How Physical Therapists Should Purchase Long-Term Disability Insurance

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If you are a physical therapist trying to figure out the best way to go about purchasing a private long-term disability policy, you came to the right place.

If you haven’t done so already, before reading this article, be sure to first check out Why Allied Health Professionals Should Consider Purchasing Long-Term Disability Insurance. That article covers what long-term disability insurance is and why those working in allied health professions should strongly consider purchasing such a policy for themselves.

Now we will learn what steps to take to make sure you go about purchasing the right policy the right way, as I have done.

Let’s get started.

HOW DO I CHOOSE MY INSURANCE AGENT?

When deciding which insurance agent to work with, make sure that they are an independent agent.

This means that they have no financial reason to market one insurance company’s policy over another. Independent agents typically advertise themselves as such.

They should also present you with policies from several different companies so that each policy can be easily compared. For example, my independent agent at Pattern Life provided me with the comparison below:

Disability Insurance Quotes

If you would like to use Pattern Life to purchase your long-term disability insurance policy like I did, you can start by filling out a simple form by clicking here.

If you work with a different insurance agent and they only provide you with quotes from one insurance company, they are likely not an independent agent.

Finally, the agent should not charge you for their time. Instead, the agent makes a commission from the insurance company from which you choose to purchase a policy.

Even with all of this in mind, it can be a good idea to get quotes from more than one agent to further decrease any likelihood of bias. You do not need to choose an agent located geographically near you as all business with your agent can be conducted remotely.

The agent should also be very familiar with the physical therapy profession and the own occupation clause needed to provide you with the best coverage.

Let’s take a look at what own occupation means next.

WHAT IS OWN OCCUPATION COVERAGE AND WHAT TYPES SHOULD I AVOID?

The own occupation component of a long-term disability insurance policy dictates if and when you are eligible to receive a benefit.

Be careful, as several different definitions of own occupation exist.

Take a look at some of the different types of own occupation definitions to help you avoid purchasing a policy you would likely regret:    

Any Occupation Coverage:

Any occupation coverage is the definition of own occupation that is most often used. It is especially common in employer group policies. With any occupation coverage, the only way to receive a benefit is if you are unable to work any job at all as deemed appropriate for you by the insurance company according to your education, experience, and training. You will not collect any benefit if one of these jobs becomes available even if you disagree and decide not to work at this job.

Modified Own Occupation Coverage:

Modified own occupation coverage is a type of own occupation coverage that will provide you with a benefit if you can no longer work your allied health job. However, if you begin to work a job different than your allied health job, then you will no longer receive the benefit.

For example, if you are a physical therapist but you can no longer work as a physical therapist, this type of coverage will provide you with a benefit. However, if you start to work a new, non-physical therapy job, then you will no longer receive the benefit.

Transitional Own Occupation Coverage:

Transitional own occupation coverage is similar to a true own occupation policy where, if you were to become disabled, you could begin working at a new non-physical therapy job. However, that job’s income could not exceed the income you previously achieved as a physical therapist. If that new non-physical therapy job made up to 80% of what you used to make, then your long-term disability benefit would provide you with only the remaining 20% of your previous income.

WHAT IS TRUE OWN OCCUPATION COVERAGE AND WHY DO I WANT IT?

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When working with your agent, the only long-term disability policies that should be considered are policies with a true own occupation clause.

A true own occupation policy is a clause in the long-term disability policy, sometimes added as a rider, that ensures that you are entitled to collect your full benefit upon a disability that prevents you from being able to perform the expected duties of being in your physical therapy job, even if you are able to work and collect income from a different occupation.

For example, if you are no longer able to perform your job as an physical therapist but you would like to work as a professor at a physical therapy program, the true own occupation clause ensures that you can collect all of your long-term disability benefit while also generating as much income as you would like while working as a professor.

For this reason, having a true own occupation clause is perhaps the single most important aspect to consider when obtaining long-term disability insurance.

WHICH INSURANCE COMPANIES OFFER TRUE OWN OCCUPATION POLICIES?

