Obtaining disability insurance with a chronic health condition

[Bored_Conscious]

Hello,

Currently in medical school. I've been diagnosed with a chronic health condition when I was in my teens.
Obviously, I did not have the foresight to have imagined this would have happened and so I did not get disability insurance that early on...

Just to be transparent, I have Crohn's Disease that is difficult to treat.

So, most likely, no disability insurance will take me. I could get a rider that excludes CD, but, to be honest, I don't know if this is even worth it. I am under the impression that even for people in good health have to fight to get their policy to pay out. In my circumstance, if I get a rider, I'll be fighting tooth and nail if something ever comes down. Especially since CD is such a systemic condition, I have some serious doubts that I could fight and obtain policy if I get coverage with a rider to exclude CD.

So, what are my options? My current thought process is to just save a ridiculous amount of money as fast as possible so that I have a "safety net".

Of course, this hinges on me being healthy enough to make it through my planned residency and fellowship.

I'd appreciate any advice.

Thank you,

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[DrMetal]

So, most likely, no disability insurance will take me. I could get a rider that excludes CD, but, to be honest, I don't know if this is even worth it.

You're probably right, disability insurance is expensive to begin with. It would likely be way more expensive with CD if not outright impossible.

Forget about it. Try to get life insurance if you can, then make sure you have good savings.

 

[rokshana]

See if what you get in residency and fellowship are portable… they usually have no underwriting

 

[Bored_Conscious]

See if what you get in residency and fellowship are portable… they usually have no underwriting

This is something I did not know about. I'll try to see what I can do about this. I am under the impression group disability insurances are usually pretty bad are they not? Also, do the premiums of group disability policies come out of my pocket or is it usually covered by the program?

Additionally, I believe some private practice groups provide group disabilities policies. Are those usually any good and/or have no underwriting?

 

[Bored_Conscious]

You're probably right, disability insurance is expensive to begin with. It would likely be way more expensive with CD if not outright impossible.

Forget about it. Try to get life insurance if you can, then make sure you have good savings.

Yea, I figured. Thanks for the confirmation.

I was under the impression life insurance is generally a scam is it not? I know there is a difference between whole- and term-life insurance, but I don't really see the point of having life insurance? It isn't like if I get seriously injured and can't work it'll pay out correct? It's mostly if I pass away?

 

[DrMetal]

Yea, I figured. Thanks for the confirmation.

I was under the impression life insurance is generally a scam is it not? I know there is a difference between whole- and term-life insurance, but I don't really see the point of having life insurance? It isn't like if I get seriously injured and can't work it'll pay out correct? It's mostly if I pass away?

Yes, Life Insurance only pertains to death (it gets paid to your beneficiaries if you die).

All of insurance is a scam. The question always is, can you afford to pay the premium, what's the benefit, and what's the travesty of not having it?

For Life insurance, it seems worth it to me: I have a family, a mortgage. If I die, they can't pay the mortgage. If I can pay $80/month for a policy that'll reward them $500K . . . that's worth it to me, so I have life insurance.

For Disability insurance, the premiums can be very high, $1K/month, for 2-3 years worth of payments. Is it worth it? Yeah, maybe so. But I opted to just save that $1K a month, have a nice liquid bank account, I can certainly use that if needed. [many would argue to opposite point, that's fine, if you have the money and wanna buy a plan, wouldn't argue.]

 

[Smurfette]

I have specialty specific disability insurance, so if I can't be a surgeon, it pays. This type of coverage is pricier.
It pays up until age 67, not just 2-3 years. If I can't be a surgeon but I can work doing other things, it still pays out.
My understanding is that if it pays, that $ is not taxable. However, all bet's are off when it comes to govt rules on taxes.
I have a few riders on my policy as well, so I had the ability to add more coverage once my income increased after being in practice a few years, without new health information being required to get more coverage.
I don't pay anywhere near $1K a month for this coverage. I got the insurance when I was finishing up residency and had essentially no medical issues, other than a h/o migraines (which they then excluded from covering if I get disabled from that). I am female, which usually means my insurance policies are more expensive than my male counterparts.

On the flip side, my only life insurance policy is the one automatically given to all physicians working for my health system, equal to my yearly income. I don't have my "own" portable one.

 

[dozitgetchahi]

Yea, I figured. Thanks for the confirmation.

