Disability Insurance: Selecting from the Menu

As a healthcare professional, you know the importance of a balanced diet. When eating out, you make choices based on what you see on the menu, what your body needs, and what you can afford. Meat or pasta, fruits or vegetables, dairy or

legumes…the goal is to have the right balance for both sustenance and satisfaction.

A Way to Protect Your Income

When it comes to disability insurance, you also have a menu of choices, and here your decisions can affect your financial health. This article will help you get up to speed

on the two basic categories of disability insurance and their many components so you can become savvy about selecting from the menu to build the right disability protection for your needs.

Yes, You Need It!

Let’s first examine the classic “want” vs. “need.” Dessert, for example, is a “want,” but disability insurance is more

of a “need,” especially for dentists. Why? Dentists face a one in three chance of experiencing a disabling injury or illness at some point in their careers.1 And when disability prevents you from working, the lost income can financially threaten your lifestyle, your practice, and your family’s security.

And don’t assume that a disability won’t

1 Data derived from ADA Income Protection

Plan claims data, 2004-2009.

Leslie Franklin Business Fundamentals Disability Insurance: Selecting from the Menu

happen to you because you’re young and healthy now. Of dentists currently receiving benefits through a group disability insurance plan sponsored by the American Dental Association, approxiincome, or only pay benefits on an “own occ” basis for a few years then switch to a lesser “any occ” basis. In contrast, the most generous coverage—called “true own occ”—will provide full disability benefits, long term, if you can’t practice dentistry, regardless of how much you earn elsewhere. 2. How much coverage can I get? Assuming your goal is to main-

mately 15 percent were under 45 when they became disabled.

If you are disabled and can’t practice for a prolonged period, disability income insurance (also referred to as personal disability insurance) will help replace your lost income. It’s therefore vital—but not all disability income policies are created equal. They can differ in quality, price, and components, so shop carefully. Here are five questions to ask:

tain your standard of living if you become disabled, experts recommend a monthly benefit that approximates 60% of your net taxable earnings from dentistry (roughly equal to your after-tax income). For example, if you net $10,000 a month before taxes, a recommended benefit amount would be $6,000/month. That puts the onus on you to adjust your coverage periodically so your protection keeps pace with your income and resulting lifestyle. Based on the maximum amount of coverage offered by a company, you may ultimately obtain multiple policies to adequately protect your income level. 3. How long must I wait to receive benefits? All policies will require you to wait a certain number of days (known as the waiting period or elimination period) from the date your disability begins until you are eligible for your first check. You may have a choice of waiting

1. How does the policy define disability? Each policy has its own standard for determining if a dentist is disabled. The definition of disability instructs how and when that policy will pay a claim, so it is one of the most important elements to investigate. Some policies only pay if your disability prevents you from working in “any occupation.” Those policies won’t pay benefits as long as you can teach, consult, or perform any reasonable job, no matter how little that job pays. In contrast, a policy with a richer “own occupation” definition of disability will pay a benefit when you’re unable to work as a dentist, even if you choose to do something else. Not all “own occ” policies are the same, either. Some will reduce your benefits when you earn other

periods, and the longer the waiting period, the lower your cost of insurance. Factor in how long

CEREC® 3D Software powered by Biogeneric: Predicts perfect proposals with a single click.

Natural form and function is now as easy as scan, click, mill.

CEREC Biogeneric Software effectively reads the morphology of the patient’s own dentition to predict the right form and function for all restorations. Based on comprehensive morphological analysis of thousands of actual teeth instead of arbitrary “tooth libraries,” CEREC Biogeneric Software allows you to create inlays, onlays, crowns, veneers and temporary bridges with just a single click. Ideal form, function and occlusion— CEREC 3D Software powered by Biogeneric does it with ease. Simply scan, click, mill and admire.

• Clinically and functionally valid proposals every time
• Automatic process: a single click produces the natural restoration
• Unrivaled ease-of-use lets you focus on your practice and not complex software manipulation

CAD/CAM FOR EVERYONE

www.CEREConline.com

you could manage without any income from your practice—30, 90, 180 days, etc.—and choose accordingly. Some policies will even let you mix multiple waiting periods to balance your need for cash with your need to budget. 4. Can I customize my coverage? Some companies sell “one-sizefits-all” policies. You buy the policy with all its bells and whistles whether or not you want them all. Other companies offer an a la carte menu of coverage features. You decide if you want these “options” or “riders” and pay accordingly. Note: Some coverage options only exist for a limited time, so check eligibility and expiration dates carefully as you consider customization. 5. Is it difficult to get disability insurance? That depends. A past injury or sickness, or a family history of certain illnesses, could make it tougher to get coverage. That’s why experts recommend

Since 1984 thousands of dental professionals have discovered Oxyfresh’s safe and effective oral health products for use in longterm care and maintenance of their patients. Retail sales, wholesale rebates and “free product” programs allow you to get paid appropriately for providing professional guidance and instruction to your patients. Ad on page 33.

Offices located Nationwide. PARAGON offers professional consultation and related services to healthcare professions with primary emphasis on the dental profession: comprehensive dental practice valuations (including a written valuation and analysis report); practice sales; pre-retirement sales; practice acquisitions; practice mergers; associateships; partnerships; practice consolidations and practice management. References available by request. Please see our ad on page 29.

