Learn why you must have this type secondary, and the basics of what

This written self-instructional program is designated for 1.o hour of CE credit by Farran Media. Participants will receive verification shortly after Farran Media receives the completed post-test. See instructions on page 124.

Learn why you must have this type

secondary, and the basics of what

by Ivan M. Kirshner, DDS

Approved PACE Program Provider FAGD/MAGD Credit Approval does not imply acceptance by a state or provincial board of dentistry or AGD endorsement.

12/01/2004 to 12/31/2012

Farran Media is an ADA CERP Recognized provider. ADA CERP is a service of the American Dental Association to assist dental professionals in identifying quality providers of continuing dental education. ADA CERP does not approve or endorse individual courses or instructors, nor does it imply acceptance of credit hours by boards of dentistry.

of protection, why the details are

to have in your policy.

Dentists have always led the way with their patients on the basics of preventive dentistry and how to avoid dental disasters. Now try applying this philosophy to yourself, and preventing financial disasters.

I cannot proceed with this article without some personal background, and my mission. Yes, I will get around to some of the fine points and the details of this type of coverage soon. But, frankly, if you don’t understand the importance of protecting your ability to earn money during your profes-sional career, then policy features and details don’t matter. My life would have been totally different if I had not been properly covered. The most valuable asset I had, and most every other dentist has, is their ability to earn money during their professional career as a dentist.

I was diagnosed with Crohn’s disease in dental school and had to drop out twice. After finally graduating, I started my practice in Phoenix, Arizona, with a wife and three young children. We did well, paid off our bills and were saving some money. But due to my health history, I was unable to get disability coverage. I knew that even under the best of conditions, I was six months from bank-ruptcy if my income were to stop due to a disability, no matter how I did the math. If I had a recurrence, how could I support my family, save for my kids’ college, much less have the money to pay on my office rent, equipment and salaries?

So, here is where it gets better. Because I was in remis-sion for 15 years, I finally got approved for personal disabil-ity insurance to help replace most of my income if I couldn’t practice due to a disability. I was also approved for business overhead expense disability insurance to help pay my cov-ered office expenses, if I was to become disabled. My policy was approved and issued without any modifications or pre-mium ratings. I also was able to get cash-valued life insur-ance with a disability waiver, which meant if I became disabled, the company would fund the policy for me. A great weight was removed from my back.

Five years later, I had a recurrence. My doctor said I would do better without the stress of managing staff and dealing with patients. I guess he was more objective than me. It was time for me to speak to my insurance agent.

My wife and I visited him at his office. He had done things right. He walked me through the claims process and was there for me above and beyond any business obligation he had. I was learning the meaning of “pay it forward.” He said a large portion of my income would be replaced, my practice could be sold intact for the full value, and I could work in another occupation if I wanted to because of the true own-occupation definitions. I could make lemonade out of my lemons.

Abstract:

If you ask most dentists what their most valuable asset is, they will usually talk about their home or their practice. Occasionally, there might be an investment or retirement account that is mentioned. Always overlooked, however, is the investment in time and dollars made in their education. The ability to earn money working as a dentist through your profes-sional career is worth many millions. If you use a future value calculator with the number of years it is possible to work, cur-rent earnings, a percentage figure for increases in salaries over time, and that every dollar earned can earn money, the future value is many, many millions of dollars. In this CE article, learn about a real life situation first and then about the basics of what to look for in a personal disability insurance policy.

Educational Objectives:

After reading this material you will understand: • Why you need to protect your income

• That a protection-first philosophy is the basis of financial planning

• Statistics are unimportant

• Financial ratings and what to look for • Elective riders and what they mean

I decided to enter the financial services industry. I would talk to doctors about their balance sheets and retirement planning, but insist on a protection-first philosophy. Retirement and estate planning totally and completely unravel without the base of the pyramid. When someone calls my office who just had an accident or diagnosis, the asset allocation is put in its proper perspective.

That was 21 years ago. I became knowledgeable and experi-enced on disability insurance by going through a claim. Due to that coverage, my kids completed college and I changed careers. My son became a CPA with a master’s degree and joined my practice. Due to my coverage, we probably have 100 dentists who have had claims with policies from our office. When the call comes in about a claim, the mission and “pay it forward” mindset rebounds and multiplies.