As of the writing of this article, I found only 6 companies in the United States that offer policies with a true own occupation clause: Ameritas, Guardian, Mass Mutual, Ohio Financial Services, Principle, and The Standard

However, Mass Mutual and Principle do not offer own-occupation clauses to physical therapists. Therefore, your insurance agent should only be presenting quotes from the remaining 4 companies.

In addition, if you live in California like I do, you cannot receive a quote from Ohio Financial Services since they do not offer long-term disability insurance in New York or California. This is why the picture of my comparison above only included these 3 companies.

WHEN CAN I START COLLECTING A BENEFIT AND HOW LONG CAN I COLLECT IT?

Now that you’re aware of what a true own occupation policy is, let’s discuss when a benefit can start being collected and how long this benefit may continue.

Elimination Period:

As discussed in Why Allied Health Professionals Should Consider Purchasing Long-Term Disability Insurance, the elimination period is the amount of time that must pass, following the initiation of a disability, before you may begin collecting your benefit. This period of time can range from 60 days to an entire year but is more commonly set at 90 days.

If your policy is set at 90 days, your benefit would not begin until the 91st day following the initiation of your disability. If you choose a shorter elimination period, it can cost you more to obtain that policy. Likewise, if you select a longer elimination period, it can cost less. However, make sure you have enough of an emergency fund in reserve to tie you over if a disability does occur.

Maximum Benefit Period:

This is the length of time that you may collect your benefit if a disability occurs. The maximum benefit period can be set for a determined number of years or simply until a certain age is reached.

It is common to have the maximum benefit period last until the age of 65, the typical age for retirement. It’s generally not advisable to set your maximum benefit period to an age greater than 65, since it will make your policy cost more and, ideally, you may reach a point where you achieve financial independence and end up canceling your policy prior to this age.

Mental Health Disorders:

Disability due to a mental health diagnosis is considered differently than physical disability when long-term disability is concerned. This is because there tends to be a higher degree of fraud in this area.

Therefore, it is common for long-term disability policies to only cover a short period, such as 24 months, or even refuse to offer coverage in a policy when the disability is due to a mental health disorder.

CAN I ADD ANYTHING ELSE TO MY POLICY?

There are many other things to consider when selecting your long-term disability policy. Each of the components we will discuss next can be referred to as a rider. A rider is an addition that can be added to an insurance policy for an extra cost. This addition can add further value to the policy in a certain manner. Below are examples of some riders to consider:

Residual/Partial Disability Rider:

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In terms of disability, so far we have only covered if you were to become completely disabled to the point of no longer being able to perform your allied health job. However, what happens if you can still perform part of your job? That is where the residual/partial disability rider comes in.

Let’s say you were only able to work 30 hours of a typical 40-hour workweek. Since you are still able to perform your job, just not to the fullest extent you were once able, you would experience a loss of 25% of your income. With the residual/partial disability rider, this percentage of lost income would have to meet or exceed the threshold of your residual/partial disability rider for you to be able to collect a benefit of that equivalent percentage. In other words, if your rider specifies that you or exceed a loss of 20% of your income, a loss of 25% of your income makes you eligible to receive the benefit of your residual/partial disability rider. However, if you experienced a loss of 15% of your income, you would not be eligible to collect a benefit. 

Now let’s tackle a more complex example. Let’s say you are a physical therapist working in multiple settings: Outpatient (50% of your income), inpatient (20% of your income), and home health (30% of your income). At some point, you become disabled and can no longer work in the inpatient setting, but you can continue to work in the home health and outpatient settings. Your residual/partial disability claim would reflect that you have had a loss of 20% of your income making you eligible to receive the benefit of your residual/partial disability rider.

Future Purchase Option Rider:

Another rider to consider is the future purchase option rider. If your income continues to increase over time, this rider allows you to increase the amount of benefit you can collect if a disability occurs without having your subsequent medical history taken into consideration like when you first applied for the policy.

This can be an especially important rider if you purchase your policy within a short timeframe of graduating from school or residency in an allied health field. Medical histories tend to become more complex as we get older.