Patterson Dental Supply Inc. is a full-service distributor of a complete range of dental products and services to dentists, dental laboratories, institutions and other healthcare providers throughout North America. As one of the nation’s largest dental distributors, Patterson Dental sells consumable dental supplies, digital and other dental equipment and practice management software. Please see our advertisement on the inside of the front cover and page 1.

applying for disability insurance while young and relatively healthy. You also may have to provide

What Your Peers Say About…

a tax return or other income information to substantiate the amount of coverage you request. On rare occasions, you can get insurance without pre-qualifying via a medical or financial review— when it’s offered on a “guaranteed issue” or “open enrollment” basis. The ADA’s student offer for ASDA

The need for disability insurance: “When I graduated from dental school, I had a wife, a baby on the way, and more than $100,000 in student loans. I knew I was just one car wreck away from not being able to practice dentistry, so I felt compelled to insure my income even though I hoped I would never need it.”

members operates this way—no questions asked—so future dentists can get important insurance in place before entering the workforce.

Name withheld at request of dentist, disabled at age 44

And a Way to Protect Your Business

Own occupation: “If I could offer any advice to young dentists, it would be this: When you get disability insurance, look for a policy that has an ‘own occupation’ definition of disability. That way, if you are disabled from dentistry, you won’t be forced to work in another occupation unless you want to.”

As a dentist, you need to protect more than your personal income: You have a thriving business, too. That’s why you should consider a second type of disability coverage called business overhead expense insurance. It’s designed specifically to reimburse you for certain practice and professional expenses if you

Bruce Jensen, D.D.S. Kaysville, Utah

Business overhead expense insurance: “It was great to have disability income insurance for my personal expenses, but it was especially important for me to know that my business expense plan was there to help pay my staff’s salaries and benefits, and cover other bills like utilities and rent.”

Neil Dicker, D.D.S. Orefield, Pennsylvania

Choosing a company: “Buy from an insurance company that will work for you—not against you—if you ever have to file a claim.”

Jac Pedersen, D.D.S. San Luis Obispo, California

Don’t Own a Practice? Why You Need Business Overhead Expense Insurance, Too

Even if you don’t own a practice yet, business overhead insurance could still be right for you. Any of these professional expenses might qualify for reimbursement benefits if you became disabled:

Student loan payments • Professional association membership dues • Malpractice insurance premiums • Licensure fees • Continuing education tuition and fees • Laundry services • Operatory rental and/or contractor overhead • Hygienist/assistant salary

A note to dental students: If you have free ADA Student Disability insurance through your ASDA membership, your coverage will automatically convert after graduation to include $2,000/month in business overhead expense insurance (in addition to $2,000/ month in disability income insurance). Call 888463-4545 or visit www. WellPreparedGrad.com for details about conversion and renewal premiums.

are disabled—and you don’t have to own a practice to take advantage of this coverage. (See boxed sidebar.)

4. How long will I receive benefits? If you become disabled, you typically will know fairly quickly if you will eventually recover or must sell your practice (thereby eliminating your business expenses). As a result, monthly benefits are paid for a shorter time, like 1 or 2 years, than for personal disability income insurance. As long as you have purchased the right amount of monthly coverage, you should have ample benefits to pay monthly expenses while you plan your next move.

The reason you need both types of disability insurance is simple: If you only have one, you could end up robbing Peter to pay Paul. For example, you might dip into your personal disability benefit to cover your payroll and then come up short for your home mortgage. But with both types of insurance in place, both your personal and professional “halves” can move forward with minimal financial impact.

Here are four key questions to ask when shopping for business overhead expense insurance:

Choosing the right company

1. What’s covered? Business over-

With all these variations, make sure the company offering disability insurance is reputable and strong. Independent rating services such as A.M. Best, Standard & Poor’s, and Moody’s Investors Service can help you check out a company’s financial strength. Your peers, mentors, and professional advisors also may have recommendations about a company’s pricing, service, and promptness in paying claims.

head policies typically reimburse the business owner for office rent/ mortgage, employees’ salaries and benefits, utilities, professional membership dues, accounting fees, advertising costs, and so on. Some companies also cover payments for practice loans and student loans, which is highly recommended for new dentists. In addition, a top-quality plan might include “locum tenens” coverage, a special benefit that covers the cost to hire a replacement dentist during a period of disability. 2. How much can I get? Companies vary in the maximum amount of coverage they offer, and the amount you request must correlate with your actual practice or professional expenses. You may be asked to verify your monthly expenses with a tax return or other information, especially when applying for larger amounts. 3. How will I be paid? Benefits are based on actual expenses for the prior month. You are reimbursed for these costs after they occur, so you’ll need to provide monthly documentation of your expenses while disabled. Some plans pay benefits even if you’re only partially disabled.

The bottom line: Just like a healthy diet includes the right variety and quantity of food, you need the right kinds and right amounts of disability insurance for whatever your future might hold. If you’re ever sidelined by disability, you’ll be glad you insisted on quality coverage. ■

Editor’s Note: This article does not constitute legal, financial, or medical advice. Please seek professional input as appropriate

to your situation.