Disability Insurance: How Attorney Policies Differ

Disability insurance for an attorney differs from the type of coverage made available to other types of occupations mainly due to the higher disability risk. The changes that were made in the 1990s to disability income policies gave insurance companies protection against the frequency in claims that came from attorneys and doctors. These changes included capping the amount of income payable under a disability policy for individuals making a high income, changing the underwriting classification and placing a benefit time limit on disability due to mental, stress and nervous disorders.

It is important to understand the reason or need for disability insurance. Disability insurance provides a benefit for an individual who is unable to perform the main duties and functions of the job for which they are trained for, either through experience or education. A disability insurance policy will also provide a benefit for a person who through rehabilitation or retraining is unable to work at all within a specified time when the disability begins.

Monthly Income Cap

The amount of benefit paid in a disability insurance policy is based on a percentage of the take home earnings of a worker who becomes disabled. Usually this amount is set at 60 to 70 percent of income. Since attorney incomes are high, the disability benefit amounts can work as incentives for an attorney. The disability amount is high enough to maintain their lifestyle, but does not require them to get back to work right away. 

To eliminate this temptation, disability insurance companies have imposed caps on incomes in excess of $400,000 or so by limiting the monthly amount paid to between $12,000 to $15,000 per month.

Different Underwriting Classification

In order to determine the occupation class that is applying for coverage, disability insurance companies have created different occupation classes for attorneys. The abuses that took place in the 1990s in the disability insurance market warranted this change. Companies were required to properly review the risk group and charge an appropriate premium relative to the group.

Most disability insurance companies use the letter “A” to indicate all employment classes, such as office, clerical, administrative, management and other day-to-day workers. A numbering system is used to further distinguish levels within a class, with lower numbers being less desirous classes, and higher numbers, such as managers and executives. Attorneys receive a letter classification of “L” or “P” to indicate their status and help disability insurance companies better classify risk.

Limits on Mental and Nervous Disorders

One of the areas that created the most problems for disability insurance companies in the past was disability leave that attorneys took for mental, nervous and stress-related disorders.  In the past, these disabilities were treated the same as physical disabilities such as loss of a limb or blindness.  As more attorneys manifested mental and stress-related disorders, the rules changed to place a limit on the length of time these disabilities are paid for, usually 2 years. This change was done to provide some adequate protection for those suffering from these disorders while also discouraging attorneys to use the legal language in the insurance contract to benefit personally.

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