or want coverage for more severe situations. These are usually optional and add a modest amount to your premium.

1.  Catastrophic Disability Benefit (CAT Rider)

Provides an additional monthly benefit if you suffer a severe disability that affects your ability to perform basic activities of daily living (ADLs) or causes cognitive impairment.

💡 Why it matters:

A catastrophic disability often leads to significantly higher expenses – caregiving, modifications to your home, or long-term assistance.

🧑‍🦽 Qualifying events include:

• Inability to perform 2+ ADLs (bathing, dressing, toileting, etc.)
• Severe cognitive impairment (e.g., Alzheimer’s, traumatic brain injury)

📈 Example:

Your base policy pays $10,000/month. The CAT rider adds an additional $5,000-8,000/month.

✅ Especially useful for physicians with families, dependents, or large fixed expenses.

🔻 Why you might skip it:

• It only activates in the most extreme situations.
• Premium cost may not justify the benefit if you already have a strong base policy.

2.  Student Loan Repayment Rider

Pays an extra monthly benefit to help you stay current on student loans during a disability.

💡 Why it matters:

Student loans don’t pause just because you’re disabled. This rider protects your ability to maintain payments without sacrificing lifestyle.

📘 Example

A disabled resident receives $5,000/month from their base policy. The rider adds another $1,000-2,000/month strictly for student loans.

✅ Ideal for:

• Residents/fellows with $100k+ in educational debt
• Borrowers on private loans that don’t offer robust deferment protections.

🔻 Why you might skip it:

• Only activates if you are totally disabled.
• The rider usually expires after 10-15 years.
• Your base benefit should be enough to cover your student loan expenses.

3.  Retirement Protection Rider

Contributes to a separate retirement account while you’re on claim – to replace lost 401(k) or IRA contributions.

💡 Why it matters:

If you’re disabled for years, your retirement savings can fall way behind. This rider helps fill that gap, mimicking missed contributions.

📈 Example:

Pays ~$500-1,500/month into a designated trust or annuity – separate from your regular disability benefit.

✅ Ideal for:

• Physicians who are more established in their careers
• Those committed to long-term retirement savings.
• Buyers who want to ensure lifetime financial stability, not just income replacement.

🔻 Why you might skip it:

• Often more expensive than other riders
• Not all carriers offer it.

Disability Insurance isn’t one-size-fits-all – but most physicians start with similar building blocks during training. Here’s a typical setup, plus tips to help you choose the right configuration based on your career stage, health, and financial goals.

🛠️ Customization Tips

✅ If you’re still in training:

• Lock in the Future Increase Rider while you’re healthy.
• Make sure your policy has true own-occupation language – not “any occupation.”
• Keep premiums manageable while maximizing flexibility for future increases.

💼 If you’re an early attending:

• Increase your monthly benefit to match your new income.
• Consider adding Catastrophic Disability for longer-term protection.
• Reassess your need for the Student Loan Rider – it may no longer be necessary.

🧮 If you want to minimize cost:

• Keep the 90-day elimination period – shorter waits increase the premium.
• Choose a benefit period to age 65 instead of 67 or 70 to reduce cost modestly.
• Start with the most critical riders only (Own-Occ, Residual, Increase, COLA) and skip CAT and Student Loan Riders if budget is tight.

💸 If budget isn’t a concern:

• Opt for to age 67 or 70 benefit periods.
• Include COLA, CAT, and Retirement Protection riders for comprehensive coverage.
• Consider graded premium options if you want to start low and grow later