A dentist friend went on disability and is now navigating claims under two different policies. He’s learned several expensive lessons.
His biggest regret was not purchasing more disability insurance when he was young and healthy. Once your health changes, it may be impossible or far too costly to increase your benefits.
For early- to mid-career dentists, your greatest financial asset is not your investment portfolio. It’s your ability to generate income over the next 20 or 30 years. That future earning capacity needs to be protected with long-term disability insurance.
Look for a True Own-Occupation Definition
First, be certain that you have a true “own-occupation” definition of disability that remains in effect for the entire benefit period.
Many policies provide the favorable definition for only the first 24 months before switching to an “any occupation” standard, making it much harder to continue receiving benefits.
A strong policy should pay if you cannot perform the substantial duties of dentistry, even if you are capable of teaching, consulting, or working in another profession.
Consider Residual Disability and Future Purchase Options
Also pay for a residual (partial disability) rider, as many claims involve a reduction in work capacity rather than total disability.
A future purchase option, or guaranteed insurability rider, is also worth getting if it’s available. It allows you to increase your monthly benefit as your income grows without having to undergo new medical underwriting.
Avoid most other riders. They are expensive and provide limited value, including return-of-premium, catastrophic disability, and Social Security riders.
Should You Buy a COLA Rider?
A COLA rider, which increases your disability benefits each year with inflation, presents a more complicated decision.
There are two reasonable schools of thought. Since it’s an expensive add-on, you might choose not to buy the rider and instead make up for it with as much fixed insurance as you can get, adding policies over time as your income increases. You could then invest the savings from not purchasing the COLA rider.
We won’t argue with anyone who takes that approach.
But under the old theory of “Man plans and God laughs,” there is a risk of young doctors becoming disabled early in their careers and therefore not being able to add more policies later—or failing to invest the savings from the COLA rider.
A younger dentist who becomes disabled early in his or her career could see inflation greatly erode fixed benefits over the coming decades.
If you are in your 20s or 30s, you should pay for the COLA rider.
Consider a Longer Elimination Period
Finally, if you have sufficient savings to cover a longer 180-day elimination period, compared with the standard 90-day period, this can reduce your annual disability insurance premiums by up to 20%.
For dentists with enough savings to comfortably cover a longer waiting period, the premium savings may make this an option worth considering.