I was under the impression life insurance is generally a scam is it not? I know there is a difference between whole- and term-life insurance, but I don't really see the point of having life insurance? It isn't like if I get seriously injured and can't work it'll pay out correct? It's mostly if I pass away?

Whole life insurance is indeed a scam, an overpriced insurance policy masquerading as an “investment”.

TERM life is no more of a scam than any other type of insurance (which, agreed, often feels like a scam in America). The price is much more reasonable and it’s worthwhile in many situations.

Disability insurance is important because unless you saved an absolutely epic amount of money, you will almost certainly never be able to make up for losing your income as a doctor if you become disabled.

 

[rokshana]

This is something I did not know about. I'll try to see what I can do about this. I am under the impression group disability insurances are usually pretty bad are they not? Also, do the premiums of group disability policies come out of my pocket or is it usually covered by the program?

Additionally, I believe some private practice groups provide group disabilities policies. Are those usually any good and/or have no underwriting?

while you are in training, typically the program pays the premiums...if you port it, then you take over the premiums.
better than the nothing you are probably going to get if you undergo underwriting...

 

[DrMetal]

I have specialty specific disability insurance, so if I can't be a surgeon, it pays. This type of coverage is pricier.
It pays up until age 67, not just 2-3 years. If I can't be a surgeon but I can work doing other things, it still pays out.

I'm curious how easily these companies pay out. In the obvious case (traumatic amputation of your hands) they will have to pay. But what about gray area cases, you have bad neuropathy, carpal tunnel, you can only do certain procedures but not others . . do they put up a fight?

 

[DrMetal]

TERM life is no more of a scam than any other type of insurance (which, agreed, often feels like a scam in America). The price is much more reasonable and it’s worthwhile in many situations.

Quite true, that's really all its about: is the price reasonable, is the coverage right, would you be devastated without it?

Hell, I have $15,000 worth of guitars, that it costs me $50/year to insure (for theft/damage, complete replacement). Of course I do it.

Yes, I have guitar insurance, but no disability insurance. Priorities . . .

 

[LucidSplash]

I posted in another thread about the difficulties of getting disability with a chronic condition, even one that is very well controlled. You can do a search. The policy I ultimately got has a rider for exclusion of anything renal, which as you know, can become an issue even as a secondary problem stemming from any serious illness. But it was the best I could do. It IS own-occupation though, which is pretty important. So if I can’t operate, I can’t be denied a payout just because I could go into another field/teaching/industry etc. Unless they decide I can’t operate because I’m on dialysis, etc.

Most disability policies for employed (W2) positions for large institutions do not have medical underwriting so that is going to be something you’ll want to look at closely as a model for when you are looking at attending jobs.

I did port my residency policy, and I’m glad I did so. But the residency policy is small and only pays out $4k/month, but it only costs $80/month which is dirt cheap in the context of disability insurance so I will help that forever. This policy has no rider, even though my nephropathy diagnosis occurred in the last couple months of residency, because it had no underwriting. We did have 3 options during residency for disability, a low medium and high, and the program only covered the cost of the low. So I had to pay the difference in cost between the low and high (was like $30/month difference I think). But I received the advice that I should get the high-policy, and did so, because it was a portable policy and also the cheapest/easiest to get insurance I would ever get.

You definitely do NOT want to get into a situation where you are denied a policy based on your chronic condition, as that makes it even more difficult to get a policy subsequently. So you ensure they know everything up front and if it seems you’d be denied, you WITHDRAW the application instead.

I note that disability insurance IS expensive, but definitely worth it for most people who aren’t independently wealthy or who don’t have independently wealthy family to fall back on. I don’t have kids/spouse but imagine it would be even more important then. I do not have life insurance, but if I had a family depending on me, I definitely would. I would have TERM, not WHOLE for reasons mentioned above.

Lastly, will note that individual disability premiums are tax deductible for SCorps (if you do 1099 work) because shareholders with more than 2% of the shares are treated as self-employed for accident and health benefit purposes, and the premiums are included in the shareholder's taxable income, which makes tax-free benefits. Premiums are NOT deductible for sole proprietorships but the benefits are. It’s a little more complicated with some “if then” statements for CCorps, but that is a less common situation probably not pertinent to this discussion.

