Why You Should Get Disability Insurance NOW!

Insurance has always been a funny concept to me - why am I paying for something I'm hoping NOT to use!?  But it's precisely those "god forbid" and "what if" situations that support the behemoth insurance industry.  If you have ever been in a car accident, you'll understand.  In the next few minutes, I hope to discuss with you and convince you why you should have Disability Insurance (DI) now.

  • What is Disability Insurance (DI)? Just like your car insurance protects you in case you get in a car accident, DI protects your income in case you become disabled.  The definition of "disability" may differ from policy to policy so it's best to carefully review the terms so you understand what is covered.
  • Why should I get DI?  The same reason you have car insurance and home insurance - it's a "just in case" plan.  Personally, I hope I never have to use my DI policy.
  • Types of DI?  There are 2 types of DI policies
    • Short Term - protects you for disabilities from 0-6 months.  I don't recommend you get this because the premium is usually quite high.  Also you should already have a 6-month emergency fund saved up exactly for these types of situations.
    • Long Term - protects you for disabilities longer than 6 months.  YOU SHOULD HAVE THIS.
  • Why NOW?  There are several good reasons why NOW is the best time to get your DI.
    • Age/health - just like a poor driving record raises your car insurance rates, your health status will impact your DI rates.  The older you get, the more opportunities for bad things to happen to you.  So it's best to lock in your DI rates when you're young and healthy.
    • Employee benefits - Like I discussed in my previous post on Work Perks, companies are willing to give out discounts to your employer to earn your business.  The same goes for insurance companies looking to sell you a policy.  For example, I currently get a 30% discount on my DI policy by virtue of being an employee of Florida Hospital.
  • A few key terms - your financial advisor will be able to answer most of your questions, but let's cover a few key terms.
    • Elimination Period - the time between when you become disabled and when your DI benefits start.  The longer the elimination period, the cheaper your premium.
    • Exclusions - a list of things that will void your DI policy such as self inflicted injury, war etc.
    • Noncancellable/Guaranteed Renewal - basically says once you sign up for a policy with a company, they cannot cancel it.  They may or may not be allowed to raise your rates.
    • Riders - optional features you can add to customize your policy.  The one you should strongly consider is the "Own-occupation" rider which says the DI policy kicks in if you cannot practice your own specialty.  For example, you are a plastic surgeon who suffers a hand injury.  This will however, increase your rates. 

I hope I haven't put you all to sleep, but I hope this serves as a primer to Disability Insurance and convince you to look into it.  There are a lot more to be said about DI, see the references below if you would like to learn more.   

Future Proof, MD

Dr. Bo Liu is an aspiring radiologist-in-training and the founder and editor of the White Coat Money Blog.  He has an interest in interventional radiology and helping his medical colleagues get ahead in this mad world of medicine and money.  When he's not crushing the list at the PACS station or typing up your next favorite blog post, you can usually find him at the local badminton club, movie theater or the most recently opened restaurant.