Return of Premium Option is a disability insurance feature that allows you to receive a refund of some or all of your premium payments if you don't make a claim during a certain period on your policy
Return of Premium Option: Disability Insurance For Doctors Explained
Get A Refund For All Or Part of Your Premiums
The return of premium option in disability insurance is a feature that allows policyholders to receive a refund of some or all of their premium payments if they do not make a claim during a specified period. This feature is particularly relevant to doctors in Ontario, who often have high incomes and may be able to afford higher premium payments in exchange for the potential return of those payments in the future. This article will delve into the intricacies of the return of premium option, providing a comprehensive understanding of its implications for doctors seeking disability insurance.
It's important to note that the return of premium option is not a standard feature in all disability insurance policies. It's typically offered as an optional rider, which means it comes at an additional cost. Therefore, doctors considering this option should weigh the potential benefits against the increased cost to determine if it's a worthwhile investment for their specific circumstances.
Understanding Disability Insurance
Before delving into the specifics of the return of premium option, it's crucial to have a solid understanding of disability insurance itself. Disability insurance is a type of coverage that provides income replacement in the event that the insured individual becomes disabled and is unable to work. For doctors, who often have high earning potential, this type of insurance can be particularly important.
Disability insurance policies vary widely in terms of their coverage, benefits, and cost. The terms of the policy, including the benefit period, elimination period, and definition of disability, can all impact the policy's cost and the benefits it provides. Therefore, it's crucial for doctors to carefully consider these factors when choosing a policy.
Importance of Disability Insurance for Doctors
Doctors are at a higher risk of becoming disabled due to the physical and mental demands of their profession. In addition, the high earning potential of doctors means that they have more to lose in the event of a disability. Therefore, disability insurance is often considered a crucial part of a doctor's financial plan.
Without disability insurance, a doctor who becomes disabled could face significant financial hardship. The loss of income could impact their ability to meet their financial obligations, including mortgage payments, education expenses, and retirement savings. Therefore, having disability insurance can provide a crucial safety net.
Types of Disability Insurance
There are two main types of disability insurance: short-term and long-term. Short-term disability insurance provides benefits for a short period, typically three to six months, while long-term disability insurance provides benefits for a longer period, often until retirement age. The type of disability insurance that a doctor chooses will depend on their specific needs and circumstances.
There are also specialty-specific disability insurance policies available for doctors. These policies provide coverage for disabilities that prevent the insured doctor from performing the specific duties of their medical specialty. This type of coverage can be particularly beneficial for doctors in highly specialized fields, as it ensures that they will receive benefits even if they are able to work in a different medical field.
Return of Premium Option Explained
The return of premium option is a feature that allows policyholders to receive a refund of some or all of their premium payments if they do not make a claim during a specified period. This option is typically offered as an optional rider, which means it comes at an additional cost.
The specifics of the return of premium option can vary by policy. Some policies may return a percentage of the premiums paid, while others may return the full amount. The timing of the return can also vary, with some policies offering a return after a certain number of years, while others may offer a return at the end of the policy term.
Benefits of the Return of Premium Option
The main benefit of the return of premium option is the potential for a refund of premium payments. For doctors who pay high premiums for their disability insurance, this can represent a significant amount of money. If the doctor does not become disabled and make a claim, they can receive a refund of their premiums, which can be a substantial sum.
Another benefit of the return of premium option is that it can provide a form of savings. The premiums paid into the policy can be returned at a later date, providing a lump sum that can be used for any purpose. This can be particularly beneficial for doctors who may have higher incomes and can afford to pay the higher premiums associated with this option.
Drawbacks of the Return of Premium Option
While the return of premium option can provide benefits, it also has drawbacks. The main drawback is the increased cost. The return of premium option is an additional rider that comes at an additional cost. Therefore, doctors considering this option will need to weigh the potential benefits against the increased cost.
Another drawback is that the return of premium option may not provide a good return on investment. If the doctor does not become disabled and make a claim, they will receive a refund of their premiums. However, if they had invested those premiums instead, they may have earned a higher return. Therefore, it's important for doctors to consider the potential return on investment when considering this option.
