Disability Coverage

Disability insurance replaces a portion of a dentist's income in the event a dentist is unable to work due to an illness or injury without using valuable assets set aside for retirement. You are your most valuable practice asset. If your income stops because of a disability, what will replace the income?

Business Overhead: A Disability Coverage Partner

If you own your own practice and need to cover practice expenses, purchase Disability Overhead coverage. A disability or business overhead policy pays dental practice expenses in the event a dentist is disabled and unable to work. Since practice expenses will exceed the proceeds of a disability policy, a dentist would not be able to live off of a disability benefit and keep a practice going until they return.

A GDIS disability overhead or business overhead expense policy works with a GDIS individual disability plan. The overhead policy keeps the practice open until the dentist can return to work or sell the practice to another dentist. Generally, overhead policies only pay benefits for a period of 12 or 18 months. Within the benefit period a dentist should have a good idea if a disability is going to be permanent, and the dentist could find someone to purchase the practice while it still has value. For an analysis of your current coverage, and free quote, call GDIS at (800) 432-4357 or (404) 636-7553.

What to Look for in a Disability Plan

Waiting period. Once you become disabled, there is a waiting period before your benefits begin paying, usually 30, 60, or 90 days. One way to reduce policy cost is to select a longer waiting period. A policy with a 30-day waiting period can cost 2-3 times more than one with a 90-day waiting period. If you have significant other income, you can purchase longer waiting periods than 90 days. However, you will be self-insuring short-term disabilities.

Length of Benefits. The benefit period starts right after the waiting period ends. It represents the maximum length of time during which benefits are paid. A policy may offer benefits for two years, five years, to age 65, or for lifetime. Premiums for policies with longer benefit periods are more expensive. As a rule of thumb, if possible, purchase a policy with lifelong benefits. If you suffer a disability, it will be financially catastrophic if benefits end prematurely.

Definition of Disability. Your policy’s definition of total disability is crucial because it determines the circumstances that entitle you to your benefits.

Imagine you have had a serious illness. Your disability makes a rigorous patient load impractical; so after you have partially recovered, you resign your practice and start teaching at a local university. Or, you sell your practice and start a career in another field. Can you still collect on your disability insurance? Yes. Good policies provide full disability benefits, regardless of what you now earn. Inferior policies will reduce your benefits because you are still employed. The worst policies will terminate your benefits completely once you go back to work, with no compensation for your drop in income.

Look for a policy that finds you totally disabled when a condition prevents you from performing the "substantial and material duties of your regular occupation." This definition, often referred to as the "your occupation or own-occ" definition is a liberal one. You collect benefits although you may practice another occupation or facet of your profession.

Another definition states that you are totally disabled when an illness or accident prevents you from performing the important duties of your regular occupation or "any other occupation for which you are suited as a result of education, training, and experience." This definition is less expansive than "your occupation" but is workable.

Because many dentists return to part-time practice after a disability, the insurance industry has introduced partial coverage that pays reduced or "residual" benefits. Make sure that your policy includes a clause of this type so that you receive benefits even if you decide to work part time. However, many policies pay residual benefits only after a period of total disability—sometimes as long as 12 months. In addition, many policies restrict benefits if partial disability occurs after age 55. Other insurers will pay benefits for only 18 to 24 months. Because your risk of disability is greatest after age 55, choose a policy that covers you up to age 65.

Plan Renewability Tips. After you buy a policy, the two worst things that can happen are having your premiums raised or your coverage cancelled. Some inexpensive policies allow the carrier to do both. An important feature of your disability income policy is its continuance provision—the clause that spells out your rights to renewal. There are three types.

  • Renewable at company’s option. This policy places you in a vulnerable position because the company has the right to discontinue your policy.
  • Guaranteed renewable. This policy is guaranteed renewable until age 65; however, the insurance company retains the right to increase your premiums if it does the same for everyone in your class. What a class is varies from carrier to carrier. Generally, a class has a common characteristic such as state residency. You should exercise caution in buying guaranteed renewable insurance.
  • Noncancellable and guaranteed renewable. This policy is noncancellable and guaranteed renewable up to a specified age. Most importantly, the company does not have the right to increase the premium above that stated in the policy, nor can it cancel your policy. This is the best type of policy because it guarantees renewal and freezes the premium at its original level for as long as you hold the policy. These are expensive to purchase but, in the end, they are the cheapest of all.