Physician financial “gotchas”? Well, that’s putting it mildly. Because in the real world of physician group LTD insurance – and in the event of a real-life disability — these gotchas can translate into killer financial mistakes, especially when it comes to protecting your physician clients and ultimately your livelihood.
Potential Gotcha #1: Pre-tax versus post-tax? If your physician clients never use their disability benefits – whew! — they’ll save money by paying their premiums with pre-tax dollars. But if they need their disability benefits, using post-tax dollars to pay their premiums places them in a better financial position.
Click here to see examples of a physician who pays premiums for $10,000 of monthly disability coverage for 10 years and is then disabled for the next 10 years. You’ll see how a $10,000 tax savings (pre-tax approach) could cost almost $400,000 of benefits (post-tax approach) in the long run.
Potential Gotcha #2: K-1 Income. Does your physician group policy penalize highly compensated partners and shareholders? Some carriers include K-1 income as part of your current monthly earnings or disability earnings, which can result in a reduced benefit when the physician is partially disabled. And if you’re not careful, your LTD policy may consider K-1 income as a direct offset or other income, which means your monthly LTD benefit may be reduced dollar for dollar for K-1 income received while disabled.
Click here to view the four questions that partners and shareholders need to ask with regard to their physician group LTD plan and Schedule K-1 income.
Say good-bye to the gotchas.