Which Side of the Coin Flip Do You Want to Be On?
- Shaun McDuffee
- Apr 2
- 6 min read
“As a Financial Advisor, I know how important it is for a Physician to secure disability protection. Literally half the people who apply for disability cannot secure a clean policy without modifications or riders. Thankfully, GSI plans have become increasingly available for Physicians.”
Shaun McDuffee, AEP, CLU, CHFC, CEPA
[i]According to a study released in 2021, 50% of private disability insurance policies issued were either declined or modified due to medical history. Essentially, this means that if you apply for private disability insurance, the chances of your application being accepted without restrictions are equal to your chances in a coin flip.
In the post-Covid world, this is a stark reality young physicians face when looking to pick up a good True Own-Occupation, private DI policy. Your most important asset as you enter practice is your future ability to earn an income in medicine. If you are unable to work in your chosen specialty, you may be able to do something else, but it likely won’t pay nearly what your specialty does. In a surgical specialty there are numerous things that could prevent a physician from performing a procedure: a tremor, a nagging chronic back problem, an eye condition, a skiing accident, etc. Although problems can range in severity, they can be equally devastating to your income. For example, a long-time client of mine recently shared that he doesn’t believe his lower back issues will allow him to continue doing hands-on care with patients for more than a few hours a day. At the more extreme end of the spectrum, a pathologist client developed ALS and had to quit working entirely. In 35 years as a Financial Advisor, I have delivered disability claims to dozens of physicians. Every one of them bought their True Own-Occupation DI coverage with hope and intent to never use it, and every one of them was incredibly thankful to have it when they needed it.
Typically, private disability carriers are extremely thorough on the front end of the underwriting process because they realize they are committing to covering this person for 20-30 years. The application time is their only opportunity to exclude certain things from coverage.
Physicians often ask what types of things could be excluded due to medical history or perhaps even prevent them from securing coverage altogether. The number one exclusion I have seen on private DI plans in the past 5 years are mental/nervous disorders.
As a society we have realized the importance of focusing on mental health to treat stress and anxiety (which is a good thing!), but these conditions will often trigger a modification or exclusion on disability policies. I have witnessed a huge spike in the number of private DI policies issued with riders and modifications in the past few years.
In the past 12 months alone here is a list of actual policy modifications I have seen on client policies (besides mental/nervous):
Migraines
Left hand
Right knee
All internal hardware
Breast
Jaw
Single ear/eye
Glaucoma
Full back
Lower back
Neck
Self-prescribing medications (decline)
Pregnancy
Chrones
Diabetes (decline)
Cancer (decline)
Multiple mental health diagnosis (decline)
Obesity/weight (build) (rated or declined)
Foot
Extreme sports like deep sea scuba diving, high altitude hiking/climbing, and hydroplane boat racing
As a Financial Advisor, I know how important it is for a Physician to secure disability protection. Literally half the people who apply for disability cannot secure a clean policy without modifications or riders. Thankfully, GSI plans have become increasingly available for Physicians.
What is a GSI Disability Plan?
Insurance companies offer Guaranteed Standard Issue (GSI) Plans to physicians in particular residency/fellowship programs where they guarantee coverage with NO medical questions asked and no modifications. It essentially guarantees that every resident/fellow at a covered teaching hospital can secure private disability coverage, and these plans have very few ‘deal breakers’ when it comes to qualifying. The primary limitation is that physicians cannot have previously received a modification or decline (or withdrawn an application) with another insurance carrier prior to applying for the GSI plan. In other words, insurance companies don’t want you to apply, get declined/modified, and then try to get the GSI plan knowing you can’t get coverage anywhere else. This is called “anti-selection”.
GSI plans depend on the idea that insurance companies have enough people enter the plan to allow them to diversify their risk. Carriers realize that a certain number of people will be perfectly healthy and a certain percentage will have medical concerns. If they simply insure enough people, they can provide coverage to all equally. This is the general concept of insurance. Typically, carriers need a certain “participation rate” from the residents/fellows to offer these plans at a hospital, which tends to be about 10-15% of the total physician population.