So that is where I am coming from, and why the message is clear. Now let’s touch base on some things to look for in a per-sonal disability insurance policy. Each of these is a must, as far as I am concerned:

Non-cancelable and Guaranteed Renewable

to Age 65

This means that the company cannot cancel your policy, it cannot change the definitions, and it cannot change the rates as long as you pay your premium on a timely basis. With group coverage, you have exposure to these risks.

True Own-occupation Definition of Total Disability

This means if you cannot practice your profession (den-tistry) due to a disability, you are considered totally disabled even if you are at work in some other capacity. Frankly, I can’t think of any other profession that can get as easily disabled as a dentist. Dentistry is a great profession, but the investment in your education doesn’t really allow you to earn significant income doing something else. Many companies say they offer own-occupation, but if you read the language you will see that you must be totally disabled and not working! This is a modi-fied own-occupation definition of disability. Be wary. If I had any other definition than true own-occupation in my coverage, my life would have been totally different.

Residual Disability Coverage

This means you will be eligible for residual (partial) benefits if you have suffered a loss of income due to sickness or injury. Most claims are residual. Otherwise, you would most likely receive benefits only if totally disabled. I would advise you to compare the residual features closely between companies. If, when, and how much benefit you would receive if your income has been reduced due to a disability is directly dependent on the contract language. Don’t assume that residual from one com-pany equals residual from another comcom-pany.

Things you need to know:

The financial ratings of the insurance company are criti-cal. All the guarantees of an insurance contract are backed up by the claims-paying ability of the company. Be mindful of the fact that if you have a long-term claim, you better hope the company will be there for you way down the road. In addition to very well known A.M. Best and Moody’s rating agencies, check their Comdex ranking, which is a composite ranking. You might have to get this from an agent, or you should be able to go to the individual company’s site to access this information. Comdex will rate specific companies as compared to other companies.

Elimination Period

Elimination period is almost always 90 days. This is like a deductible. Premiums for shorter elimination periods usu-ally don’t make sense. Longer elimination periods don’t save you enough to make any sense either. Better to use these pre-mium dollars toward purchasing a longer benefit period. Your life won’t be any different years from now if you had benefits that began after 60 days, but what if they stopped paying you at age 65 when you might have qualified for graded lifetime benefits?

Benefit Period

Again, some companies still offer graded lifetime benefits through an optional rider. If not, at least look for a “to age 70” or “to age 67” or “to age 65” benefit period if at all possible.

Future Purchase Option

This means that you have the opportunity to purchase more coverage in the future without any health questions or medical exams. Needless to say, you should purchase the maximum amount your income qualifies for in the beginning, but when your income increases, you want more coverage, with only financial documentation required.

Cost of Living Adjustment (COLA) Rider

If you have a claim that lasts a long time, your monthly ben-efit needs to be increasing every year to keep pace with inflation.

“The most valuable asset I had,

and most every other dentist has,

is their ability to earn money

during their professional career

as a dentist.”

Different companies have different riders and costs for this rider, and it is not in the scope of this article to address the details. To give you an idea of the impact of this rider, the potential bene-fit for a 25-year-old dentist with a $5,000 per month benebene-fit to age 67 is $2,505,000. This is simply $5,000 per month times the number of months of benefit. The same example, by just adding a three percent guaranteed compounded COLA rider, has a potential benefit of $4,906,392. Know that this rider is costly and well worth it. Remember, you are just staying even with purchasing power.

Social Insurance Substitute (SIS) Rider

This is a rider that coordinates with payments received from Social Security. In my opinion, it was created to lower the premium costs, but it often results in having a lower monthly base benefit. I would avoid this if at all possible, and just get the maximum monthly benefit without this rider. After all, if you were to become severely disabled, wouldn’t you want to collect from both Social Security and from your individual disability policy? This is a very poor way to save very few premium dollars.

Underwriting for this type of coverage is challenging. The declined, rated up or modified offer with exclusions is all too common, probably about 30 percent of applicants. You should lock this up or review your coverage while you still have the option. It should go without stating, that you prob-ably cannot improve your coverage after a health change. Also, you don’t become younger. Every year you begin a policy, the rates are higher.

Look for an agent who specializes in disability income insur-ance for dentists. Some insurinsur-ance agents might mean well, but may not understand the finer points of what to look for as it applies to a dentist.

