Dentist disability insurance: CDSPI or a private contract?

If a broker has told you that association coverage is always weaker than a private policy, they have not read the CDSPI contract. For dentists, this comparison is closer than the sales pitch on either side suggests.

What CDSPI DisabilityGuard actually is

DisabilityGuard is underwritten by The Manufacturers Life Insurance Company and sold through CDSPI to dentists. The contract is guaranteed non-cancellable, with coverage available to age 75.

It offers up to $25,000 in monthly benefits for eligible applicants, elimination periods of 30, 60, 90 or 120 days, and a choice between level premiums that stay constant to age 65 and step premiums that adjust at five-year age bands. Premiums are guaranteed under either option. Own-occupation coverage is described as included at no extra cost, meaning benefits can continue even where you earn income in another occupation. A cost of living adjustment increases benefits to a stated maximum of 8 per cent (CDSPI).

Read that list again. Guaranteed non-cancellable, own-occupation, a benefit ceiling of $25,000 a month. Those are the features a private policy is usually sold on.

So what is left to compare?

Three things, and none of them is contract strength.

Price for your age, specialty and health. Individual underwriting is individual. A 31-year-old non-smoking associate with clean medical history may find a private insurer cheaper, or may not. The only way to know is to price both with the same benefit, the same elimination period and the same riders.

Riders and their cost. Compare the total premium with own-occupation, cost of living and future increase options included, not the base rate. A cheaper base rate with priced riders often ends up higher.

Your history. A prior back injury, a hand condition, an anxiety or depression claim, or a hobby such as motorcycling can produce an exclusion or a rating from one insurer and not another. Where your file is complicated, the value of shopping goes up.

Overhead is a separate problem

Your income is one exposure. Your practice is another.

If you own the practice, rent, staff wages, equipment leases and utilities continue while you are off. Office overhead expense insurance reimburses those running costs rather than replacing your income, and CDSPI offers it separately (CDSPI). An associate on a percentage agreement generally does not need it. An owner with two chairs, three staff and a ten-year lease does.

Size overhead coverage from your actual monthly fixed costs, not from a rule of thumb. Pull twelve months of the practice's operating expenses and remove anything that stops when you stop.

Associate or owner changes the order of operations

An associate's first priority is income coverage, bought early and bought with a future increase option. Production climbs quickly in the first five years, and a contract issued at 28 with the right to add coverage later is worth more than a larger contract issued at 34 after a knee surgery has gone on your file.

An owner has three claims on the same budget: personal income coverage, office overhead expense coverage, and whatever the lender required when the practice loan was written. Lenders often ask for life insurance assigned to the loan and sometimes for disability coverage as well. Check the loan agreement before you buy anything new, because coverage you are already contractually required to hold is not optional and should be counted first.

The order matters more than the total. Owners who buy overhead coverage before income coverage usually discover the sequencing problem at the worst possible moment.

Does the premium payer change the answer?

Where you pay premiums personally with after-tax dollars, benefits are generally received free of tax. Where the corporation pays and deducts the premium, benefits are generally taxable to you, so the same monthly benefit delivers less (Canada Revenue Agency).

Office overhead expense coverage is the case that belongs in the corporation, because the premium is a practice cost and the benefit reimburses deductible practice expenses. Personal income coverage usually does not.

How much do you need?

Start with household spending after tax, add any personal debt payment that continues, subtract coverage already in place, and treat what is left as the gap. The disability coverage gap calculator will do the arithmetic with your own figures.

Then decide the elimination period against your cash reserve. A 90-day wait is cheaper than a 30-day wait, and it is only sensible if you can actually fund three months.

Guaranteed non-cancellable

The insurer cannot cancel the policy or change the premium. Both are fixed for the life of the contract.

Own-occupation

A definition of disability that pays when you cannot perform the duties of dentistry, even if you earn income in another occupation.

Step premium

A premium that starts lower and increases at set age bands, as opposed to a level premium that stays constant.

Office overhead expense

Coverage that reimburses the fixed running costs of the practice while you are disabled, separate from income coverage.

Elimination period

The waiting time between the start of a disability and the first benefit payment.

The honest conclusion

For many Ontario dentists CDSPI coverage is competitive on its own terms and there is no reason to replace it. For dentists with a health history, or those who want an insurer their family already deals with, private shopping is worth the underwriting effort. What is never worth doing is cancelling existing coverage before a replacement policy has been issued and delivered. Insurance advice is provided by licensed advisors of AT Financial Group.

What to bring to a 20-minute review

Send your CDSPI certificate or private policy schedule, your last two years of practice financial statements if you own the practice, and one number for household spending after tax. We will read the definition of disability, size the two gaps separately, and tell you whether shopping is likely to change anything.

Book a 20-minute review