September 15, 2004

 

 A disabling injury or long-term illness - September 15, 2004

posted September 1, 2004
 




It could be a sudden back injury from lifting a calf, an unexpected diagnosis of multiple sclerosis, or even a stroke. When a veterinarian is confronted with a long-term disability, the situation presents multiple problems.

A primary concern is the cost of medical care. Health insurance can cover critical, short-term care, but rarely covers the ongoing care a long-term disability could require.

A second, equally pressing concern is the impact on income, should one be unable to work for an extended time, or if one would have to reduce hours or work in a lesser-paying profession as a result of a disability. Even veterinary students, who aren't yet earning a professional income, need to consider how they would pay their bills, tuition, and student loans if they were to become disabled.

A third concern is the ability to sustain the viability of one's practice. Veterinarians who have a solo practice or practice with partners are typically responsible for all or a portion of the overhead expenses of the business—everything from office rent to employee salaries. Those expenses recur every month, whether the veterinarian is able to work or not.

All of these concerns can be adequately planned for, with the proper insurance.

Planning for disability is so important because a serious accident or illness can occur at any age, and happens more frequently than most people realize. In fact, one in five individuals will experience a disability, according to the U.S. Census Bureau. A study released by the census bureau reveals that more than 152 million Americans between the ages of 21 and 64—prime working years—have some form of disability.

For young veterinarians, who may not yet be as financially secure, a disability of even a few months could prove disastrous. For veterinarians of any age, with the possible exception of the very wealthy, a long-term disability will present financial difficulties. The average nursing home facility costs around $5,000 a month. Even a part-time home health aide could easily cost more than $1,000 a month. If a working spouse provides in-home care, the impact on the spouse's career and income can be devastating.

Covering the cost of care
Options other than paying for long-term care from personal funds are limited. Medicare may pay some expenses if the individual is disabled or over age 65—but Medicare is limited in what it covers. Medicaid is really the last resort, since an individual must, basically, exhaust their financial assets to qualify for it. And, the choice of care would be restricted to the limited pool of caregivers (mostly institutions) accepting Medicaid patients.

Long-term care insurance is a responsible solution.

Long-term care is defined as the kind of assistance an individual would require with daily activities—help with eating, bathing, dressing, and transferring from a bed to a chair, for example. Typically, an individual qualifies for care when he or she is unable to perform at least two of those daily activities.

The care may be provided by a nurse, health aide, or other caregiver, at a care facility or at home. Because most long-term care is not skilled nursing, some policies will also pay a benefit that allows care to be provided by friends or family members.

Tax incentives are provided to those who insure for long-term care. Self-employed individuals, including partners and some S Corporation shareholders, may be able to deduct a percentage of eligible long-term care premiums. (Consult your tax professional.) Long-term care insurance may also be funded through a Health Savings Account, which allows premiums to be paid with pretax dollars.

Protecting earning power
With the burden of cost eased by long-term care insurance, the next component of protection is income. Because earning power is often a veterinarian's greatest asset, long-term disability income insurance should be considered as a basic part of a benefit plan. This insurance can help guard against debt, depleted savings, and disruption of a family's standard of living resulting from a covered disability.

Some plans allow the insured to select a monthly benefit, which is typically a percentage of average earnings, often around 60 percent. Many plans also offer what is called a residual benefit. This benefit kicks in after the individual has returned to work and long-term disability income benefits have stopped, but while the individual is still experiencing a reduced income because of reduced work hours or a change in responsibilities. Residual benefits can help offset lower earnings.

Another optional coverage to consider is "own occupation" insurance. This protection can pay full benefits (as opposed to residual) when a disability prevents the insured from performing the material and substantial duties of his or her occupation. The insured can receive full benefits, even if working in another occupation, as long as the new position does not require use of veterinary education or training, and as long as the insured remains under the regular care of a physician.

Students also need to protect the investment they and their families have made in their education and future career. Special plans, geared for students, offer affordable options to provide monthly income to allow disabled students to help pay bills and, hopefully, complete their education.

Keeping the business viable
The final issue to be addressed is the cost of keeping a business open during the disability of an owner or partner. Professional overhead expense plans can be a solution.

Plans typically allow the insured to select a monthly benefit level (from a few hundred dollars to several thousand dollars) based on business expenses, including rent, principal and interest on outstanding debts, utilities, employees' salaries, postage and stationery, equipment maintenance, and monthly average of taxes on the business premises.

For professional overhead expense plans, benefits typically apply when individuals are unable to perform the substantial and material duties of their occupation, are under a doctor's care, and are not working at a gainful occupation.

The premiums for this kind of insurance are also generally tax-deductible as a business expense. (Consult your tax professional.)

Because group coverage is almost always more affordable than individual coverage, veterinarians seeking insurance should consider group options available to them, including plans offered by the AVMA Group Health and Life Insurance Trust.

The odds of experiencing a disability during one's working years are, unfortunately, substantial. But fortunately, with the three elements of long-term care insurance, long-term disability income insurance, and professional overhead expense insurance in place, a disabling injury or illness does not have to turn into a personal or business financial disaster.