 

[Bored_Conscious]

I posted in another thread about the difficulties of getting disability with a chronic condition, even one that is very well controlled. You can do a search. The policy I ultimately got has a rider for exclusion of anything renal, which as you know, can become an issue even as a secondary problem stemming from any serious illness. But it was the best I could do. It IS own-occupation though, which is pretty important. So if I can’t operate, I can’t be denied a policy just because I could go into another field/teaching/industry etc. Unless they decide I can’t operate because I’m on dialysis, etc.

Most disability policies for employed (W2) positions for large institutions do not have medical underwriting so that is going to be something you’ll want to look at closely as a model for when you are looking at attending jobs.

I did port my residency policy, and I’m glad I did so. But the residency policy is small and only pays out $4k/month, but it only costs $80/month which is dirt cheap in the context of disability insurance so I will help that forever. This policy has no rider, even though my nephropathy diagnosis occurred in the last couple months of residency, because it had no underwriting. We did have 3 options during residency for disability, a low medium and high, and the program only covered the cost of the low. So I had to pay the difference in cost between the low and high (was like $30/month difference I think). But I received the advice that I should get the high-policy, and did so, because it was a portable policy and also the cheapest/easiest to get insurance I would ever get.

You definitely do NOT want to get into a situation where you are denied a policy based on your chronic condition, as that makes it even more difficult to get a policy subsequently. So you ensure they know everything up front and if it seems you’d be denied, you WITHDRAW the application instead.

I note that disability insurance IS expensive, but definitely worth it for most people who aren’t independently wealthy or who don’t have independently wealthy family to fall back on. I don’t have kids/spouse but imagine it would be even more important then. I do not have life insurance, but if I had a family depending on me, I definitely would. I would have TERM, not WHOLE for reasons mentioned above.

Lastly, will note that individual disability premiums are tax deductible for SCorps (if you do 1099 work) because shareholders with more than 2% of the shares are treated as self-employed for accident and health benefit purposes, and the premiums are included in the shareholder's taxable income, which makes tax-free benefits. Premiums are NOT deductible for sole proprietorships but the benefits are. It’s a little more complicated with some “if then” statements for CCorps, but that is a less common situation probably not pertinent to this discussion.

Hey! Really appreciate this in-depth response.

So, your current policy is simply a ported residency disability policy? It sounds you like you got an own-occupation disability insurance with an exclusion policy as well. Let me know if I'm interpreting this incorrectly, but do you currently have two disability policies active?

 

[gutonc]

I will just add that I too have a ported training disability policy with low premium ($50/month) and low payout ($2500/month) but no exclusions. I also have an employer sponsored "own occ-ish" policy for 100% of my base salary that the employer covers completely. It required no medical underwriting and did not exclude my chronic autoimmune condition. I make too much to bump it up, but it can be bumped up to double your salary or $500K/y at a relatively nominal monthly cost.

I am in an interesting position as well to know how this particular disability insurance pays out when it matters. The person who had this job before me, who I met and discussed the job with before considering it, had to take disability due to a debilitating condition. They are still paying him...almost as well as they pay me...and he has gone onto permanent disability. The policy pays out "in full" for 5 years and then tapers off over another 10 years. It's honestly one of the reasons that he chose not to go back to work.

 

[LucidSplash]

Hey! Really appreciate this in-depth response.

So, your current policy is simply a ported residency disability policy? It sounds you like you got an own-occupation disability insurance with an exclusion policy as well. Let me know if I'm interpreting this incorrectly, but do you currently have two disability policies active?

Yes. I have the small policy ported from residency. I am currently doing full-time 1099 work (have been for about a year and a half because I left my former job and then decided to get an MBA last year) and it took me a minute to find a way to get the own occupation policy. So I have both. The residency policy is a good extra but not sufficient in case something catastrophic happened.

 

[RangerBob]

I posted in another thread about the difficulties of getting disability with a chronic condition, even one that is very well controlled. You can do a search. The policy I ultimately got has a rider for exclusion of anything renal, which as you know, can become an issue even as a secondary problem stemming from any serious illness. But it was the best I could do. It IS own-occupation though, which is pretty important. So if I can’t operate, I can’t be denied a payout just because I could go into another field/teaching/industry etc. Unless they decide I can’t operate because I’m on dialysis, etc.

Most disability policies for employed (W2) positions for large institutions do not have medical underwriting so that is going to be something you’ll want to look at closely as a model for when you are looking at attending jobs.

