Professional Insurance Programs

Disability Income Insurance: What Every Veterinarian Needs to Know

By David R Dorley

When you teach the owners of your patients’ the basics of preventative medicine—good nutrition, hygiene and the importance of appropriate vaccinations—you’re helping them avoid future problems for their animals.

But have you prepared as well for your own future—in particular, your financial future? What if, for example, you suddenly become disabled—through an accident…an injury…or an illness—and are unable to work? Are you fully prepared for such a scenario?

Unfortunately, no matter how young or careful you are, it can happen to you According to the U.S. Social Security Administration’s February 2013 Fact Sheet, 64% of wage earners believe they have a 2% or less chance of being disabled for 3 months or more during their working career. However, the Fact Sheet shows that the actual odds for a worker entering the workforce today are about 25%.

Furthermore, it may not be prudent to rely solely on a group policy your practice may have purchased. While group disability policies are often relatively inexpensive and easy to administer, it can also fall short just when you need it most—leaving you in for some unpleasant surprises when it’s too late to correct the situation.

Want to be better prepared? Consider the following:

Learning to speak the lingo
The right individual disability income policy can help you keep your household going, even if you suffer a long-term disability. But before you go shopping for a disability income insurance (DI) policy, you need to know what features to look for—and the language the insurance industry uses to describe them. The following terms are part of the language describing high-quality policies, and are what you should look for to get coverage you can count on:

• Non-cancellable: To avoid the possibility of losing your coverage just when you need it most, choose a policy that’s non-cancellable and guaranteed renewable to age 65—with premiums also guaranteed until age 65. With group or association group coverage, you run the risk of being dropped and left unprotected at a time in your life when, due to your age or to a change in your medical condition, it would be very difficult to qualify for coverage from another provider.

• Conditionally renewable for life: Although premiums may increase after age 65, your policy should be guaranteed renewable for life, as long as you are gainfully employed full time at least 10 months each year.

• The core of any disability income policy is its definition of “Total Disability” which outlines what constitutes being “totally disabled” and therefore eligible for benefits. This definition is in every carrier’s policy; however, it does not always mean the same thing. For example, some policies pay benefits if you are unable to perform the duties of your own occupation, even if you are able to work successfully in another occupation, while others pay only if you cannot work at all.
• Residual Disability coverage: Through a rider, a good individual DI plan can provide you with protection against the income loss you may suffer as a result of partial (residual) disability—even if you have never suffered a period of total disability. This kind of residual coverage is not available with most group plans.

• A choice of Riders: Riders offer optional additional coverage such as annual Future Increase Options, Automatic Benefit Enhancements and Cost of Living Adjustments, or “COLA.”

Protecting your practice, as well as yourself
As a professional, you must also protect the source of your income: the practice you’ve worked so hard to establish and grow. Special policies, available from the same DI providers who offer high-quality individual coverage, offer your practice protection while you recover from a disability.

To help meet the expenses of running the office while you are disabled, consider a separate type of disability coverage known as Overhead Expense or OE. Benefits reimburse your practice for expenses such as rent for your office, electricity, heat, telephone and utilities, as well as interest on business debts and lease payments on furniture and equipment.

Overhead expense insurance specifically designed for professionals pays some additional costs not included in regular business overhead expense policies—including the salaries and employer-paid benefits of non-owner employees who are not members of your profession. In a practice such as yours, for example, salaries for the receptionist and nurse would be covered, but not the salary of your veterinarian partner or employee. However, high-quality professional overhead policies will cover at least part of the salary of a professional temporary replacement for you, such as a veterinarian retained to fill in during your total disability.

In addition…
Veterinarians who are partners in a group practice will also want to consider a policy known as a Disability Buy-Out or DBO. In much the same way that life insurance benefits can be set aside to fund a buy-out by the remaining partner (or partners) if one partner dies, DBO is designed to fund the healthy partners’ purchase of the disabled partner’s share of the business. With the proper agreement in place before disability occurs, potential hard feelings and the conflicts of interest that result from a partner’s disability can be avoided. Furthermore, in combination with the disabled partner’s individual Disability Income coverage and OE, a DBO policy can allow the business to continue to generate an income for the healthy partner(s)—while the disabled partner is supported by the benefits from his or her individual DI policy, and any continuing share of the business expenses is reimbursed by the OE policy.

The fact is, as part of your overall planning, you owe it to yourself to look into protection for the one thing that makes all the other planning possible: your ability to earn an income.


Prepared by Berkshire Life Insurance Company of America, Pittsfield, MA.
Include FR/RR/FA disclosure.