Written by: Peggy Haslach
Question: Do Female Doctors Really Need Disability Income Replacement Insurance?
Answer: Why do you think they call me Peg?
The featured image of this blog post is a picture of my right shoulder. It is not really the reason why they call me “Peg,” but I do use this picture to drive home the point about why it is important to have disability insurance especially if you are a female doctor (veterinarian, dentist, or attorney).
The picture was taken after my 2nd surgery for an injury I sustained at work while picking up a bag of dirty towels. Prior to the injury, I was your typical 36-year-old. I was a young, healthy athlete who was rapidly advancing in my career and didn’t think I needed anything more than what my employer covered for Long-Term Disability benefits. My thinking was that I have always been able to come back from injuries in sports, so why would an injury effect my ability to work. What could happen?
What Could Happen?
Two things could and did happen. First, I injured my right shoulder in 1995 and had to have two surgeries, the first in 1998 and again in 2008. And second, I lost my job and my employee benefits in 2009 when the company downsized and then was sold. So here I was with a prosthetic shoulder, without a job and now was the poster child on why one should not rely on your employer for disability benefits. The worker’s compensation claim covered the surgeries and physical therapy, but once that was done, I had nothing.
When I started working as a Financial Advisor in 2013, the first type of insurance I applied for was Disability Insurance and I quickly learned why it is wise for females to apply for disability insurance when they are young. I was now 54 years old, so my coverage was about $25/month (per $1,000 of coverage) more than if I had applied 20 years earlier at age 34. Plus, my coverage excluded my right shoulder. In disability insurance, preexisting conditions will affect your ability to get coverage.
Why is Disability Insurance More Expensive for Women?
There are lots of reasons cited for why disability insurance is more expensive for women than men, but the main reason is that insurance companies are more likely to pay claims for women and pay them much earlier in life. That does make sense considering that women get pregnant. Pregnancy is not a disability, however, there may be complications from the pregnancy that will prevent the claimant from returning to work. In addition, insurance companies have found that women are more likely than men to seek a doctor’s help. They are also more likely to pay women on a claim for a longer period of time. Men just die earlier (that is why women get better rates than men when it comes to Life Insurance).
So overall, the claims statistics do show that women should have disability insurance in place because they are more likely to need and use it. But there are other reasons why women, and specifically practicing doctors, dentists, veterinarian and other professionally licensed females need disability coverage. Those same insurance actuaries who determined that women have more claims also found that surgeons or physicians working in a higher risk medical specialty, such as those working emergency, military or correctional medicine pay higher premiums because of the higher claim rates. But claim rates are not the only reason for women earning high salaries to be concerned about protecting their income.
The Financial Impact a Disability Can Have on a Household
First is the financial distress the disability can cause. An American College study found that over fifty percent of woman believe that if they become disabled, the impact on the household’s finances would be devasting and they would not have enough in their cash reserves to cover a long term illness. In addition, most working women also have the family caretaking responsibilities of the household. If their spouse becomes disabled, they must pick up the slack and still care for the family. When the role is reversed, the spouse may work harder, but they rarely take on caring for the family at home. So, when a woman becomes disabled not only will the income coming into the home be decreased, but the expenses of bringing in help to cover things like childcare, cleaning, etc. will also increase.
Second, women who begin their marriage either earning less than their husbands or not working at all are significantly more likely to get divorced if their career suddenly surges. This is according to a 2018 study by Swedish researchers. Women who attend medical school see their salaries jump from the sub $100K salaries of a resident or fellow to an average salary of over $200K when they become an attending physician. And because many of these women are moving into the main breadwinning position in the household, they are having to pay their spouses alimony or child support if they get a divorce. Couple that with the stats for disability claims for women that were mentioned above, you can see why there is a need for women to protect their income. Even if they do not get a divorce, they are still more likely to outlive a male spouse.
Lastly, the number of women owned businesses is skyrocketing according to the "2018 State of Women-Owned Businesses Report" commissioned by American Express. That means that women are moving out of corporations and into owning their own businesses. Having personal policies for disability and life insurance in place before you make the jump is much easier and much less expensive than trying to put something in place after you lose your corporate benefits especially if you have a preexisting condition like I had with my shoulder.
A Case for Opting out of Your Employer’s Plan and Getting your Own Policy Before You Go Out on Your Own
Even if you are not planning on starting your own practice now, it might be a good idea to opt out of your employer’s plan and instead buy a stronger policy that is portable. This is because most employer provided plans have a prohibitively narrow definition of what constitutes a disability. In addition, the policy in place may have caps and restrictions that limit the amount of coverage you receive. For example, I am working with one young Associate DVM where her employer plan covers 60% of her salary up to a cap of $10,000. That may seem fine now that she an associate making $120K, but her income potential is way above the $200K point where she will hit the cap. Plus, her employer’s plan only covers her base pay. It does not cover bonuses or other production compensation that she can make with her job.
And what if she wants to change jobs? If she had kept her employer's plan with the 60% benefit and purchased a personal policy to cover the remaining 40%, unless she has a future increase rider on her policy, she would have to go back out into the market and purchase a policy to cover the 60% when she leaves employer. This is not easy if she is older and has any pre-existing conditions.
Choosing a Plan That Provides Financial Flexibility
When working with female professionals, we work collaboratively to come up with a plan that provides them with the most flexibility. In the case of disability coverage, we will go out in the market to find a policy that will meet their needs now and offer them the most flexibility so that we can also cover their need later. We will do this with all the strategies we put in place. We call this out MYOM strategy because we work with female professionals to Make & Manage Your Own Money. If you are curious about how we can help you find the right disability company and policy for your circumstances, please reach out to us.