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by Malik Amine
Why Physicians Skip Disability Insurance (And Why That's a Mistake)
You spent four years in undergrad. Four years in med school. Three to seven years in residency. You're finally earning real money as an attending.
Then I ask about disability insurance and you tell me you don't have it.
The reason is usually the same: "It's expensive. And I'm healthy. I don't need it."
I get it. When you're paying off student loans, buying a house, and trying to catch up on retirement savings, disability insurance feels like another bill you can skip. You're young. You're healthy. Nothing's going to happen.
But here's what I see after working with physicians for years.
How Do Physicians Build Wealth Differently?
Physicians have one asset that matters more than anything else. It's not their investment portfolio. It's not their real estate.
It's their ability to work.
A cardiologist making $500,000 a year has a human capital value of $10 million or more over their career. If you can't work due to disability, that $10 million disappears overnight.
Your investments can recover from a market crash. Your career can't recover from a disability without protection.
What Taxes Affect Doctors Most?
This is where disability insurance gets interesting.
When you receive disability benefits, the tax treatment depends on how you pay the premiums.
If your employer pays the premiums, benefits are taxable. If you pay with after-tax dollars, benefits are tax-free.
Most physicians I work with choose individual policies with after-tax premiums. Yes, it costs more upfront. But when you're collecting benefits tax-free during a disability, you're keeping every dollar.
Consider this: A $15,000 annual premium on a policy that pays $20,000 per month in benefits. If disabled for two years, you paid $30,000 in premiums and received $480,000 tax-free.
When Should Physicians Get Disability Insurance?
The answer is sooner than you think.
During residency: You're earning $65,000 to $75,000. Premiums are cheapest when you're young and healthy. Many residents can get a policy for under $100 per month that locks in their insurability.
First attending job: This is non-negotiable. You should have coverage in place before you start earning your full salary.
After a major income jump: If you go from $300,000 to $600,000, you need to increase your coverage. Most policies allow you to increase benefits without new medical underwriting if you do it within a certain window.
Why Do Many Doctors Go Broke?
It's not bad investments. It's not overspending.
It's a disability that lasts longer than their emergency fund.
I've seen physicians with perfect investment portfolios lose everything because they got sick or injured and couldn't work. Six months of no income wipes out most people. A year-long disability destroys careers.
The physicians who stay wealthy aren't the ones with the best stock picks. They're the ones who protected their income first.
How Much Disability Coverage Should a Physician Have?
Most policies cover 50 to 60 percent of your pre-disability income.
For a physician making $400,000, that's $20,000 per month in benefits. Some high-limit carriers go up to $30,000 or $40,000 per month for specialists.
Here's what to look for:
Own-occupation definition: This is critical. If you can't perform your specific specialty but could work in another field, you still get benefits. A surgeon who can't operate due to a hand injury should get paid even if they could theoretically work in urgent care.
Residual benefits: If you can work part-time after a disability, you get partial benefits based on income loss. This helps with gradual return to work.
Cost of living adjustment: Benefits increase with inflation. A $20,000 monthly benefit today won't buy the same in 10 years without COLA.
Future increase option: You can increase coverage as your income grows without proving you're still healthy.
What's the Best Disability Insurance for Physicians?
There's no single best company. But there are best practices.
Top carriers for physicians: Guardian, Principal, Ameritas, and Ohio National all have strong physician-specific policies.
Specialty matters: Anesthesiologists pay different rates than primary care physicians. Surgeons have different considerations than psychiatrists. Work with someone who understands your specific specialty risks.
Group coverage through your hospital: This is a good start, but usually not enough. Group policies are often taxable (employer-paid) and may not have true own-occupation coverage. Use group coverage as a base, then supplement with an individual policy.
State-specific considerations: Some states have mandated disability programs. California, New York, and Hawaii have state disability insurance. This affects how much individual coverage you need.
Common Mistakes Physicians Make
Waiting too long: The older you get, the more expensive premiums become. A 35-year-old physician might pay twice what a 28-year-old pays for the same coverage.
Not reading the definition of disability: Some policies use "any occupation" after two years. That means if you can work in any job, benefits stop. You want own-occupation for the entire benefit period.
Choosing a long elimination period to save money: A 180-day elimination period (waiting period before benefits start) is cheaper than 90 days. But can you survive six months with no income? Most physicians can't.
Not coordinating with other coverage: If you have group coverage, workers' compensation, and an individual policy, you need to understand how they work together. You don't want to over-insure and waste premium dollars.
FAQ: Physician Disability Insurance
Q: Is disability insurance tax-deductible for physicians?
A: Generally no. Individual disability insurance premiums are paid with after-tax dollars. The tradeoff is that benefits are tax-free when you collect them. If you're a 1099 contractor or have a side business, consult a tax professional about potential deductions.
Q: What if I already have coverage through my employer?
A: Group coverage is a good foundation, but it's usually not enough. Employer policies often lack true own-occupation coverage and benefits are taxable. Most physicians need an individual policy to supplement group coverage.
Q: How long should the benefit period be?
A: Until age 65 or 67 is standard. This covers you through your entire earning career. Some physicians choose shorter periods (2 years, 5 years) to save on premiums, but that leaves you exposed later in your career when disabilities are more likely.
Q: Can I get disability insurance if I have a pre-existing condition?
A: It depends on the condition. Some carriers will exclude specific conditions. Others may decline coverage entirely. This is why getting coverage early, before any health issues develop, is so important.
Q: What about partial disabilities?
A: Look for residual or partial disability benefits. If you can work but earn less due to your disability, you'll receive a percentage of your full benefit based on income loss. This is crucial for physicians who can do some work but not at full capacity.
The Bottom Line
Disability insurance isn't exciting. It doesn't generate returns. You'll pay premiums for years and hopefully never use it.
But it's the foundation that everything else sits on.
Your investment portfolio, your real estate, your retirement savings — none of it matters if you can't work to fund them.
I've seen physicians lose everything because they skipped this. I've also seen physicians protect their families and recover from disabilities because they had coverage in place.
The choice is straightforward. Protect your ability to earn, or gamble that nothing will ever go wrong.
Realistically, you got to be smart about this. The few thousand dollars you save by skipping disability insurance isn't worth the risk of losing your entire earning potential.
Have questions about disability coverage for your specific situation? Reach out. I'm not here to sell you anything. I'm here to make sure you understand what you need.