How to Fill the Disability Coverage Gap for Doctors With High Income

Coverage amount. Look for a policy with a monthly benefit that's sufficient to comfortably meet the physician's monthly budget in the event an extended disability causes income to take a hit. The best policies offer maximum benefits of $50,000 to $100,000 per month or more and cover up to 75% of your current income.

Guaranteed Issue. High-end group disability programs may offer guaranteed issue policies, which cover participants without the need for a medical exam. This is a huge benefit for physicians groups whose members have pre-existing conditions.

Definition of total disability. The most comprehensive policies provide benefits if you're unable to perform the "material and substantial" duties of your "own occupation." Policies that provide true own occupation coverage pay full benefits even if you get work in another occupation and regardless of how much you earn. For example, a surgeon who injures her hand would be eligible for benefits even if she gets a teaching job at a medical school.

Residual or partial disability. Residual or partial disability benefits are critical since they can have a significant impact on earnings. Typically, benefits are triggered when an illness or injury causes your income to drop by a 15 or 20 percent.  Most of these policies pay a 50-percent benefit for the first six months to one year of a partial disability claim, although some base benefits on the doctor's actual losses.

Recovery or transition benefits. These provisions recognize that even after the injured physician recovers from a disability, the impact on their earnings persists as they strive to rebuild their patient base.

Benefit period. High-end supplemental policies, particularly those that offer guaranteed issue, typically have benefit periods of five years. But riders are available that provide large lump-sum payments at the end of the benefit period. The best policies are non-cancelable (meaning premiums won't increase) and guaranteed renewable throughout the benefit period.

Future increases. Look for a policy that offers cost-of-living adjustments and the option to purchase additional coverage without the need for a medical exam.

Lump Sum Benefits.  Lump sum benefits for permanent disabilities can be used to fund a buy-sell agreement, replace retirement plan contributions or purchase long-term-care coverage. Some policies can be converted into long-term-care policies at retirement age.

Not all disability policies are created equal. A high income earner like a physician shouldn't assume that they are protected against financial loss just because they have a standard group or individual disability policy. Advisors should help them scrutinize the policy's terms and consider acquiring high limit disability coverage if the current program fails to fulfill the financial plans created and provide the security desired.