Important Definitions

A well written Disability Income Policy will include these crucial definitions:

  • Own Occupation/Medical Specialty Protection: The inability to work in your specialty because of a covered disability means you would be considered totally disabled.  Note: there are many different definitions of Own Occupation offered in the Disability Policy’s on the market today. Every company has their own version.  Make certain you evaluate their similarities and differences.  This is an important contratual provision and you need to understand how it will impact you. See the Own Occupation Definitions tab under Learn More, for further details.
  • Partial Disability Benefit/Residual Benefits: These benefits will pay you if you have a covered disability but can still work in your specialty part time. It is common for the insurers to require you to experience a 15% to 20% reduction in current earnings compared to those prior to your disability. If this applies to your situation you would receive a percentage of the total disability benefit, equal the percentage of lost earnings you are experiencing.
  • Mental Nervous/Stress and substance abuse protection etc.: This contractual clause may provide coverage for certain hard to diagnose disabilities. This is one you don’t want to be without.  You will want long-term benefits for these types of disabilities. The caveat is that some policies limit this type of claim to a 24 month payout because they are so important.
  • Inflation Protection Rider: Most of us are not independently wealthy because of this it is wise to consider a Cost of Living Benefit rider.  It increases your benefit while on claim for a prolonged residual or total disability lasting 365 days or greater and acts as protection against inflation or increases in prices of common consumer purchases.
  • Future Purchase Option/Guarantee of Insurability Rider: Enables you to purchase additional protection in the future whatever your current health. Young professionals should not overlook this as it can provide protection for your future earnings.
  • Level or Graded Premiums: This provision defines how you will pay for the policy.  You can either choose Level or Graded premiums.  Choosing Level locks in your premiums and they will never increase for your initial coverage.  If you choose Graded then then your initial premium will increase over a time of your choice.  1 to 5 year terms are common for increases.  Graded premium amounts are usually quite abit less than Level.  Which means that during residency you can save alot of money.  Should you decide to switch at some point when your income is more substantial then that option is open.
  • Non-Cancellable Guarantee Renewability:  This definition is pretty straight foward.  Basically, once your policy is active the company cannot change or cancel it.  Additionally, your premium rates are guaranteed never to increase (if level premium is selected).
  • Premiums and Discounts: Once the policy is active any Discounts and Premiums(If level) are locked in forever.
  • Elimination Period: Is the number of days that a Disability must elapse before the policy starts owing you money. A 90 day elimination period is most commonly chosen and priced considerably less than 30 or 60 day elimination periods.
  • Benefit Period:  Is maximum payout period the company will pay you for a covered Disability. The majority of doctors and dentists choose to receive benefits until age 65. Other benefit periods include age 67, 70 and Lifetime payouts.