Case Study: A Surgeon is Grateful for Long-Term Disability Insurance

Like many of you, I do a lot of reading to stay on top of the changes in my industry. I need to be able to provide the very best advice for my clients. Something I haven’t talked a lot about is disability insurance, but this story caught my attention. This was about Derek, a 50-year old orthopedic surgeon, performing at the top of his game, making $500,000/year. He was divorced, had two kids in college and enjoyed living well.

Derek was with a patient one day when he noticed a slight tremor in his right hand. He was a doctor, prone to self-diagnosis, so he feared the worst. He sought out a neurologist friend from medical school, who confirmed his fear—his tremor was an early sign of Parkinson’s disease.

Parkinson’s: a devastating diagnosis

This was a devastating diagnosis. People are living with Parkinson’s these days and managing their lives around the disease, but Derek knew that the progressive tremors would soon end the surgical career that he loved.

Fortunately for Derek, long ago in medical school a fellow student had advised him to buy a Long-Term Disability Insurance (LTDI) policy to protect himself as he began a high-paying, demanding, career. With this diagnosis, he began making changes in his life to accommodate his disease. He sold his practice and became a full-time professor. Less stressful and not as physically demanding, it would be much easier to manage his Parkinson’s disease in this new role.

Best of all, because of Derek’s LTDI, he will receive benefit payments—equal to 60% of his salary as a surgeon—until he retires. This policy allows him to earn from a job that is different from his original occupation while receiving the LTDI benefits.

How does LTDI work?

• Cost. You can expect to pay between 2–4% of your gross income in annual premiums; the cost will depend on factors such as age, gender, occupation and policy features.
• Tax benefits. The benefit amount of your policy would cover you if you’re out of work for an extended length of time. The benefits aren’t taxed (if you pay with after-tax dollars), so a policy that pays out 60% of your gross income would effectively replace most of your take-home paycheck.
• Look for Own Occupation Policies. These define a disability as the inability to work at your regular occupation, even if you still might be able to work at another occupation—like Derek, you can continue to collect disability insurance while working at another profession.
• Residual disability benefits. A policy with residual disability coverage pays benefits if you can work some time but not all of the time due to a disability. The policy will help cover the partial loss of income with a partial payout of your disability benefit.
• Length of coverage. The most comprehensive disability policies cover you until you reach 67 —meaning if you get permanently disabled from working in your 30s, you’ll be covered until 67, when your retirement benefits take over. However, there are shorter coverage periods that bring the premium down.

Who needs LTDI?

Most working people should have some LTDI. Extended medical issues, bills and subsequent lost income are the cause of much of the financial hardship in the US. Physicians, in particular, should have disability insurance. It protects their substantial investment in their education and training and safeguards future income from a disability that would prevent them from working in their profession.

Group LTDI
Group disability is also an option if you have or work for a company. Some group plans insure as few as two people and the underwriting can be more lax than with individual policies.

Do you have questions about long-term disability insurance for yourself or your business? Contact Carly: carly@cjbins.com, CJB Insurance Services, 510.342.2670.