It's important to plan ahead and be practical while running your dental practice. Buying disability insurance is a practical and smart move. But when you decide to make the purchase, there are several things you need to watch for.
Choosing the right disability insurance policy requires a considerable amount of knowledge and research. You need the knowledge of insurance agents and companies to steer you in the right direction, but you must also conduct your own research to better ensure you’re receiving appropriate advice.
With all of the available companies, policy types, and optional features, it’s difficult to know where to even begin. Here are five areas dentists should research and understand before shopping for disability insurance.
1. Know the reputable insurance companies to help focus your search.
It’s important for dentists to know which reputable companies offer own occupation disability insurance policies. Guardian, Mass Mutual, The Standard, Principal, Ameritas, and Ohio National are all recognized in the industry for having strong disability insurance policies. These are established insurers with strong financial ratings that offer the key components for adequate disability coverage for medical professionals. However, you will want to verify which ones offer disability insurance in your state. Some companies do not sell their policies in all 50 states.
2. When comparing companies and features, everything is not always apples to apples.
Dentists need to do more than just compare costs. Companies are different in the ways they structure their policy features. For example, some companies include own-occupation in the base contract and others require the purchase of an additional rider to design the policy as own-occupation.
Another example is future increase option, which provides the opportunity to increase your coverage if your income increases. But the availability and process to increase can differ by insurer—some offer it on an annual basis to age 55, others annually to age 60, and others only every three years. For more information on the differences between policies, see the Ultimate Guide to Disability Insurance for Dentists.
3. Know how your agent is paid and how he or she is incentivized.
Insurance agents, including those who sell disability coverage, are almost always paid a commission. The total commission is a percentage of the premium payments of the policies sold to clients, which can range from 50% to 70%. The more premium you pay for insurance, the more your insurance agent earns in commission.
This is important to know because some disability insurance agents may attempt to pad your policy with added features you may not need in order to bump up their commission. These features may come in the form of optional riders that do little to enhance your coverage but add to your cost and their compensation.
Sometimes, insurers want to increase the sales of a specific product by offering a commission bonus for all policies sold in a month or quarter. Agents can also qualify for incentives such as trips for their total sales in a year. In short, make sure you find an agent you trust to give you unbiased advice.
4. Know which features are absolutely essential, and which ones you can live without.
Because agents can be incentivized to sell you more than you need, it’s critical to know what aspects of your disability coverage are “must-haves” for your situation and which ones are not essential. Any dentists in the market for disability insurance coverage will want to have the following features included in their policies:
Non-cancelable—This means the insurer cannot change any part of the policy, including the premium amount, and cannot cancel the policy for any reason.
Own-occupation—This provision states that the policy will pay benefits if an injury prevents you from working in your medical specialty, even if you’re capable of earning income in another profession.
Benefits guaranteed to age 65—This will allow you to collect benefits until you reach age 65, regardless of whether you become disabled at age 35, 45, or 55.
90-day elimination period—Disability policies include a waiting a period, sometimes referred to as an elimination period, which is the period of time between when the disability occurs and when benefits are paid. You should opt for a policy that begins paying at least within 90 days of the disability occurring.
Another feature to consider is a residual disability benefit. This allows you to collect benefits if you aren’t totally disabled, but suffer a loss of income due to a disability. Most companies require a loss of at least 15% to 20% before any benefits will be paid.
5. Know which states are more expensive than others if you will be moving.
This often comes as a surprise to many dentists, but the cost of disability insurance can significantly vary between states. This is due to several factors, including cost of living, claims history in each state, the regulatory environment, and overall competition between insurers. If you’re a dentist training in an expensive state, such as California, and you might move to a more affordable state to establish your practice, you may want to wait until after you move to purchase disability insurance. Knowing the cost difference between locations can help you save as much as 30% on your premiums.