I did port my residency policy, and I’m glad I did so. But the residency policy is small and only pays out $4k/month, but it only costs $80/month which is dirt cheap in the context of disability insurance so I will help that forever. This policy has no rider, even though my nephropathy diagnosis occurred in the last couple months of residency, because it had no underwriting. We did have 3 options during residency for disability, a low medium and high, and the program only covered the cost of the low. So I had to pay the difference in cost between the low and high (was like $30/month difference I think). But I received the advice that I should get the high-policy, and did so, because it was a portable policy and also the cheapest/easiest to get insurance I would ever get.

You definitely do NOT want to get into a situation where you are denied a policy based on your chronic condition, as that makes it even more difficult to get a policy subsequently. So you ensure they know everything up front and if it seems you’d be denied, you WITHDRAW the application instead.

I note that disability insurance IS expensive, but definitely worth it for most people who aren’t independently wealthy or who don’t have independently wealthy family to fall back on. I don’t have kids/spouse but imagine it would be even more important then. I do not have life insurance, but if I had a family depending on me, I definitely would. I would have TERM, not WHOLE for reasons mentioned above.

Lastly, will note that individual disability premiums are tax deductible for SCorps (if you do 1099 work) because shareholders with more than 2% of the shares are treated as self-employed for accident and health benefit purposes, and the premiums are included in the shareholder's taxable income, which makes tax-free benefits. Premiums are NOT deductible for sole proprietorships but the benefits are. It’s a little more complicated with some “if then” statements for CCorps, but that is a less common situation probably not pertinent to this discussion.

You're saying if you're an s-corp with no employees, you can deduct the cost of the disability insurance premiums and the benefits are tax-free as well?

I was of the understanding you can pick one or the other, but never both.

 

[LucidSplash]

You're saying if you're an s-corp with no employees, you can deduct the cost of the disability insurance premiums and the benefits are tax-free as well?

I was of the understanding you can pick one or the other, but never both.

The premiums are a BUSINESS deduction as they are part of employee compensation package/benefits. They increase my “taxable income” that I pay myself as a W2 employee (which is nowhere near 100% of what I make because the IRS just says it has to be “reasonable” and my accountant came up with a “reasonable” number for the income I pay myself and pay payroll taxes on. I have access to the rest of what I make as the only shareholder of the S-Corp as owner distributions. Because the point of an S-Corp is to avoid double taxation, as the remainder of the $$ is pass through. But because the premiums are part of my personal (not business) taxable income, the benefits would be tax-free.

As explained to me by my accountant. I make no claims of being an expert in this area, though I think I have a reasonable understanding based on advice from a tax expert.

S Corporation compensation and medical insurance issues | Internal Revenue Service

When computing compensation for employees and shareholders, S corporations may run into a variety of issues. This information may help to clarify some of these concerns.

www.irs.gov

Is Disability Insurance Tax-Deductible?

The answer to this question is, it depends. This article discusses whether or not one can deduct the premiums for different kinds of disability insurance.

www.disabilityquotes.com

 

[comp1]

Shouldn't the OP look for a job that has such insurance as a benefit when they graduate? Then they wouldn't have to worry about underwriting. For example, if the OP works for the VA post graduation, after 18 months of employment, they would be eligible for 60% of their salary for the second year of the disability and then 40% thereafter (until age 62 when it might actually increase a lot). This is a benefit included in your employment with the government, no exams required. Obviously that doesn't cover the first year of the disability, but that's what you save up your sick and vacation leave for. It seems like purchasing this sort of insurance on the private market would really be prohibitively expensive, even for someone relatively healthy, unlike the OP. There's such a horrific adverse selection for private disability insurance.

 

[LucidSplash]

Shouldn't the OP look for a job that has such insurance as a benefit when they graduate? Then they wouldn't have to worry about underwriting. For example, if the OP works for the VA post graduation, after 18 months of employment, they would be eligible for 60% of their salary for the second year of the disability and then 40% thereafter (until age 62 when it might actually increase a lot). This is a benefit included in your employment with the government, no exams required. Obviously that doesn't cover the first year of the disability, but that's what you save up your sick and vacation leave for. It seems like purchasing this sort of insurance on the private market would really be prohibitively expensive, even for someone relatively healthy, unlike the OP. There's such a horrific adverse selection for private disability insurance.

More than one post noted that employed W2 jobs usually have no-underwriting for the disability insurance policies and my own even suggested looking closely at that employment model for that reason. But it is important to remember there are pros and cons to different employment models and disability insurance is just one thing the OP should consider, and they should have access to the full spectrum of information on the subject of disability insurance etc so they can make an informed decision for themselves.

