Authors: Michael Ernst, Eric Shappell
Editors: Eric Shappell, James Ahn, Ryan McKillip
Table of Contents
The purpose of long-term disability (LTD) insurance is to financially support you and your dependents in the event that you are unable to work as you currently do. Disabilities that can affect your ability to work range from chronic medical conditions (e.g., cancer or low back pain), to accidents (e.g., a hand injury from rock climbing), to mental health issues (e.g., depression or alcoholism).
While short-term disabilities are commonly covered by cash reserves (though short-term disability insurance is also available for purchase), long-term disabilities have significant potential to affect one’s finances. Thus, insurance to protect against this possibility warrants special consideration.
Five questions can help residents navigate decisions related to LTD insurance, each of which will be addressed in this section:
Question 1: Should I buy long-term disability insurance in residency?
Question 2: What are the different types of long-term disability insurance?
Question 3: What properties of long-term disability insurance I should consider?
Question 4: Where can I buy long-term disability insurance?
Question 5: How much will my long-term disability insurance policy cost?
Should I buy long-term disability insurance in residency?
Probably. Around 15% of working adults will have a period of disability before age 65, and the average length of a claim before recovery is approximately three years, which is long enough to be financially devastating for most. At least some coverage to protect against this possibility seems prudent. You don't need to break the bank over a fancy policy; just like you probably live in the apartment you can afford rather than the one you want during residency, so too can your LTD insurance policy be matched to your budget during training. With that said, you do not need disability insurance if you think you would be ok without your income if you became disabled (e.g., if you have a high-income spouse that would keep working).
What are the different types of long-term disability insurance?
Group and individual. Group policies are typically offered through your employer, whereas individual policies are purchased on your own. Individual policies typically have more to offer but are also typically more expensive.
What properties of long-term disability insurance I should consider?
Look for a policy that is non-cancellable, guaranteed renewable, and, unless you'd be fine with doing some other job, own-occupation that is specialty-specific. Cost of Living Adjustment riders and future purchase options are also nice, particularly early in your career. These options may not be available from group policies, but should be available through an individual policy.
Where can I buy long-term disability insurance?
Find an agent that can sell you policies from multiple different companies. Your colleagues in your program can likely recommend someone with whom they've had a positive experience. You can also easily find agents online.
How much will my long-term disability insurance policy cost?
As a rough estimate, the premium will commonly be in the 0.2 - 2.0% of the benefit covered for group policies and 2.0 - 5.0% of the benefit covered for individual policies.