You’re at the pinnacle of your career as one of the best physicians in your area and your field of expertise, and your bustling practice treats plenty of patients who keep your doctor’s office busy every day. Then, out of nowhere, a car accident or other disaster leaves you unable to perform your most basic duties as a licensed doctor. Don’t let this scenario create financial destitution. Examine these reasons why you should invest in a lump sum disability insurance policy.
With a lump sum disability policy, the insurance company pays your benefit in one huge payment at a certain time rather than disbursing amounts on a monthly or weekly basis. Many insurance companies sell this type of supplemental insurance to cover financial needs beyond losses that other policies cover. That’s because basic disability policies may only cover a small percentage of lost income. A lump sum distribution makes up more of the difference between your actual income and what disability insurance policies provide for you, and it bridges the gap until you are able to return to work.
More Time to Find Income
You may receive a lump sum payment anywhere from 90 days to 12 months after your disability. The money covers you until you heal well enough to get back to work or find new, viable work. If you cannot get back to work, the insurance covers you until you receive disability benefits through Social Security or until you retire. Disability insurance doesn’t replace a lifetime worth of income as a doctor, but a lump sum payment lets you decide how to spend your money until you find another steady source of income.
Benefit Even After You Return to Work
With many policies, you receive your lump sum benefit even if you return to work before you receive the benefit. Your lump sum disability insurance coverage makes it possible to receive an income when you can’t fulfill your normal duties as a medical doctor. It also makes up for lost income from losing your high-paid position. With other policies, you may lose your benefits after you go back to work. A lump sum policy guarantees that you receive the full amount that you are entitled to, even if you are able to go back to work soon after the incident.
Some lump sum disability policies may provide higher limits than your regular disability insurance coverage. Many companies have exam-free policies that don’t require you to undergo a medical exam to receive a basic policy. If you’re willing to have a medical examination, your coverage limits may increase, and you could have a higher lump sum payout. A little investment in the policy now could pay off with larger amounts later. Paying into a policy can also save you some money each year around tax time and every month when you receive your paycheck, so a bigger investment at the start makes sense.
You pay premiums before you take out income taxes on your salary. That means the premiums you pay on your lump sum disability policy reduce your income tax liability on each paycheck. The caveat is that you pay income taxes on the lump sum you receive. However, if you never have to make a claim on your disability insurance coverage, you save some money every year in which you pay premiums because payroll reduces your monthly income by the amount of the premium. Your paycheck has less income tax taken out of it when you pay into pre-tax insurance premiums. Plus, if you own your own practice, your insurance costs may turn into a tax deduction as a business expense. Check with your accountant about how to turn your insurance into a tax advantage.
A lump sum disability insurance policy is a good idea for physicians because it provides peace of mind if an accident prevents continued employment as a doctor. The coverage may not bring back your entire income stream, but it helps to make up the difference. A lump sum disability policy provides for your family in a time of need while you try to put your life back together. Hopefully you never need to file a claim on your disability insurance, but if you do, a lump sum insurance policy may help guarantee your financial security.