And while disability insurance is expensive, I would not consider it “prohibitively” so in the context of average physician income. I paid for my 3-year policy in a lump sum to save 10%. Was it a hefty chunk of change to pay at once? Yes. But not prohibitive.

 

[Bored_Conscious]

Thank you to everyone who has responded so far. Getting some great advice and also making me realize it's a pretty complicated topic as well with a variety of options that I'm not quite understanding.

Is there something I should be asking during residency interviews and/or when I finish residency and start looking for jobs? I'm most likely going to work for a private practice...but obviously that could always change.

 

[operaman]

Some thoughts:

The holy grail for you is a residency program with a guaranteed issue disability policy that you can take with you. Not every program offers this even though all offer disability insurance. Don’t confuse these two things. Often the employer provided coverage has limits on payouts both in amounts and in how long they pay out. Case in point, my current employer provided coverage pays a nice chunk of my salary, BUT only pays out for 3 years max if I can’t work. Many employer provided plans do similar things.

Contrast this with private policies where you’re usually covered until you hit a designated age around normal retirement age. That’s what you’re looking for in a guaranteed issue plan.

The other HUGE thing you need to know: there is one and only one way to get denied a guaranteed issue plan with no underwriting - if you’ve ever applied for and been denied coverage elsewhere. So please don’t ever apply for anything until you have a guaranteed issue plan in hand. I’ve never seen a portable guaranteed issue plan that didn’t exclude anyone with a past denial. So be very careful - don’t let some insurance salesman talk you into applying for some life insurance policy only to get denied and never be eligible for guaranteed issue disability coverage.

 

[LucidSplash]

Thank you to everyone who has responded so far. Getting some great advice and also making me realize it's a pretty complicated topic as well with a variety of options that I'm not quite understanding.

Is there something I should be asking during residency interviews and/or when I finish residency and start looking for jobs? I'm most likely going to work for a private practice...but obviously that could always change.

Honestly I wouldn’t choose a residency based on the availability of a portable policy. In the grand scheme of things, most of the resident policies are not going to be enough to make up for the kind of policy you’d want to get for your attending salary. If you’re between two programs and like them equally, but one has a portable policy, sure, rank that one higher.

But also honestly if you ask about the portability of the disability policy at residency interviews, I’m willing to bet in many cases the program faculty won’t know the answer. Sometimes maybe the admin staff will or the GME staff will. You’ll get a packet of info about benefits but honestly this kind of detail might not be included. I think it would be fine to ask but I wouldn’t chase after it too much.

And yeah as I said before and others have pointed out, don’t get denied coverage. Withdraw your application if it looks like that will happen. Coverage denial will absolutely hose you in the future.

 

[rokshana]

Shouldn't the OP look for a job that has such insurance as a benefit when they graduate? Then they wouldn't have to worry about underwriting. For example, if the OP works for the VA post graduation, after 18 months of employment, they would be eligible for 60% of their salary for the second year of the disability and then 40% thereafter (until age 62 when it might actually increase a lot). This is a benefit included in your employment with the government, no exams required. Obviously that doesn't cover the first year of the disability, but that's what you save up your sick and vacation leave for. It seems like purchasing this sort of insurance on the private market would really be prohibitively expensive, even for someone relatively healthy, unlike the OP. There's such a horrific adverse selection for private disability insurance.

However it’s good to have own DI, since that is pre tax and is portable… when you leave
/lose your job, the DI ends as well.

 

[comp1]

I do agree that disability insurance shouldn't be the only or even a major factor in either residency or attending jobs. The level of concern should probably be tied to what your ultimate specialty is. It's darn hard to prove disability from own occ in some specialties. It's darn easy in surgical specialties. Fortunately there are a lot more benefits to salaried employment than just disability insurance that doesn't require underwriting.

 

[Bored_Conscious]

A lot of awesome responses here. Thanks everyone.

 

[xenotype]

I pay $240/month for 10k in coverage with option of increasing and got the policy with no underwriting in residency. Early career without substantial retirement savings it is a no brainer. You have to get it in residency or med school with option to increase once you have attending income. Afterwards if I didn't have such a plan or the forethought to get one while healthy I would just have to rely on group disability and making sure it is a W2 job that includes this.