Disability definition and other DI questions

[JD]

Hello,

I'm finishing up a fellowship in Infectious Diseases and trying to analyze my disability insurance options. I have made an effort to read up here and elsewhere but obviously I'm still a novice in this realm.

One of the gloomier proposals I've seen to illustrate the value of "Own Occupation" policies is that with a typical group policy "you are covered in your occupation for two years. After that, if you can sell pencils on the street, the insurance company will not pay."

http://library.groupcoverage.net/articles-indvidual-disability-vs-group.html

While I don't need to live in luxury, the prospect of attempting to pay off my six-figure student loans on minimum wage is not especially enticing. I am not in a procedural specialty and while it does seem unlikely that I'll develop a problem that would preclude me from performing a basic physical exam and recommending antibiotics yet leave me able to bag groceries, the possibility remains frightening. My future employer offers what seems like a relatively generous group policy: 66% of monthly wage base up to $20k. The policy is paid for entirely by the hospital as far as I can tell. It does feature a form of the 2-year rule alluded to in the example above. The policy notes:

"Disability or Disabled is either:

1) for the Elimination Period and for the Normal Occupation Period [2 years], being unable due to sickness, bodily injury or pregnancy to perform with reasonable continuity the Material Duties of your Normal Occupation; and for the Any Occupation Period, being unable due to sickness, bodily injury or pregnancy to perform with reasonable continuity the Material Duties of any occupation for which you are reasonable qualified by education, training or experience; or

2) working, but due to sickness, bodily injury or pregnancy being unable to earn 80% or more of your Increasing Monthly Wage Base."

Does #2 above at least protect me from trying to subsist solely on street pencil sales (so to speak)? ie if I can work but do not earn 80% of my previous physician salary I will still receive disability benefits?

Another question: if I purchase an individual policy before the end of fellowship, would these benefits be paid in addition to my employer's group policy, or offset? The policy states:

"Other Benefits are any benefit amounts that are payable for disability under any other group [emphasis mine] insurance coverage."

I am somewhat reluctant to invest heavily in an individual policy because, like the author of this blog while I am healthy I do have hobbies (climbing, skiing) that both my mom and insurance companies frown upon. It seems unwise to rely on something that excludes some potential causes of my future disability. I am however not ignorant of the benefits of insurance in unforeseen circumstances (my neighbor set the apartment on fire, thanks renters' policy!) and am open to opting for a combination of group + individual policies.

Anyone have any wisdom to share for my situation?

Thanks for your time.

[Scott at MD Financial Services]

What I typically look in the definition are:

1:  Is there a clause of 2 years, 3 years, or 5 years and if so what is the definition past that period of time.  Typically they read that they will 'protect you in your occupation as long as you are not engaged in another occupation for wage or profit but after 24 months of a disability you will be required to do any reasonable occupation based on your education, training, OR experience'.  That is pretty weak without a doubt because if your education makes you eligible even though you have no training then it is an eligible occupation.  The word OR makes a HUGE difference.

2:  Residual benefits in group plans usually have a loss of income of 20-25% to trigger benefits and at 80% benefits are cut off.

 

I think you will be fine selling pencils or bagging those groceries as that income is probably not going to exceed your 20% of pre-disability income but the High School Biology teacher position (like it or not) potentially could cause a problem depending on the salary and what your pre-disability income was.

Let me know if we can help further.

[JD]

Hi Scott,

Thanks a lot for your time.

Can you tell me if I understand the very basics?

IF I am salaried at ~$150k and (I'm obviously oversimplifying) thus earning ~$12k/mo before taxes...

Does that mean that (without going too deep into the fine print) under the above group disability policy, so long as I make less than ~$80k or ~$6.7k/mo pre-tax (66% of $150k is $100k or ~$8k "monthly wage base," 80% of that is $80k) selling pencils or teaching high school, I will receive some disability benefits to boost my earnings to the $6.7k/mo range?

 

Thanks again!

[Scott at MD Financial Services]

JD,

First off your welcome.

The simple ratio in that group product if you are working is, % of income lost is the % of the benefit that will be paid.  If your % of lost income exceeds 80% then you get 100% of the benefit, if the % of income lost is less than 20% then the benefit is $0.

If your income is $150k then anything less than $119,999 of income would trigger some form of benefit.  If your income is something less than $30,000 then you would trigger 100% of benefit.  Now keep in mind the carrier in these situations hold the keys....if they THINK you could or should be doing something else that would earn more money thus allowing them to reduce more benefit to you then they can and typically will use that assumed position with that assumed income.  That is why when they inject the language of Any occupation...reasonably qualified....or the the word OR, you know you typically have a real mess on your hands if you ever have a claim.

 

From your posting above:

"1) for the Elimination Period and for the Normal Occupation Period [2 years], being unable due to sickness, bodily injury or pregnancy to perform with reasonable continuity the Material Duties of your Normal Occupation; and for the Any Occupation Period, being unable due to sickness, bodily injury or pregnancy to perform with reasonable continuity the Material Duties of any occupation for which you are reasonable qualified by education, training or experience; or"

These type of contracts are referred to as income protection contracts for 2 years then Any Occ contracts.  True Own Occupation/Specialty contracts protect your specialty so if you can't do your medical specialty then you get paid 100% of the benefit regardless of future income and regardless of future time spent doing your next occupation.

Let me know if we can help further.