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Catastrophic Disability Benefit Costs vs. Benefits for Physicians

There are many decisions physicians need to make when buying disability insurance, including choosing a strong definition of disability and deciding whether to include policy riders that will enhance your coverage. One rider to consider is a catastrophic disability benefit.

The good news is that catastrophic disability benefits are inexpensive compared to the additional payout you’ll receive if you become severely disabled. Let’s look at how the catastrophic disability benefit rider works to better understand when it applies.

What is a catastrophic disability rider?

The catastrophic disability benefit rider (CAT) is an optional disability insurance rider that pays out an additional monthly benefit if you become catastrophically disabled. This includes severe disabilities that affect your ability to perform basic living activities, such as bathing and dressing yourself. It also applies if you have a severe cognitive impairment or a medical condition that’s easily presumed to be a total disability.

How do catastrophic disability benefits work?

The primary purpose of the catastrophic disability benefit rider is to help cover the expenses associated with a severe disability that requires additional medical care or services. Because catastrophic benefits are paid in addition to your policy’s base benefit, this rider can enhance your coverage so you’d receive up to 100% of your pre-disability income.

Qualifying for a catastrophic disability insurance claim

To collect catastrophic disability benefits, you’ll typically need to meet one of the following qualifying conditions:

  • Unable to perform two or more activities of daily living without assistance. 
  • Become cognitively impaired.
  • Become presumptively disabled.

Although the catastrophic disability benefit can vary, this rider is generally consistent among the top individual disability insurance carriers.

Catastrophic disability: Activities of daily living

If an injury, illness or medical condition prevents you from being able to complete certain self-care functions on your own, you can likely qualify for catastrophic benefits.

Activities of daily living (ADL) include bathing, dressing, eating or feeding, toileting, transferring and continence. For example, if you need assistance getting in and out of bed or no longer have the ability to maintain bladder functions, you would meet the requirements for transferring and continence.

You’ll need to prove you’re unable to perform two or more of these activities without the assistance of another person. 

Catastrophic disability: Cognitive impairment

If you become cognitively impaired due to an injury or disease, your catastrophic disability benefits will kick in. Here are two example definitions of severe cognitive impairment from Principal and MassMutual:

  • Principal. “Measurable impairment to short-term/long-term memory; orientation to people, places, time; deductive/abstract reasoning that severely impairs the ability to function independently.”
  • MassMutual. “A severe deterioration and/or loss of cognitive capacity that is due to an injury or sickness as measured by standardized tests commonly accepted for use in the medical community.”

Common causes of cognitive impairment include but aren’t limited to Alzheimer’s disease, stroke and traumatic brain injury. But qualifying for a cognitive impairment disability will come down to your medically documented life-altering symptoms, such as confusion, disorientation and memory loss.

Needed documentation will vary by insurance company, but they will generally consider your medical diagnosis, history of symptoms and the need for substantial supervision for your health or safety.

Catastrophic disability: Presumptive disability

Presumptive disability coverage is included in most long-term disability insurance policies. This provision allows you to automatically qualify for total disability if you experience complete loss of speech, hearing, sight or use of at least two limbs. Such conditions result in a payout of your base benefit amount. But if you have a catastrophic disability rider, you’ll receive catastrophic benefits as well.

Do you need catastrophic disability insurance?

Adding a catastrophic disability benefit rider to your policy is relatively inexpensive, and it can be of significant benefit if you experience a life-altering disability. In terms of severity, we’re talking about the difference between “I can’t stand on my feet to perform surgeries” versus “I can’t feed or dress myself.”

Although they occur less frequently than non-catastrophic disabilities, catastrophic disabilities do happen. By including catastrophic disability benefits in your policy, you’ll be able to protect up to 100% of your pre-disability income in case of an extreme scenario versus being limited to the base benefit, which usually maxes out around 60% of your income.

That said, it’s not necessarily disastrous if you don’t add this rider to your policy. One of the key factors to remember about catastrophic disability benefits is that they are paid in addition to your base policy benefit. They do not affect your main benefits, which you would receive for any covered disability, including a catastrophic one.

Overall, it’s a good provision to have in your policy in case the unexpected happens. Sometimes, people purchase the coverage and later drop it to save money. But other policy adjustments can be made to reduce policy costs without losing out on catastrophic benefits. So, it’s best to speak with a knowledgeable insurance broker who will walk you through options for catastrophic disability benefits and other policy decisions that best fit your needs and budget.

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