If you become disabled while in school and have to drop out, disability insurance benefits can help you pay your student loans. You'll also save on premiums.
Published November 19, 2018|5 min read
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With disability insurance, you can receive monthly benefits from the disability insurance company when you become disabled and can’t earn an income. But if you’re still a student, there are a lot of reasons to get disability insurance now, if you’re able to.
For one, if you become disabled while you’re in school and have to drop out, you’ll still be on the hook for your student loans, and disability insurance benefits can help you make those payments.
Additionally, getting disability insurance when you’re younger and healthier can mean paying considerably lower premiums than getting it later, when you’re older and could have developed health complications.
Disability insurance for students makes the most sense if you’re in school for a medical degree, with the expectation that you’ll be able to earn a large salary when you graduate. In fact, if you’re not earning an income and aren’t getting an advanced degree, you might not be eligible for coverage in the first place.
If you’re training to go into a medical field, you need disability insurance. For one, medical school is expensive, and you’ll have many years of student loan debt to pay off when you graduate. Although medicine is a high-paying career, medical school graduates frequently struggle to make large student loan payments when just starting out in the workforce.
The Association of American Medical Colleges requires all medical schools to offer disability insurance coverage to their students. Some schools also require their students to purchase coverage, although in most cases it is optional.
Talk to your school’s benefits administrator to learn whether you have coverage already or need to purchase some.
If you belong to a professional organization, such as the American Dental Association, you should be able to get coverage through it as well. Check the website of your organization for more information.
As we’ll see in the next section, coverage offered by your school or professional organization may not be enough for your needs. Furthermore, that disability insurance may expire once you graduate or enter residency, so it might be better to purchase your coverage directly from an insurer where it could be more “portable.” A licensed representative at Policygenius can help you find a disability insurance policy that covers you while you’re still in training and after you start your practice.
Disability insurance at any point in your career mostly works the same way. When you become disabled, the insurer pays you benefits during the benefit period or until you recover or die. However, disability insurance when you’re a student has a few differences.
The benefit amount is how much you’ll receive each month while you’re disabled. Under a disability insurance policy for workers, this amount is typically about 60% of your gross income. But for students, insurers usually set the benefit amount at a flat rate of between $1,000 and $2,500.
Your benefit amount can change depending on where you are in your program. Some insurers offer benefit amounts as high as $5,000 to $7,000 when you enter residency.
The definition of disability for student policies is a measure of how disabled you have to be before you become eligible to receive benefits. For most policies, you must show that you’re unable to continue attending school. In addition, in order to keep receiving benefits after being disabled for a certain period of time, you may also have to show that you can’t work in any occupation for which you went to school.
Disability insurance for students is some of the cheapest around. That’s because:
Some schools and organizations offer it for free or at a reduced group rate.
You’re getting much lower coverage while you’re in school.
While disability insurance starts out low when you’re in school, it could increase in price after you graduate. The biggest reason for the price increase is simply that you’ll need to increase your coverage to match your income.
The benefit period is the length of time during which you’re eligible to receive benefits after becoming disabled. A long-term disability insurance policy can have a benefit period that lasts until age 67 (or just several years, if you don’t think you’ll need coverage that long).
Student disability insurance benefits can also be paid long after you’d otherwise still be in school. Some policies even last until retirement age. Your benefits will end if you recover from your disability.
As with disability insurance you get when you start your career, student disability insurance also has an elimination period. This is the time you have to wait after you become disabled before the insurer will begin paying you benefits. A common elimination period is 90 days, although shorter elimination periods are available if you’re willing to accept a shorter benefit period or pay a high premium.
Disability insurance replaces around 60% of your pre-tax income while you're disabled and can't work.
In most cases, you can’t get disability insurance if you don’t earn an income, and you’ll have to prove your income when you apply and go through financial underwriting. Insurers make an exception for medical and dental school students, regardless of specialty. Students in other majors and fields may not be able to get coverage until after they begin their jobs. (You also can’t get covered if you’re under 18 years old.)
Student loan debt is a big part of the reason to get disability insurance, whether you’re currently a student or already working. Since high-income professionals also tend to have a lot of student loan debt, disability insurance is especially important not only for doctors and dentists but also for everyone from lawyers to CPAs to pharmacists to software engineers.
If you’re totally and permanently disabled, the U.S. government may allow you to discharge any of your outstanding federal student loans. But private student loan debt may still need to be paid.
You can also purchase a student loan disability rider for your disability insurance policy. When you become disabled, this rider will pay a monthly benefit directly to your student loan servicer. These benefits are in addition to the usual benefit amount in your policy’s basic coverage, although not every profession is eligible to receive the rider.