From the December 2006 issue of Investment Advisor • Subscribe!

Physician, Insure Thyself

After a long dry spell, physicians and dentists are once again able to get disability insurance coverage that matters

Disability insurance is undergoing some interesting changes. According to John Ryan of Ryan Insurance Strategy Consultants in Greenwood Village, Colorado, one of those changes is the return of own-occupation (own-occ) coverage for physicians and dentists. Those professions had a rough time getting coverage for more than a decade, after the onslaught of managed care and the resulting early exodus of doctors from practice. Even though a few companies continued to offer ample coverage, many insurers drastically cut benefits or eliminated eligibility.

Now, however, premiums are on the way down and caps on monthly benefits are being raised. Not only that, Ryan says, but now there's a new wrinkle in retirement protection disability coverage that "allows physicians, dentists, and small business owners to ensure 100% of their retirement plan contributions." Before, Ryan says, only 20% was insurable.

While the broadening market for own-occ coverage is "industrywide," says Ryan, only three companies offer the retirement coverage: MassMutual, Principal Financial Group, and Berkshire Life, a subsidiary of Guardian. The "neat thing" about this coverage, says Ryan, is that companies generally will issue it regardless of how much coverage the insured already has. Since doctors and dentists have had to deal with reduced benefits since 1995, Ryan says it's most attractive to them.

David Runyon, a disability brokerage manager at Guardian/ Berkshire, says his firm has always offered own-occ coverage, but that the industry's general exit from market was due to doctors who "were not happy with what was going on in [managed care] medicine and found an exit strategy, claiming they were stressed out or burned out or something." Claims of that nature have subsided, he says, so loss ratios are returning to expected levels.

Physicians and dentists in particular will be interested in what Matt Gottfried, director of individual disability income for Berkshire, says is the "true own-occ market." Berkshire's coverage pays benefits if, for instance, a surgeon is no longer able to continue as a surgeon because of an injury or illness that prevents her from using her hands--even if that surgeon goes on to teach or to pursue some other occupation. The policy also accepts specialties recognized by the AMA and the ADA as "own-occ" so that an orthopedic surgeon, if no longer able to work within orthopedics, can receive benefits.

Coverage is also extended for partial and/or residual disabilities, so that even if an insured is able to resume work, but is not able to return to full productivity, the policy provides benefits.

Berkshire's retirement coverage product is called Retirement Protection Plus. The proceeds of the policy are placed into a trust, and the trust is invested at the discretion of the insured, which reduces the downside risk of a disability on retirement savings, says Gottfried; he also suggests that it provides advisors with an additional opportunity to be of service to their clients by providing the best guidance possible for investment of those funds.

The cost of Retirement Protection Plus, relative to an insured's projected account balance at age 65, is approximately one percent. Gottfried says that this policy is a new concept in disability protection, and adds that, the average consumer is far from prepared either for disability or for the impact that a disability will have on her retirement income.

Says Ryan, "The disability world is looking bright again. Companies are looking for ways to write the business now; for the last 10 years, it was the opposite."

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