Find a way to pay for the best policy you can get. Think about what you pay per year to protect the value of your car, and what you pay per year to protect the value of your home. Your ability to work as a dentist is worth many millions of dollars, so look for a good, not an inexpensive policy. The greater risk to losing your home and car is if you can’t work! Consider temporarily raising some deductibles while keep-ing the maximum coverage in place to help pay the disabil-ity premiums.I

Author’s Bio

Dr. Ivan Kirshner entered the financial services area in 1990 after leaving the private practice of dentistry. He attended the University of Arizona and graduated from the University of Tennessee College of Dentistry in 1968.

In his first professional career as a dentist, Kirshner was in private practice from 1972 to 1990. He served as president of several dental organizations and served on the board of his local and state associations. He is a retired member of the American Dental Association, the Arizona State Dental Association and the Central Arizona Dental Association. He served two terms as a Trustee of the Arizona State Dental Association. He has volunteered his services for underprivileged children and was on the board of directors of the Crohns and Colitis Foundation of America-Arizona.

Kirshner began his second career after retiring from dentistry for health reasons in 1990. He has intensely pursued classes and continuing education in finance and economics for 21 years. This has enabled him to assist hundreds of other health professionals throughout the country in a unique way that they have not been exposed to before. Kirshner has worked with and spoken to senior dental students around the country and published several articles in dental publications dealing with financial planning and insurance matters. He is considered an expert in the area of disability insurance and buy/sell planning for dental practices.

Kirshner has been honored by Guardian Life Insurance Company of America as the top Disability Agent of the year and has been a member of their Leaders Club and Inner Circle for 18 years. He has also served on their executive committee two times.

Ten years ago, he formed Kirshner and Klarfeld Financial Group, LLC, with his partners Michael Klarfeld, CLU, and his son, Jeffrey Kirshner, CPA, MBA, PFS. They practice together in Scottsdale, Arizona with clients around the country.

Disclosure: The author discloses that he has financial interest in the sale of disability insurance.

*The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly owned subsidiary of Guardian. Kirshner & Klarfeld Financial Group, LLC, is not an affiliate or subsidiary of PAS or Guardian.PAS is a member FINRA, SIPC. The views and opinions expressed herein are solely that of the author and do not represent the views or opinions of The Guardian Life Insurance Company of America, or its subsidiaries or affiliates thereof.

1. The first priority when choosing an insurance company for disability should be:

a. premium.

b. elimination period. c. benefit period. d. financial strength.

2. A cost of living adjustment rider: a. is used to increase the premium. b. reduces benefit if there is inflation.

c. adds more benefit automatically while healthy. d. increases benefit on anniversaries of claim situation. 3. Non-cancellable and guaranteed renewable contract feature:

a. is available on group policies. b. can be added after issued.

c. means the company cannot cancel, change or alter pre-mium after issued.

d. means the insured can never cancel the policy. 4. What is modified own-occupation?

a. Unimportant for a dentist.

b. Disabled in occupation and not gainfully employed. c. More desirable for a dentist.

d. If one is disabled, he or she can earn money doing some-thing else and collect full benefits.

5. Comdex ratings of an insurance company: a. are easily available.

b. can be found on individual insurance companies’ Web sites. c. are a composite, relative comparison of insurance

compa-nies ratings.

d. can be purchased online.

6. Social insurance substitute riders:

a. mean I can collect benefits from the government and my company.

b. raise the premium cost.

c. usually lower the premium because the base coverage has been reduced.

d. are a good way to lower my premium.

7. When is the highest potential benefit from a disability policy? a. When you first graduate dental school.

b. When you start to earn serious money in practice. c. After you first purchase a policy.

d. When you have a change in health.

8. If I cannot practice dentistry, I can always collect from: a. workmen’s comp.

b. Social Security.

c. individual disability policy. d. employer-sponsored group policy. 9. A future increase rider means:

a. benefits will increase every year while under claim. b. benefits increase due to inflation.

c. I have the right to purchase more coverage with no health exam or questions.

d. my insurance is more important as I get older. 10. Financial planning should:

a. consider rates of return.

b. stress retirement planning before estate planning. c. have a protection-first philosophy.

d. consider modern portfolio theory.

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What Every Dentist Needs to Know

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