At this stage in life, your future income is at its greatest potential since you have many income-generating years ahead of you. Therefore, if you were to become disabled early on, it would be a huge financial loss. Not only is getting long-term disability early on in your career a good idea because of this, but since your income will likely increase from there on out, you can also later increase your policy without a medical screening just as long as you are willing to pay the increase in cost.

When I purchased my private long-term disability policy, I added this rider. In doing so, it provided me with the option to increase my coverage every 3 years by as much as an additional $20,000 per month, provided my income increased enough to substantiate this.

When allowing this increase, insurance companies want to make sure you do not become over-insured. A quick estimate is that insurance companies typically want to insure somewhere between 40-60% of your income on a monthly basis.

Catastrophic Disability Rider:

The catastrophic disability rider is another commonly offered rider. A catastrophic disability is typically defined as the inability to perform two or more activities of daily living (ADLs) such as bathing, dressing, feeding, transfers, using the bathroom, ambulation, and memory or experiencing a major loss such as the use of one whole limb, both hands, both feet, eyesight in both eyes, or speech.

If a catastrophic disability were to occur, the benefit you would collect each month would be doubled.

Cost of Living Rider:

As each year passes by, you may realize that the value of money generally decreases due to inflation. So, what would happen if you were to become disabled and collect the same fixed benefit each year? That benefit would numerically remain the same, but each year its value would decrease at the rate of inflation.

Therefore, the cost of living rider accounts for this by increasing your benefit at the rate of inflation while you are disabled.

This rider is especially important if purchasing your long-term disability policy early on in your career since the value of your benefit is determined at that time. If you become disabled many years later, this rider at least allows the value of the benefit to more reasonably keep up with inflation.

Non-Cancelable Rider and Guaranteed Renewable Rider:

The non-cancelable rider prevents the insurance company from increasing your premiums while the guaranteed renewable rider prevents the insurance company from changing your policy terms or being able to cancel the policy altogether.

Both the non-cancelable rider and guaranteed renewable rider are often part of the long-term disability policy. If they are not included, you will want to have them added.

HOW LARGE A POLICY CAN/SHOULD I PURCHASE?

Early on in your career, consider purchasing the largest policy you can. The policy you will be allowed to purchase is reflective of your income. You will be asked to verify your income with a W-2 from your full-time job and/or 1099 statements from your side hustles. You can instead provide your previous tax return, which I opted to do, since that not only documented the income I made from my full time physical therapy job and the side hustle income I made from working prn home health and for Luna, but also the side hustle income I generated from my cash-paying private clients.

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Even if you don’t qualify for the amount of coverage you would want to purchase, you can include the previously mentioned future purchase option rider when you purchase your long-term disability policy and then, later on, increase your coverage as your income increases thereby allowing you to qualify for more coverage.

If you’re hesitant to purchase a larger policy because you want to avoid becoming over-insured, try to think ahead to determine how your expenses may increase as you acquire a home, get married, have children, etc.

In the end, I felt safer erring on the side of overestimating rather than underestimating.

DO I NEED TO KEEP MY LONG-TERM DISABILITY POLICY UNTIL IT EXPIRES?

Of course not! You should look to end your policy when it is no longer needed and thereby save money. Such is the case when you are in a financial position where you no longer need to rely on your job’s income.

It can be a good idea to make sure your overall health is in good order before canceling, so consider getting all of your ducks in a row by checking in with your primary care physician and ruling out any potential medical conditions that you may have not anticipated. This is especially true if you have a family history of something to be wary of.

FINAL THOUGHTS. . .

I hope you found the information covered here beneficial. Feel free to refer back to Why Allied Health Professionals Should Consider Purchasing Long-Term Disability Insurance as needed.

Ready to purchase your own long-term disability insurance policy? Pattern Life is a good company to check out. You get can things started by filling out their form here.

Do you have any additional information to share after reading this article? Any questions on aspects that may not have been covered? Before moving on, please help make the Money Mobilizer a supportive and welcoming community for our current and future colleagues by leaving a question or sharing your knowledge below! 

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