Considerations When Choosing the Return of Premium Option
When considering the return of premium option, there are several factors that doctors should consider. These include the cost of the option, the potential return on investment, and the doctor's individual circumstances.
The cost of the return of premium option can be a significant factor. This option comes at an additional cost, which can increase the overall cost of the disability insurance policy. Therefore, doctors should consider whether they can afford the increased cost and whether the potential benefits outweigh the cost.
Financial Situation
A doctor's financial situation can also impact whether the return of premium option is a good choice. Doctors with higher incomes may be more able to afford the increased cost of this option. In addition, doctors who have a good savings and investment plan in place may not need the return of premium option as a form of savings.
On the other hand, doctors who are just starting out and have lower incomes may find the cost of the return of premium option prohibitive. In addition, doctors who do not have a good savings and investment plan in place may find the return of premium option beneficial as a form of forced savings.
Health and Lifestyle
A doctor's health and lifestyle can also impact whether the return of premium option is a good choice. Doctors who are in good health and lead a healthy lifestyle may be less likely to become disabled and make a claim. Therefore, they may be more likely to benefit from the return of premium option.
On the other hand, doctors who have health issues or lead a lifestyle that increases their risk of disability may be more likely to make a claim. Therefore, they may not benefit from the return of premium option.
Return of Premium Option and Disability Insurance for Doctors: Conclusion
The return of premium option in disability insurance can provide benefits, but it also comes at an increased cost. Therefore, doctors considering this option should carefully weigh the potential benefits against the cost. Factors such as the doctor's financial situation, health, and lifestyle can all impact whether this option is a good choice.
Ultimately, the decision to choose the return of premium option should be based on a thorough analysis of the doctor's individual circumstances and needs. Consulting with a financial advisor or insurance professional can provide valuable insight and help doctors make an informed decision.
Disability Insurance Advisor Contact
Disability Insurance is Complicated
Here are answers to frequently asked questions...
No, the only thing you will ever pay is a premium to the insurance company that provides the disability insurance policy for you.
Yes, we have access to various discounts based on your income, your affiliation with a specialty association and other factors. These discounts will be determined and applied during your quote request process
Rates are based on your age, health history, smoking status, gender and income. The insurance company also compares and makes assessments based on similar individuals with the same profile like age, gender, smoker status, specialty and province of practice. Unlike association rates which are based on the claims of the whole group i.e. your rate is affected by someone who smokes even if you don't smoke, or if you neve claim and other claim multiple times, for example.
We simplify the process knowing how busy doctors get and need flexibility. The first step is simply to request your quotes and getting a sense of the cost and coverage available. Next, we compare the policy options and other riders like Own Occupation and discuss what makes sense for you and answer your questions. Lastly, you apply and buy risk-free.
Yes you can increase it and that is our recommendation. Anywhere you do residency in Canada for example, you’re automatically enrolled in a health-benefits plan, which includes disability insurance coverage. As a resident you can purchase a private disability policy under the Medical Student Offer for example. The benefit of this is that you don't have to go through a medical examination to qualify.
The more relevant clause is what's called "Future Income Option" which gives you the option in the future to buy more disability insurance if your income increases, without having to worry about your health having changed just in case. The monthly benefit and premium will depend on your new income, age, and province you’ll be practicing. The process is simple and will not require you to undergo medical underwriting.
In most cases, it can take between 1-3 months from beginning to end. A lot of the time may depend on follow up information required by the insurance company. In our experience 1 month is usually a standard timeframe.
As an independent insurance broker we have no affiliation with any one insurance company. We know which insurance company is most suited for the type of disability insurance policy that is most conducive for doctors. As a broker we get a finders fee from these insurance companies and they are all the same, without any financial conflict of interest either.
Underwriting is where the insurance company verifies your information that you submitted on the application your complete with us and gathers additional details such as health history , travel, and personal history to determine the best rate possible.