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Disability Insurance as Part of Retirement Planning

By Scott B. Elkind, Esq.

Whether you are getting up to that time or not, it is time to take out your disability policy and actually read it. I know it might be a little difficult. I don’t mean the legalese, but the actual removal of the policy from the protective plastic holder which pulls of the ink on the face page.

No one wants to become disabled. It really isn’t fun and can be quite boring(as most of my disability clients, including several physicians, tell me). This is why you need to plan for the unexpected as you do with life insurance. Unlike your life insurance, the standard for policy collection is not as simple. To collect on a life insurance, you need to be dead. Simple. To collect on a disability policy, you need to be unable to perform the duties of your occupation. Seems simple, but it isn’t. For example, I worked on a case where an OB-GYN suffered a torn rotator cuff and could no longer perform the necessary maneuvers to deliver infants. The problem was that he was still fully capable of his GYN duties. Therefore, he was able to obtain partial disability. Further, group policies may have provisions which consider your work skills and whether you can perform other related work after two years of receiving benefits. For example, a surgeon who has developed essential tremor could still perform the duties of a general practitioner….at least the insurer will argue that point to avoid payment of benefits.

There are other provisions which you need to verify in your policy. First, how does the insurer calculate your monthly benefit. If you have a policy which pays only 60% (most only do), then the amount of monthly payment may be far less than you expect. In addition, does the policy have a rider with a cost of living increase on an annual basis. This is not standard and must be purchased as a separate rider. It is not cheap. Next, if you have had good earnings from your practice, you could expect to receive up to approximately $1800/month in disability benefits from Social Security. The Social Security standard differs in that your disability must be from all other jobs in the national economy taking into consideration your age, education, and experience. Even if you qualify, does your private policy have an offset provision for Social Security benefits. If it does, then you will not be double dipping from the disability well as you may have planned. Further, does your policy have limitation provisions for mental illness or self-reported illnesses (fibromyalgia, chronic fatigue, etc.). If so, then you may be subject to a 24 month limitation as your total payout. And, do not think for a second that your insurer would not just love to hold a few references in your medical record to depression and/or anxiety against you to limit the payout even when faced with a substantial underlying physical illness. As I tell many of the clients, the policy is black and white; how it is interpreted is gray; and how it is paid is green. Lastly, you need to verify the benefit period to be paid. It makes a big difference if your policy pays to age 65 or 67 rather than 62 when considering whether you wish to take your Social Security retirement at an earlier or later age.

Of course, whenever you believe that disability may be an option to be considered, please call an attorney before you do anything of a proactive nature. Why? These policies cost an insurer a lot of money when faced with a payout. The insurer has every motivation to seek ways to avoid payment and many will not hesitate to do so. The best example is an eye surgeon in Florida suffering from Parkinson’s disease who was turned down and had to file suit against the insurer to collect his benefits. He eventually won, but it took year for him to get paid. I can’t imaging a more obvious disability precluding someone from their prior work. But, then again, I’m not the one who has to pay the monthly benefit. And, when you take into consideration, that physicians constitute the largest growing sector for disability claims, you can see why insurers are trying to cut down on their increasing liabilities.

As you can see, disability coverage should be part of your retirement planning equation. Again, take some time to review your policy and speak to your insurance advisor. An annual insurance check-up may be the ounce of prevention you need.

Scott B. Elkind, Esq. is a Principal with Elkind & Shea, The Disability Benefits Law Firm, in Silver Spring, Maryland.

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