Amber Stitt [00:00:00]:
Welcome to the Responsible Resident. I'm Amber Stitt. This podcast takes a common sense approach to financial decisions for physicians, breaking down complex topics into something clear, practical, and usable. Because you shouldn't have to have a finance degree to build financial freedom. I'm a disability insurance specialist and co-owner of MD Disability Quotes. My business partner, Scott Nelson-Archer, and our team have spent over 4 decades helping physicians protect their income, and we've had the privilege of serving as the longest tenured vetted advisors for readers of the White Coat Investor. In today's episode, we're going to walk through an important topic that comes up for almost every physician during training and early practice: "What is the difference between employer disability insurance and private disability insurance?" The challenge is that many physicians assume their employer coverage fully protects their income.
Amber Stitt [00:00:54]:
But most group plans have limitations that aren't obvious until you look closely, or until you need to rely on them. Most physicians have access to a disability plan through their employer, but understanding how that plan works and how it compares to a private policy can help you evaluate how your income is actually protected. Why do most physicians have group disability insurance? If you are a physician working as a resident, or fellow, or attending, there's a strong chance your employer offers group long-term disability insurance as part of their benefits package. Sometimes the employer pays the entire premium, other times you may pay part of the cost yourself, and in some systems the plan is mandatory, meaning you're automatically enrolled and cannot opt-out. Group disability insurance is designed to provide a baseline layer of income protection for employees, for the whole health system, or larger hospital via a group certificate. These certificates cover all employees regardless of their health. In other words, the unhealthy, or potentially other uninsurable folks get the same coverage as the healthiest person. This is helpful to those that are uninsurable, but leaves the healthy person with contract modifications that they wouldn't otherwise have.
Amber Stitt [00:02:15]:
But most never actually review the details of how the benefit works. What does the employer disability insurance contract provide? Most group long-term disability plans replace a percentage of your base salary if you become disabled and cannot work in any job, even if the contract reads as headline on the flyer as own occupation, or own occupation for 24 months. Inside the group certificate you will find the additional language, that we call modified language, that shows you all the restrictions inside that contract for all under that policy. Several features are modified in the employer group long-term disability plans. For example, benefits typically replace a portion of income, not all of it, especially if you are not on an income guarantee. Many plans have a maximum monthly benefit cap of your guaranteed income. Benefits may be taxable depending on how the premium is paid and the coverage is generally tied to your employer, meaning it may not follow you if you change jobs. They offset for any other income. That last point is one of the biggest limitations of a group contract.
Amber Stitt [00:03:30]:
Scott always says, "The devil is in the details." Many group plans offset benefits with other sources of income and in some cases may not pay at all if you don't meet certain definitions like Social Security disability, they may count dependent income as your income, too, and offset the benefits. Because of these details, physicians often want to understand exactly what their employer plan provides and try to supplement where they can to hold a private own specialty policy. I'd like to take a second to tell you about a free Medical Professionals Blueprint that I created with you in mind. At some point in your career, you realize it's not just about making more money, it's about making decisions that actually support your life. That's exactly why I created the Pathways Perspective for Physicians. It's a simple, non-technical framework to help you think through your career, your money, your risk, and how everything connects as your life evolves. You shouldn't have to have a finance degree to build financial freedom.
Amber Stitt [00:04:35]:
You don't need to have everything figured out, you just need a place to start. You can download the Free Medical Professionals Blueprint at: StittStrategies.com/Blueprint. Here are some questions to ask your HR department when collecting items to do your benefits review. Understanding these details is what allows you to make informed decisions instead of reactive ones later. The truth about HR and benefits is that most people dread trying to keep up with all of the contract jargon. Sometimes when you ask, the HR department can be confused, too, since they are not licensed insurance people. So you may have to ask a few different ways and these tips can be noted for future use when it is time for you to ask.
Amber Stitt [00:05:22]:
You can ask your HR department these questions: 1. How much of my base salary does the group disability plan replace? Many plans replace around 60% of salary, but the structure can vary depending on the employer, before taxes. 2. Is there a monthly cap on the benefit? Even when a plan replaces a percentage of income, many policies also include a maximum monthly benefit limit. This cap can significantly affect the total income replacement for physicians. 3. Is the benefit taxable if I receive it? If the employer pays the premium, the disability benefit is often taxable income. If you pay the premium with after tax dollars, the benefit may be tax free. Understanding this difference helps you estimate how much income you would actually receive during a claim.
Amber Stitt [00:06:11]:
4. Can I get a copy of the group certificate? The group certificate explains how the policy works, including how disability is defined, how long benefits may last, how long your waiting period is before you receive the benefits, and any limitations, or exclusions that apply. Having this document allows you to review the structure of the plan. One of the larger questions to ask when reviewing a group disability policy is are you required to apply for Social Security disability insurance before benefits are paid? Some employer sponsored disability plans do require this and it can significantly impact how and when benefits are received. I've seen variations of this over the years working with physicians and business owners, but one story that stands out came from a dentist I met at a white coat investor conference. I'll call him Eric. Eric had been dealing with back pain for some time and eventually it progressed to the point where he could no longer treat patients, as his hands shook during treatments.
