Using Your Insurance
For 18 years, Barry Kaplan, DDS, EA, CFP®, operated a thriving dental practice until life threw him a curveball in the form of herniated disks in his neck that ended his ability to practice.
“I had to leave dentistry in 1999, and I still miss many aspects of it,” Dr. Kaplan says. “The loss of my dental career also could have been financially catastrophic, but I turned it into an opportunity instead.”
Fortunately, Dr. Kaplan had two things in place at the time of his disability: adequate disability insurance and a passion for financial planning that soon evolved into a second career. “As a dentist, so-called ‘financial advisors’ were always trying to sell me something, and more often than not, the products were inappropriate,” Dr. Kaplan recalls. He began to study financial and investment planning to do it for himself, and later for family and friends. He also enrolled in the Certified Financial PlannerTM program and was about to sit for the CFP® Certification Examination when the herniated disks forced him to stop practicing dentistry.
“The good news was that my disability insurance provided income for my family,” he says. “The bad news was that sitting at home was no fun.” So at age 44, Dr. Kaplan went to work as a financial planner, first for a Goldman Sachs subsidiary and currently at Cambridge Southern Financial Advisors in Atlanta.
INSURANCE MAKES IT POSSIBLE
A new career meant starting at the bottom rung of the salary ladder, and Dr. Kaplan says that would have been financially impossible without the monthly insurance benefit paid by the American Dental Association (ADA) Income Protection Plan, which is underwritten and administered by Great-West Life & Annuity Insurance Company. “Without the insurance, I would have felt compelled to take a job just for the money in order to support my family, and I might be miserable today because I wasn’t doing what makes me happy.”
Dr. Kaplan draws from his experiences as a dentist, a financial planner, and someone who lives with a disability to offer the following suggestions to other dentists regarding their disability insurance:
Buy the maximum amount you can qualify for. Disability income insurance typically is capped at 60% of an individual’s net monthly earned income to approximate after-tax take-home pay. “If one insurance company’s maximum benefit does not cover 60% of your net earned income, consider getting a second policy from another company,” Dr. Kaplan says.
Lengthen the waiting period if premium costs are an issue. Instead of choosing a lower benefit amount to save on premiums, Dr. Kaplan recommends opting for a longer waiting (elimination) period, which is the number of days you must be disabled before receiving benefits. “When you buy disability insurance, you’re not scared of what will happen to your income in the first 30, 60, 90, or 180 days of disability,” he explains. “You’re thinking about what would happen if you end up being disabled for years.”
Take advantage of options. Dr. Kaplan bought two options with his disability insurance, and both have paid off. One option allowed him to automatically increase his coverage as his income from dentistry grew. Now that he’s disabled, the second option provides a cost-of-living adjustment to his benefit. “Without that option, inflation could eat you up,” he says.
Pay premiums with after-tax dollars. Under current tax laws, most disability benefits are free of federal income tax if premiums are paid with after-tax dollars. “If you are ever disabled, you will be glad that you can receive your benefit tax free,” Dr. Kaplan says.
Don’t overlook business overhead expense insurance. “This type of insurance is particularly critical when you have a solo practice like I did,” Dr. Kaplan observes. “The insurance helped pay my monthly business expenses so I could keep the practice open while I tried to recover and then made the decision to sell. I needed two years to reach that decision, so I’m glad that I purchased two years’ worth of coverage, rather than just one.”
“I enjoyed dentistry, and I was a good dentist,” Dr. Kaplan concludes. “I also think that I am a very good financial planner, and I am thankful that my insurance has given me the opportunity to pursue my new passion.”
Editor’s note: Dr. Kaplan’s statements were obtained by Great-West Life & Annuity Insurance Company, underwriter and administrator of the ADA Insurance Plans, relative to his coverage under Group Policy #1105GDH-IPP and #1106GDH-OEP, and reprinted with permission. For more information, visit www.insurance.ada.org or call 888-463-4545. This article does not constitute legal, tax, or financial advice; please seek professional input as appropriate to your situation.