Disability insurance: Answers to your questions

Feb. 1, 2010
Dentists have about a one in three chance of becoming disabled at some point during their clinical practice careers, making disability insurance a priority.

For more on this topic, go to www.dentaleconomics.com and search using the following key words: work–related disability, disability insurance, partial benefit, Jim Biesterfelt.

Dentists have about a one in three chance of becoming disabled at some point during their clinical practice careers, making disability insurance a priority. Yet a survey by The McGill Advisory found that many dentists are “dangerously underinsured … while paying excessive premiums for the coverages they do have.” So how do you find the right coverage at the right price for your needs?

We posed this and other questions to a disability insurance expert: Jim Biesterfelt, vice president of group special accounts at Great–West Life & Annuity Insurance Company, underwriter and administrator of the American Dental Association's group insurance plans. Here's what we learned.

DE: Dentists have told us that shopping for disability insurance can be complicated and confusing. Why is that?

Biesterfelt: It's not a simple product—there are many variations in both quality and price. You have to take time to ask questions, read the contract, and compare features to make sure you know what you're getting. You also have to shop for a financially strong company that will be there in the future if you ever need to file a claim. The financial problems experienced by some insurance companies during 2008 and 2009 have underscored how important it is to make sure the company you choose is sound.

DE: What basic features should a dentist look for?

Biesterfelt: Start with the definition of disability. Look for a policy that pays a benefit if you're unable to work in your “own occupation” — i.e., your dental specialty. This is much better coverage than insurance that only pays if you are unable to work in “any occupation.” Because dentists have highly specialized skills, they should insist on the higher quality “own occupation” coverage. Then, for example, if a back or wrist injury prevented you from working as a dentist, you would be eligible to collect benefits even if you decide to work in another field.

DE: Are all “own occupation” policies basically the same?

Biesterfelt: No. Some pay own occupation benefits for only the first two or five years of a disability and then require that you be disabled from “modified own occupation,” “any occupation,” or “any reasonable occupation” to qualify for further benefits. A higher–quality plan pays own occupation benefits to a high age, like 65, and doesn't switch you to an inferior disability definition.

DE: What happens to a dentist's disability benefits if he or she can't practice any longer, but decides to pursue another career?

Biesterfelt: Again, that depends on the policy's definition of disability. The best insurance will continue to pay full benefits if you are totally disabled from the practice of dentistry, whether or not you choose to earn income in another occupation such as teaching dentistry or as a dental consultant.

DE: We know dentists who have a disability but still work part–time. Does disability insurance pay benefits in those situations?

Biesterfelt: Not always. The insurance must include a partial (or residual) benefit, which would pay benefits proportionate to your loss of income. It could be part of the basic plan or purchased as an option. Either way, it's an important feature because partial disabilities are common, yet they can significantly reduce your earning potential. In addition, the most generous plans will pay partial benefits if a disability forces you to reduce to part–time even if you were not totally disabled first. This can be particularly meaningful for dentists who develop a degenerative joint condition, such as osteoarthritis, and have to cut back on their hours, yet might never become totally disabled.

DE: How much disability insurance should a dentist have?

Biesterfelt: The goal is to keep as close to your standard of living as possible if you become disabled so most experts recommend purchasing a monthly benefit that approximates 60% of your net monthly earned income since that's roughly equal to your take–home pay after taxes. If you own a practice, you should also consider business overhead insurance. This type of disability insurance will help keep your practice functioning while you recover because it reimburses certain expenses related to operating a practice, such as rent, utilities, employees' salaries, practice loans, a replacement dentist, and so on. Online calculators like the one on the ADA Insurance Plans' Web site (www.insurance.ada.org) are a quick way to calculate your need more precisely. And, of course, as your income and practice grow, it's imperative to increase your personal disability income coverage as well as your business overhead insurance.

DE: How long do you have to wait to start receiving benefits after a disability?

Biesterfelt: That depends on the elimination, or waiting, period—it's the time that must elapse from the date the dentist first qualified as being disabled until benefits can be paid. With most plans, you can choose a 30–, 60–, 90–, or 180–day waiting period. The longer the elimination period, the lower the premium cost. We recommend that dentists determine how long they could get by without any income and choose the waiting period accordingly. From our experience, dentists typically choose a 90–day waiting period. Also, look for a policy that waives the waiting period if you are hospitalized for a certain number of days due to the disability.

DE: Are options a good deal or a waste of money?

Biesterfelt: Options, also called riders, can be very useful because they allow you to customize your basic plan to fit your needs and budget. For example, the residual benefit option we talked about earlier is an important one to consider. Another is the future increase option that allows you to add to your existing coverage in the future without having to undergo a medical exam. There's also a cost of living adjustment option, or COLA, that automatically increases benefit payments after a disability to keep pace with inflation. That could be especially valuable if you are disabled at a young age, and your disability lasts for many years.

DE: Is it difficult to qualify for disability insurance?

Biesterfelt: It can be. That's why it's a good idea to apply for insurance early in your dental career while you're in good health. The future increase option we talked about is another way to ensure your insurability. It's also advantageous to work with an insurance company that specializes in the dental market because the company's underwriters are experienced in assessing the risk of disability as it pertains specifically to the practice of dentistry. Therefore, insurance companies aren't lumping dentists together with other similar professions when creating premiums.

DE: How can a dentist protect against insurance companies that sell a disability plan and then change the coverage down the road?

Biesterfelt: Again, read the contract carefully. For example, under the ADA Insurance Plans, the coverage features you choose cannot be changed without your approval, unless, of course, changes are mandated by law or regulation.

DE: Earlier you mentioned the importance of working with a reliable company. How do you check out an insurance company?

Biesterfelt: Look at a company's ratings by independent rating services such as A.M. Best, Standard & Poor's, and Moody's Investors Service. And ask other dentists about their personal experience with a company and its representatives. Find out if the company has experience in the dental market. All this can take some time, but it's time well spent. If you ever become disabled, you will be glad you insisted on a quality plan.

Editor's Note: This article does not constitute legal, tax, or financial advice. Please seek professional input as appropriate to your situation. References available upon request.

Jim Biesterfelt is vice president of Group Special Accounts at Great–West Life & Annuity Insurance Company, which underwrites and administers the ADA Insurance Plans and is sole provider of ADA–sponsored life and disability insurance. For information about ADA Insurance Plans, call (866) 607–5330, send an e–mail to [email protected], or visit www.insurance.ada.org.

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