What disability insurance should a doctor have?
Doctors and dentists should have own-occupation disability insurance, which pays if you can no longer perform a specific specialty due to injury or illness.
In this article, we’ll break down everything you need to know about own-occupation disability insurance for doctors, including how it differs from any-occupation policies, how much coverage is enough, and when it’s time to revisit your policies.
Why Disability Risk is Higher for Practice Owners
Disability risk often remains higher for practice owners. For one, running a practice comes with high physical demands, which can cause serious health challenges. In fact, one study found that 58.3% of dental professionals reported musculoskeletal disorders (MSD). MSD, fractures, sprains, and mental health challenges can all result in a disability risk. Outside of the physical toll, most practice owners have single-income dependency. If no other associate physicians or dentists are active in the practice, revenue halts with an illness or sickness.
Own-Occupation vs. Any-Occupation Policies: Why the Distinction Matters
Disability insurance for doctors isn’t the same as a standard policy. According to Savant Wealth, any-occupation policies provide coverage for an individual unable to work in a job suitable for their age, experience, and education, while own-occupation policies offer coverage for the individual’s specific occupation at the time of the claim.
The policy distinction is crucial when it comes to potential benefit payouts. Under an any-occupation policy, if the individual could find employment elsewhere, benefits may be disallowed. However, under an own-occupation policy, if the individual is unable to perform the duties at their specific job, they can receive benefits, even if they have employment elsewhere.
Take a dental surgeon who suffers an injury that prevents them from performing surgery. Under an any-occupation policy, they may be disallowed from receiving benefits since they could find other employment in a dentistry-related field. Depending on the terms of the policy, an own-occupation policy may provide benefits if the surgeon is unable to perform the duties of that specialty, even if they continue working in another capacity.
How Much Coverage is Enough: Using Income Replacement Benchmarks
So, how much coverage is enough? While there’s no one-size-fits-all way to determine the right own-occupation disability coverage, using income replacement benchmarks can be a great starting point. Some insurance professionals use income-replacement benchmarks suggesting that doctors may consider coverage designed to replace approximately 60% to 70% of gross income, although the appropriate amount of coverage will vary based on individual circumstances.
Let’s say that you make $250,000 per year, which includes your salary and bonuses. This results in a gross disability payout of between $150,000 and $175,000. Other factors can determine the income-replacement percentage you want, such as other household income and expenses.
Individual vs. Group Disability Policies: The Pros and Cons
Individual disability policies have different characteristics compared to group disability policies. Certain own-occupation disability policies may provide benefits if an insured is unable to perform the material duties of their specialty, even if they engage in other employment, subject to the terms, conditions, and limitations of the policy. On the contrary, group disability policies can have an intro-period treated like own-occupation for 12 to 24 months. Then, they switch to an any-occupation type policy, where benefits are denied with other employment.
Another key distinction between individual and group insurance for doctors is the ownership. Own-occupation policies are owned by the individual doctor, while employers own group policies. If you leave the practice with a group policy, rates and terms can change. Under a group policy, covered compensation can be limited to base salary alone. Own-occupation policies, on the other hand, may include compensation beyond base salary, such as bonuses or other earned income, depending on the policy. Talking with a qualified disability insurance provider is the best way to determine which type of policy is right for your situation.
How Disability Insurance Interacts with Business Overhead Expense (BOE) Coverage
Disability insurance for doctors isn’t the only type of protection practice owners can leverage in the event of injury or illness. Business overhead expense policies are generally designed to help cover certain eligible practice expenses during a covered disability, subject to policy terms and limitations. Covered expenses may include items such as rent, utilities, and employee compensation. However, business overhead expense policies usually specifically exclude owner compensation. Bundling an own-occupation disability policy with a business overhead expense policy can provide your practice with more financial protection.
When to Review and Update Your Coverage
While it’s always great to review your own-occupation policies on an annual basis before renewals, there are a few more instances that can trigger a policy update:
- Income Growth – As your income increases, your policy may need to be changed to fit income replacement benchmarks.
- Career Transitions – If you are transitioning careers, such as moving into a new specialty, your own-occupation policy should be updated.
- Major Life Changes – Major life changes, like adding kids or a partner no longer working, can be a great time to revisit your policy coverage.
Summary
Own-occupation disability insurance for doctors is a key component of protecting your financial health. If you have questions about disability insurance and the coverage most practice owners underestimate, please contact us.
PBM is now part of Savant Accounting & Business Advisory (“SABA”) as of 8/31/26. SABA provides accounting, tax, consulting, payroll, retirement plan, and business advisory services to businesses, business owners, individuals, and families. SABA is a wholly owned subsidiary of Savant Wealth Management. The scope of services to be provided depends upon the needs of the client and the terms of the engagement.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment or tax advice from Savant. Please consult your investment or tax professional regarding your unique situation.