Amber Stitt [00:07:11]:
He had both a group disability policy through work and an individual disability policy he had purchased on his own, so he filed claims on both at the same time. He had been considering a transition out of dentistry since he knew he wasn't going to be able to practice during the claims process, he began working as a financial planner for other physicians. Here's where things became more complex. His group policy required him to apply for Social Security disability insurance. When he was denied on the first application, as many people are, he was required to go through the appeals process in order to continue pursuing benefits under the group plan. Meanwhile, his individual policy approved his claim and began paying benefits based on his inability to perform the duties of his occupation as a dentist while he worked as a planner. After about 18 months of navigating the group claim and Social Security requirements, he was ultimately denied because he was able to work in another capacity. The group policy determined he was not eligible for benefits and he never received a payout from that coverage.
Amber Stitt [00:08:16]:
This is an important distinction. Group policies often include offset provisions and Social Security requirements that can add layers to the claims process and in some cases result in reduced, or even zero benefits. Understanding whether these requirements exist helps you better anticipate what the claims experience may look like. Because in many cases if you are not approved for Social Security disability, the group benefits may not pay. We talked about why physicians need private disability insurance in the first episode. A quick summary of why in this context is that employer coverage can provide a helpful starting point for those that already have pre-existing health conditions. However, most physicians should evaluate private disability insurance as part of their long-term planning early in their careers. The main reason comes down to career flexibility and control in the event of an injury, or illness. As you have heard here with Eric, there is a huge difference between the two types of contracts.
Amber Stitt [00:09:14]:
This means that if an illness, or injury, takes you from your material duties of your specialty, or subspecialty, that you can be considered totally disabled. The absence of the restrictive language and modifications is what most refer to as "True Own Occupation". Private plans let you collect the disability income check even if you are working in any other job. Private disability insurance is designed to follow the physician, not the employer. That difference can matter over the course of a long medical career, again, providing freedom if you were to leave that job, or go to a private group setting. At some point, it is critical for medical professionals to have a true own specialty definition in their contract and we break down key highlights next. Portability: Private disability insurance is portable, meaning the policy belongs to you. If you change hospitals, open your own practice, move to another state, or transition to a different role in medicine, the coverage stays with you.
Amber Stitt [00:10:14]:
For physicians whose careers may evolve over time, portability can preserve flexibility. Rate Locks: Most private disability policies are non-cancelable and guaranteed renewable. In simple terms, this means the insurance company cannot raise your premium based on changes to your individual risk profile. You are able to make changes, or cancel, but they cannot. Your rate is generally locked-in based on your age and health. When you purchase the policy, your health status is locked-in, too. When a private policy is issued, your health classification is also locked into the contract. If your health changes in the future, whether due to injury, illness, or a new diagnosis, the insurance company cannot add new exclusions to the policy.
Amber Stitt [00:11:02]:
The coverage you secured when you were healthy remains intact. We will discuss Claire's story in the next episode. The ability to work while receiving benefits, as mentioned with Eric, certain physician focused disability contracts allow a physician to receive disability benefits if they are unable to perform the duties of their medical specialty even if they choose to work in another field. In those situations, a physician could potentially stop practicing their specialty, transition to another type of work, and still receive disability income benefits. Some physicians use this flexibility to teach, consult, work in administration, or pursue other professional opportunities. The key concept is that the insurance is protecting the specialized career you trained for, not simply your ability to earn income in any job. To wrap this up for you, at a high level, this comes back to one word: "Freedom." If your ability to earn an income is what supports your life, then understanding how that income is protected gives you more control over your future.
Amber Stitt [00:12:10]:
Physicians spend more than a decade developing specialized skills. For many doctors, their ability to practice medicine becomes their largest financial asset over the course of their career. Understanding how both employer disability insurance and private disability insurance work allows physicians to evaluate how that asset is protected. You don't have to solve everything today. Taking the time to review your employer plan and understand your options is a small step, but one that can make a meaningful difference over time. Your broker should be able to do this with you, annually, or as often as your employment benefits change. In the next episode of The Responsible Resident, we'll take this one step further and walk through how disability insurance contracts are actually structured for physicians. I'll also share a guide you can download if you'd like to follow along, because once you understand how these policies are written, how disability is defined, how benefits are paid, and what limitations may exist, you'll be in a much better position to evaluate your coverage with confidence. And remember, protecting your ability to earn an income is one of the most important steps in protecting the life you're building in medicine.
Amber Stitt [00:13:21]:
If this episode helped you think a little more clearly about your next step, that's the goal. You don't need to have everything figured out, but you do need to take ownership and take a meaningful step forward today. Thanks for listening to the Responsible Resident!
