If you are injured or become ill and are subsequently unable to practice dentistry, you could experience a significant loss of income. Disability income insurance can help compensate your lost income by supplying a portion of it if you’re ever unable to work because of a covered illness or injury.
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Learn some of the important information about disability income insurance and why it may be a useful policy to protect your income against your inability to work:
What Is Disability Income Insurance?
Disability income insurance is a type of policy you can purchase that will provide a monthly benefit in the event you cannot work due to a covered illness or injury. Your ability to earn income by practicing dentistry is potentially your greatest asset.
If you suddenly lose the ability to work, though, disability income insurance gives you a safety net by providing income that often may be between 45% and 65% of your typical salary.
This monthly income benefit will take effect if you as the policyholder cannot work due to a covered illness or injury that prevents you from being able to earn your regular income.
The benefits received from disability income insurance may be tax-free. You will need to review this issue with your accountant, though, to determine whether your benefits will be tax-free.
If you work as a dental associate, you could be offered disability insurance through your employer. Of course, it might not be offered and instead be a purchase you need to make independently.
As a dental practice owner, you will most likely have to purchase disability income insurance on your own.
Generally, policy premium costs range from between 1% and 3% of your gross annual income.
If it applies to you, disability income insurance policies could pay over and above social security income.
Finally, disability income insurance policies often have a 30-day (or longer) waiting period before benefits begin.
Why Is Disability Income Insurance Important?
Disability income insurance is an important protection you should have in the event you become injured or ill and cannot work for a period of time.
Workers’ compensation might not apply to your disability case if you were not injured at work. Let’s say you injure yourself while away on vacation or any other location and your illness or injury is not related to your occupational duties. This likely means a denied claim and no compensation in the form of supplemental income if you are relying solely on workers’ comp for disability protection (more on this later).
There are also several compelling reasons to purchase disability income insurance regardless of where you are in your career. These reasons are all based on statistical analysis of modern American households and income.
Disabling events take place more often than you may realize. Among today’s 20-year-olds, one in four will lose income because they are physically unable to work at some point before they reach retirement age due to injury or illness. (1)
In addition, short term disability claims statistics reveal that 5.6% of Americans will face the temporary loss of their income due to an illness or injury that will span at least six months. Many of the illnesses or injuries will involve something non-occupational, meaning workers’ compensation insurance would not provide coverage. (1)
It’s also worth noting that it’s challenging to depend on social security disability alone to make ends meet. Data shows that the benefits paid by social security disability only average $1,197 monthly, which comes to just $14,364 annually. This amount is below the current poverty line for an American family of four as defined by the federal government. (1)
A study conducted in 2014 considered the annual consumer bankruptcy filings in a year’s time. In 15% of these cases, illness or injury had a direct correlation with filing bankruptcy.
Medical bills were deemed at fault for 26%. These statistics show the immense importance of having disability coverage to help prevent future problems in the event of a disability. (1)
If you were to suffer a life-altering injury, disability income insurance can help give you peace of mind, knowing you can get a monthly income benefit even if you physically cannot work due to injury or illness.
Should You Get Disability Income Insurance?
The quick answer is, it depends. Whether disability income insurance is appropriate for you or not will vary based on several factors.
How Much Coverage Might You Need?
Your ability to keep the same standard of living will depend on your income. For example, since the supplemental income you get from disability income insurance will probably be around 60% of your taxable income, if you make under $100,000, you might need every dime of that income just to maintain your current standard of living. Conversely, if you make over $500,000, you might still be able to maintain your current lifestyle fairly easily. Therefore, you need to determine if you could make it on the benefit you would be provided through disability income or you can offset some of the loss yourself.
How Long Could You Require Benefits?
Thankfully, this is a variable you can determine and define. You choose the timeframe for which you will continue deriving benefits through your policy when you purchase said insurance. In many instances, policies will continue to pay out until you reach the age of 65 or even longer if disabled prior to 65.
What Is Usually Not Covered by These Policies?
If your injury or illness is the result of an illegal activity, pre-existing condition, incarceration, etc. it is typically not covered, although what isn’t covered will be defined by your policy upon policy delivery.
Will I Ever Use My Disability Income Insurance Policy?
While there is no way to predict if you will ever use your disability income insurance, this is one purchase you don’t want to have to use. However, having this protection in place to help provide for your loved ones — and yourself — should something unexpected occur helps you cover your bases.
Do I Need Disability Income Insurance?
Many dentists, though not all, are eligible to get a disability income insurance policy and could one day utilize its coverage. Therefore, it’s difficult to consider the answer to this question definitively, because whether you qualify or would benefit from this type of insurance will differ from others. That’s why it’s a good idea to learn more about how disability income insurance could be used in your individual situation.
Is Workers’ Compensation Insurance Enough?
In short, typically no. Workers’ compensation will not cover your loss of income if you are injured or become ill due to any cause outside your occupation. Therefore, it is not enough to purchase a workers’ compensation plan and call it a day. Ideally, you will combine the two types of insurance and ensure you have appropriate coverage should you face an unexpected loss of income due to illness or injury.
Your Next Step
We hope a disability income insurance policy is something you never have to use. However, if you should find yourself facing an unexpected illness or become injured and are unable to continue to work, such a policy can make a significant impact on your quality of life now and on into the future.
At Treloar & Heisel, we are here to answer any and all questions you have pertaining to your individual need for disability income insurance. In fact, we have put together a disability income insurance guide that goes into greater depth about the specifics of this type of insurance coverage. We encourage you to give it a read and then contact us to review with a licensed insurance professional about disability income insurance for dentists.
Treloar & Heisel and Treloar & Heisel Property and Casualty are divisions of Treloar & Heisel, LLC.
Insurance products are offered through Treloar & Heisel, LLC.
Treloar & Heisel, LLC. and its divisions do not offer tax or legal advice.
This information is provided for general informational purposes only. These definitions are not binding contract definitions. You should review your policy to determine the binding contract definitions. Please review with a licensed insurance professional.