Relevant Factors for Resident Physician Disability Insurance
What are the relevant considerations for resident physician disability insurance? Resident physicians may want to consider getting disability insurance for several reasons.
For one, being a resident physician is a demanding and physically demanding job, and there is always the risk of on-the-job injuries or illnesses that could prevent a resident physician from being able to work. In addition, disability insurance can provide financial protection if a resident physician cannot work due to a non-work-related illness or injury.
Coverage of Disability Insurance
This type of insurance can help replace a portion of a resident physician’s income, which can be crucial in helping maintain their living standard and cover their living expenses. Additionally, disability insurance can help cover the cost of any necessary medical treatment, rehabilitation, and other fees associated with a disabling condition. For more detailed information on disability insurance, you might find this article from Investopedia informative.
If you’re in training now, you’ve likely received a disability insurance policy offered through an outside company or your employer. And I find most residents or fellows utilize the disability policy, then get locked into a certain amount. And if they continue that policy, it can follow them throughout their career. But there are some things to think about. Whether to get supplemental disability insurance and how that works if your employer also offers it.
Should Residents Buy Disability Insurance?
As a healthcare attorney with over two decades of experience, I have dealt with disability insurance issues and have advised clients on whether it is a good option for them. For example, I had a client who was a surgeon and did not have sufficient disability insurance. He suffered nerve damage in his right hand, which made it impossible for him to continue practicing surgery. In this situation, disability insurance would have been beneficial to help him financially during his recovery and transition to a different career.
Types of Disability Coverage
As a surgeon, it is essential to have disability coverage to protect against a potential loss of income. There are two types of disability coverage: short-term and long-term. Short-term coverage typically lasts for 30 to 90 days and provides a percentage of your average wage. Long-term disability coverage is for those considered totally or partially disabled and unable to practice as a physician. The policy determines the length and amount of payments for long-term disability. Both short-term and long-term disability coverage needs to be in place for physicians.
It is crucial to ensure that your disability coverage includes both short-term and long-term coverage. Some policies only provide long-term coverage. A short-term disability policy typically provides 60-80% of your wage or salary for a short time. A long-term disability policy can provide 40-80% of your wage or salary, depending on the amount you pay for the policy. It is essential to carefully consider the terms of your policy to ensure that you have the coverage you need.
Disability Policy and Its Benefits
The premium for your disability policy, which is the annual cost of the coverage, will determine the number of benefits you receive if you become disabled and are eligible to collect. Those who pay a higher premium or a higher percentage of their income will receive a higher benefit amount if they become disabled. On the other hand, those who spend a lower premium or share of their income will receive a lower benefit amount. It is essential to carefully consider the terms of your policy and the premium you are willing to pay to ensure that you have the coverage you need. For a further explanation of how insurance premiums work, consider this resource from Insurance Business America.
One issue with some disability policies is that they are set at a fixed amount based on your income when the policy is purchased. If your income increases substantially over time, you may need to revisit the policy and adjust the benefit amount to ensure adequate coverage. It is vital if your policy is based on a percentage of your income at the time of purchase. It is essential to carefully consider the terms of your policy and the potential for income changes over time to ensure that you have the coverage you need.
Review Your Disability Coverage and Policies
It is crucial to work with your insurance agent to ensure that you have the appropriate amount of disability coverage as your income increases throughout your career. Many people have disability policies while in training, which they can take to their new job. However, if their new job offers a policy, it is often worthwhile to consider using both policies for added protection.
In many cases, employer-provided policies may not be as comprehensive as individual policies and may have a lower benefit amount. It is essential to carefully consider the terms of both policies and work with your insurance agent to determine the best course of action.
It’s usually a good idea to utilize the employer’s disability policy. Still, you need to weigh the employer’s policy versus the one you have now and are taking with you to determine if you want supplemental coverage. Even if you bring a policy from training into a new job and have essentially two disability policies that are simultaneously active, you can see if you can beef up one of those if necessary. I should have gone over this at the beginning.
The point of the disability policy is that if you are disabled and unable to do your job, you will get at least some of your income for a long time so that you’re not entirely out of luck and have no way of producing income for your family.
Physician Disability Insurance Cost
The cost of a disability insurance policy will vary depending on several factors, including the physician’s age and health. Additionally, the coverage and the type of policy (short-term or long-term) will also affect the cost. In general, the price of a disability insurance policy for someone who makes $200,000 a year may range from several hundred dollars to several thousand dollars per year. Disability insurance is similar to life insurance in that it provides financial protection for your loved ones in the event of a disability.
The policy will provide a benefit amount that can help your family maintain their standard of living and cover expenses in the event of a disability. Disability insurance policies can be expensive, especially for high-income earners such as doctors. For example, as a surgeon earning close to $1 million per year, the cost of a disability insurance policy may be surprising (in a bad way!). However, the peace of mind that comes with knowing that you and your family will have financial protection in the event of a disability may be worth the cost.
Insurance is a gamble, and no one expects to become disabled, but having a disability insurance policy can provide peace of mind that your loved ones will be taken care of if the unexpected happens.