Most GSI plans today are essentially the exact same policy you can purchase on your own (True Own-Occupation, Specialty Specific protection, with most of the same riders and features). However, they typically have a lower total coverage amount in order to diminish the insurance company’s exposure. Most GSI plans provide a maximum of $15,000/month in total benefits, while medically underwritten individual plans will typically provide a maximum of $30,000/month in total benefits.
Who Provides GSI plans for Physicians?
Three main GSI providers offer physician-specific DI coverage: Standard, Guardian, and Ameritas. There are some older plans still in existence with carriers like Unum and Principal, however these three companies provide the majority of new policies.
The features of these plans are fairly similar, however there are a few differences in regard to pre-existing conditions and coverage for physicians on Visas.
Guardian is the only carrier that offers no pre-existing condition exclusion. Ameritas has what is called the 3/12 exclusion for pre-existing conditions. This means that if you are disabled in the first 12 months of having the policy for a condition that you knew about 3 months or less before securing coverage (or if a reasonable person would have known of the condition), they will not pay on the claim. There is language in the Ameritas plan that states any material change or increase in coverage in the future will start the 3/12 clock again. Ameritas is, however, typically less expensive than Guardian. Clients who are ok with the pre-existing condition clause can save about 5-10% with Ameritas, depending on occupation class.
I often recommend Guardian for foreign nationals because (in most states) it is the only GSI policy that will continue to pay a disability claim that occurred in the US. This applies even if you are required to leave the country due to losing your academic or work Visa. Other GSI plans require you to return to the US to receive treatment in order to continue receiving benefits, or they limit payments to 12 months unless you are living in the US for six consecutive months in a calendar year. All these plans exclude a disability that occurs outside the US for Visa holders unless it is incidental travel (less than 31 days in length, and you have a return trip booked within that time period). In this case, you are required to return to the US for treatment and evaluation.
Play it safe- don’t gamble with your future earnings.
I realize residents and fellows are bombarded with emails from agents and advisors all telling you they can help you shop for the best deal and offering to send comparison summaries of the various carriers offering coverage. What many don’t know is that the price of coverage doesn’t vary from agent to agent and the cost for any carrier is an apples-to-apples comparison.
With the increased availability of GSI plans covering physicians in training, it’s imperative to first check if there is a GSI plan offered for your program. In the past, it was generally best to shop disability carriers for the best offer, however today that can actually hurt your ability to apply for certain policies. All carriers will deny you access to the GSI program if you have previously applied for private coverage elsewhere and received a modification, rating, decline, or have withdrawn an application for any reason.
For this reason, it is critical to talk with someone who has access to a physician-specific GSI plans and apply for it first to ensure the guaranteed coverage. Given that 50% of offers on medically underwritten policies are modified or declined, it’s not worth the “coin flip” to risk applying with a carrier outside the GSI.
Shaun McDuffee is the President and Founder of Twin Oak Advisors and GSI4DOCS. He has spent the past 35+ years working exclusively with Physicians in the areas of Debt Management, Risk Management, Wealth Accumulation, and Estate Planning. He is a Chartered Life Underwriter (CLU) Chartered Financial Consultant (ChFC) Accredited Estate Planner (AEP), and Certified Exit Planning Advisor (CEPA). He is the Author of the Physicians Guide to Financial Independence and a regular speaker across the country. Shaun has been named one of the Top 100 Financial Security Professionals in America by Forbes Magazine every year since theystarted the ranking in 2020. He has served on the board of FINSECA and is the Founder and Chairman of Stop Alzheimer’s Now a non-profit focused on raising money to find a cure for Alzheimer’s. He is the proud Father of three amazing, independent Daughters and he and his wife Kristin split time between their homes in Austin, TX and Steamboat, Co.
[1] The Milliman company conducted a review of the 15 largest Individual Disability Insurance companies’ policies that were issued between 2016-2020. They found that 36% of every case issued was issued with some sort of medical modification or rating. They also found that 14% of every applicant was declined due to medical history. https://www.milliman.com/en/insight/2021-annual-survey-of-the-us-individual-disability-income-insurance-market
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