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Disability insurance for Canadian physicians: What you need to know

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Fingers crossed that you’ll never have an injury or illness that will disrupt your medical training or practice. The loss in time can be hard to recoup, not to mention the financial burden of having to take time off. This is where disability insurance comes in.

Disability insurance can minimize the financial burden while you’re unable to work. It provides tax-free income that can help you:

  • cover your debt and bill payments
  • save you from cashing in your RRSPs or other investments to make ends meet
  • cover your day-to-day expenses
  • fund additional expenses incurred during disability

Here are some common questions about disability insurance for physicians.

What does disability insurance do?

Disability insurance provides a monthly income benefit to help you get by while you recover from an accident or illness. The coverage can last for a short period or a long period, it can be for partial disability or total disability, and the benefits can start from 30 days to 365 days following the accident or illness — it all depends on how your coverage is set up. Disability insurance can be complex, so be sure you understand enough to make a sound decision.

Do doctors need disability insurance?

The likelihood of you suffering an accident, injury or illness that affects your earning ability is no different from anyone else. Since your ability to earn an income is your biggest asset, it is worth protecting with disability insurance.  

How much does disability insurance cost?

The cost of disability insurance (premiums) depends on various factors, including your age, gender, health status, coverage amount, benefit period, waiting period and occupation (e.g., general physician vs. surgical specialist).

If you are a member of your provincial or territorial medical association (PTMA), you can take advantage of its insurance programs. Your PTMA has worked with an insurance company to design physician-specific disability insurance coverage and has negotiated discounted rates for members. Disability insurance from PTMAs have features that can lock in your good health status from today to guarantee that you will be able to buy more insurance in the future if you choose, no matter what your health is like.

What is an insurance rider?

An insurance rider is optional coverage that can be added to your insurance coverage. Adding riders will generally cost you more in premiums, but the benefits can be worth the extra cost. Here are some typical riders available with disability insurance coverage:

  • Cost-of-living adjustment (COLA): COLA provides coverage increases to ensure your benefit amounts keep up with inflation. This feature does not take effect until disability benefits begin.
  • Future income option: This benefit allows you to increase your coverage as your income rises, without you having to provide medical evidence. It’s also called guaranteed insurability.
  • Own occupation: If you’re injured and you can’t perform the duties of your occupation (e.g., cardiac surgery), you would receive full benefits even if you’re able to work doing different duties (e.g., teach cardiac surgery at medical school).

What should you look for in disability insurance coverage?

Be sure you have an idea of what some of the terminology used with disability insurance means.

  • Benefit amounts: Before calculating the benefit amount you require, consider the duration of benefit payments, the ability to integrate one disability insurance program with similar programs, and indexing for inflation. Your MD Advisor* can work with you to recommend an appropriate benefit amount.
  • Benefit period: This refers to the duration of benefit payments. Ideally, the benefit period should extend to when you plan to retire (i.e., the age when you would normally stop earning income).
  • Causes of disability: These should include both sickness and injury.
  • Elimination period: This is the waiting period before disability benefit payments can commence. The longer the elimination period, the lower the cost of the disability insurance coverage. An elimination period may typically be 30, 60 or 90 days. You should have emergency reserves to cover any costs you incur during the elimination period.
  • Restrictions: You should review your disability coverage to check for restrictions. These restrictions may limit or deny coverage relating to certain circumstances, such as disability resulting from pre-existing conditions (known health problems in existence at the time of application).
  • Guaranteed renewability: This allows you to renew your coverage, but not necessarily at the same rate.
  • Non-cancellable: This means the insurer cannot cancel the insurance.
  • Reduced disability benefits: If you don’t meet the definition of total disability, you may be eligible for a reduced amount through either a partial or residual disability benefit.
  • Refund of premium: Some disability policies allow for a partial refund of premiums if you have not made a claim during a specified time period.
  • Tax treatment: Generally, disability benefits are non-taxable if you paid the disability insurance premiums with your personal after-tax dollars.

Talk to your MD Advisor to discuss your specific situation. MD Advisors work together with the insurance advisors from PTMAs to provide advice and solutions for physicians.

MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.

Insurance products are distributed by MD Insurance Agency Limited. All MD employees dealing with clients regarding insurance products hold life licences.  

The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.