Seek a Trusted Physicians Insurance Agent
The best way to find a disability insurance policy is to find a trusted insurance agent. Ask your colleagues if they have any recommendations for local agents. Having a name and face to go with your insurance agent can be helpful, as you might be doing business with them for many years. Meeting with your insurance agent in person allows you to ask questions and get to know them better before making a decision. It is essential to carefully consider your options and work with a trusted insurance agent to find the best policy for your needs.
Many agents specifically cater to physicians, so I would try to find one of those. They have some creative ways of dealing with things; just utilizing a general person who doesn’t focus on healthcare is not a bad idea. But it’s always good to do business with an expert. So, that’s what I suggest.
Malpractice Insurance for Fellows
What are some issues surrounding medical malpractice insurance for fellows? First, when you are in training as a resident or fellow, whatever program you’re with will provide medical malpractice insurance. Then, depending on the type of policy, they’ll also cover your tail insurance. Do you need additional medical malpractice insurance during training?
No, you do not. I don’t know of any physicians with supplemental medical malpractice insurance. Anytime you’re working for an employer as an employee is different than if you’re an independent contractor.
Different Types of Medical Malpractice Insurance Coverage for Fellows
But if you’re working for an employer as an employee, they will pay for your underlying premium, which means how much it costs to insure you annually. And depending upon what type of policy it is, the language in the contract will dictate if tail insurance is necessary.
Let’s go through the different types of medical malpractice insurance and what a fellow should think about.
Self-Insured
First, many large organizations, hospitals, and hospital networks are self-insured. It’s slightly different than if you are in private practice or working for a corporate-owned physician group. If they’re self-insured, in the simplest way, they set aside a large pot of money, and they pay all the claims out of that. In that scenario, the physician wouldn’t need to worry about anything. There is no underlying premium, and they wouldn’t have to worry about paying for tail insurance.
Claims-Made Policy
The second type of insurance is claims made. Claims made medical malpractice insurance means a policy has to be in effect when someone makes a claim. So, you could work for an employer. Let’s say you work for them for four years, then leave. That claims-made policy only has effect during the term of employment. So, you could leave an employer, and that policy is over. However, there still is time for someone to sue you. The statute of limitations in most states is around two years.
There are some exceptions for minors when they become adults, but I’m not going to get into that. So, let’s take two years as an example. If you have a claims-made policy and leave an employer, there will be a gap where there’s no coverage unless you get tail insurance.
Tail Insurance
Tail insurance covers the gap between when you leave an employer and the last day somebody can sue you. You can purchase different lengths of tail insurance. It could be indefinite, meaning it lasts forever. It could be five years, or it could be three years. And the contract will usually dictate how long the tail policy needs to be. And as I said before, the employment contract will also dictate who pays for tail insurance. So, the language will state if it is a claims-made policy and if the contract terminates, either the physician or the employer will have to purchase tail insurance. It’s probably 50-50 if you work for a private physician-owned practice.
It depends, but it’s different from a slam dunk where the employer will pay for your tail insurance every time. That’s not true. The cost of tail insurance certainly is a consideration. And tail insurance generally is about twice your annual premium. The yearly premium is how much it costs to insure you annually. And you multiply whatever that number is by two, and that’s how much you have to pay for tail insurance. It’s a one-time cost. It’s not like you have to pay for this yearly, but it can be costly for some specialties.
Depending on your claims history and length with the employer, the cost could be as low as 150% up to 300%. But as a rule of thumb, two times the annual premium is pretty standard. And let’s take an OB-GYN, for example, which is the most expensive.
An annual premium for an OB-GYN could be 50 to $80,000. And so their tail insurance costs could be somewhere between one hundred to 160,000, which is a large amount of money. Whereas if you’re in primary care, your annual premium is around $6,000. So, your tail cost would be $12,000.
Resident Tail Insurance (Does 2X PROTECT You?)
Does a physician resident need tail insurance after they complete their training?
First, a brief discussion of medical malpractice and the different types of insurance utilized by physicians is essential. Then I’ll talk about tail insurance a little bit as well.
Types of Medical Malpractice Insurance and Their Difference
There are two main types of insurance used for physicians. You have occurrence-based coverage and claims made. With an occurrence-based policy, you do not need tail insurance. With a claims-made policy, you do. Let’s talk about the difference between the two. An occurrence-based policy has to be in effect when the malpractice incident occurs.
If you have insurance while you’re working for an employer and the employment relationship ends, the policy ends at the time that the employment relationship terminates. You do not need additional insurance, called tail insurance after you leave. People would use occurrence-based coverage because it has no tail insurance cost. However, occurrence-based coverage is generally about a third more expensive than claims made. Let’s talk about claims made. A claims-made policy has to be in effect when someone makes a claim. The big difference between occurrence and claims made is that the employment relationship could end, and your claims-made policy ends. However, someone can sue you up to two years after they either knew or should have known of the malpractice incident.
So, you could be done with the employer but get sued two years later, and the claims-made policy ended. If there is another policy in place, called tail insurance, which covers the gap between when you leave the employer and when the statute of limitations runs, you’re covered. If you’re sued within that period and have coverage, you don’t have anything to worry about.
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