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If you’re an American Dental Association (ADA) member you are probably aware of the ADA member insurance plans. There are seven different types of insurance offered through the ADA; however, we will be focusing on the three most common policies here. Term life, disability, and office overhead insurance. As a student ADA member, you are automatically enrolled in the term life and disability plans with no direct cost to you. Are these plans worth paying for though? That is the question we will look to answer.
How do you enroll in these policies?
After you graduate, you will receive renewal letters asking if you would like to continue coverage for each of the policies. You will need to maintain ADA membership if you do want to continue coverage or enroll for the first time. For 2023, the cost of ADA membership is $600.
Disability Insurance
First up, disability insurance, arguably one of the most important policies for a dental professional. Dentists spend a lot of time and money on their education. It is important to protect your earning potential.
Definition of Disability
One of the most important things to consider: is the ADA policy own occupation? The answer is yes. The policy states that working at least 20 hours per week performing the clinical practice of dentistry will be covered. On individual disability policies, 30 hours per week is generally the norm. This is a slight advantage of the ADA policy definition.
Own-occupation is important because it provides a much stricter definition of disability. It means, if you cannot practice dentistry, you will receive your benefit. An any-occupation policy is less likely to pay you because you might be able to perform other jobs.
Benefit period
The maximum benefit period for this policy is age 65 if you become disabled before reaching age 65 and have a continuous long-term disability or partial disability. If you become disabled between age 65 and 75, the benefit period is a max of 24 months. A benefit period until age 65 is a typical option for many disability policies.
Benefit Amount
The maximum monthly benefit amount you can receive on the ADA policy is $15,000 per month. Generally, an individual policy will allow you to insure for greater than that if you qualify.
Waiting (elimination) Period
Standard waiting periods ranging from 7 to 180 days are available on this policy. The longer the waiting period, the lower your premium cost will be.
Cost of Living Adjustment (COLA) rider
The cost-of-living adjustment (COLA) rider will increase the benefit you are receiving when disabled to help keep pace with inflation. The COLA on this policy will be the lesser of the consumer price index (CPI) change or 9%. According to the policy, the CPI-W will be used. The last time the percent change in the CPI-W was greater than 9% was in 1980. Based on prior years, the increase will not be very generous for someone receiving disability benefits. The more preferred COLA would be a compounding rate. A 3% compounding rate is common.
Future Increase Option (FIO) rider
The FIO, along with all other riders, will require proof of good health in order to be included in your policy. Generally, this means a health related interview plus any medical testing.
The default FIO allows you to increase your benefit amount by $1,000 in up to 5 different years without any medical underwriting. If you exceed the 5 increases or want to increase by a different amount, you will need to submit a new application and undergo medical underwriting again.
By having an individual policy, you could forego any medical or additional underwriting in order to increase your benefit amount. With the right disability plan, you will only need to provide your financial information.
Additionally, the FIO amounts in the ADA policy are only available with the longest waiting period of 180 days. If you go on disability, you might receive your base policy benefit after 90 days, then after 180 days you would be able to receive any increase amounts you have opted for over the years. An individual policy would allow you to receive all of your benefit (including increases) after whichever waiting period you select for your policy.
Other items of interest
If you are away from work for more than 60 days you will likely no longer be considered actively working and might not receive full benefits if a disability occurs.
If you already have a substantial individual disability policy, adding the ADA policy will likely not provide much more value.
Life Insurance
Life insurance is a lot more clear-cut than disability insurance. You’re either alive or you’re not. Though it is still important to make sure you have the right amount of life insurance in place. Life insurance can be crucial in taking care of your family if you were to die prematurely.
Death Benefit
The death benefit maximum for an insured member dentist is $3,000,000. The death benefit for a spouse or domestic partner cannot exceed $1,000,000.
Life Insurance riders
Depending on your unique circumstances, you may want additional riders (add-ons) on your insurance policy. The ADA life insurance policy only has a few options for riders. These include accidental death, disability waiver of premium, and life insurance for dependents.
The accidental death rider provides additional money if you die due to an accident.
The disability waiver of premium rider will allow you to not pay premiums if you become totally disabled while covered by the plan.
The life insurance for dependents rider provides a small death benefit if an insured dependent dies while insured by the policy. An example of an insured dependent could be your child. If they were to unexpectedly die, this policy would pay a sum of money in order to assist with expenses like funeral and burial.
There are many other riders that might be worth considering for your family. However, you will not be able to get them on the ADA policy.
There is a section of the policy that allows for conversion from a group policy to an individual policy. The ADA policy is a group policy that is only for ADA members. Converting to an individual policy would mean that you now have a policy that would stay with you whether you are an ADA member or not. There are certain limitations on the conversion privileges.
Restrictions
There are restrictions in place on the ADA policy regarding suicide and flying aircraft. This does not mean you can’t fly, but if you are killed due to a flying incident, the policy will only pay partial benefits or no benefits at all.
There are not many other things of note on the base ADA life insurance policy.
Office Overhead Insurance
The office overhead policy will only apply to practice owners. You can think of office overhead insurance as disability insurance for your practice expenses. It could provide your practice with a reimbursement for fixed expenses. Typical items to be covered include: staff payroll, office expenses, property taxes, rent/mortgage, insurance premiums, and accounting/legal fees.
The ADA overhead expense plan has a maximum amount of coverage of $25,000. Generally, this is the minimum amount that would be recommended to a single doctor practice. Once you have more doctors or a larger staff you will want to reevaluate your coverage amount.
One important feature missing from the ADA policy is a residual benefit rider. This rider would allow the office to receive a partial benefit if the doctor was disabled and the business loses at least 20 percent of its income while the doctor is attempting to return to work.
Waiting (elimination) Period
The ADA policy has options for a 30 day or 90 day waiting period. Meaning the doctor must be out for this many days on disability before benefits are paid.
Benefit Period
The ADA policy has a 12-month and 24-month benefit period. This is the length of time benefits will be paid if the doctor remains disabled. Twelve months is often enough time to determine if you will be able to go back to work or if you will need to bring in additional help.
Salary Replacement Monthly Benefit
One thing that is not covered by the base policy is compensation for a replacement doctor. This could prove to be valuable if you are unable to return to work in a timely manner. However, you will need to purchase an additional rider in order to obtain this coverage.
Summary
A dentist should have their own individual life, disability, or business overhead insurance prior to considering one of the ADA plans. The main concern with the ADA insurance is that it is not your plan and you are not in control. Many dentists think that they have disability or life insurance when they sign up through the ADA. This is a common misconception. They are enrolling in coverage, just like an employee would enroll in their employer’s health insurance plan. The organization is in charge of what is offered and the plans available. The premiums and stipulations of these policies can change whenever the ADA desires.
That being said, these policies are great supplemental insurance if you need a bit more coverage beyond your individual insurance. Especially if you are already receiving value in other ways from your ADA membership.