When it comes to choosing life, disability, and critical illness insurance, the options available to Ontario doctors are abundant, but not all plans are created equal. While many physicians opt for OMA group insurance, there are significant benefits to considering private insurance plans instead. The differences in coverage, cost, flexibility, and long-term protection can impact your financial security well into retirement. This post will explore the key factors that physicians should consider when deciding between OMA and private insurance policies.
Understanding OMA Group Insurance for Physicians
Ontario Medical Association (OMA) offers a range of insurance plans tailored to physicians, but they come with some notable limitations. While these plans may appear convenient initially, many doctors are finding that private insurance offers better protection and long-term value.
OMA’s group life insurance includes term policies, but these typically expire at age 75, with coverage drastically reduced after that. Furthermore, maintaining coverage requires ongoing OMA membership, which incurs additional costs. As a result, many physicians end up paying more for less flexibility as they age or their insurance needs evolve.
Limitations of OMA Life Insurance
The OMA Flex Term Life insurance provides term options of 10 and 20 years with coverage amounts ranging from $100,000 to $3 million. However, it has several drawbacks:
- Coverage expires at age 75 unless converted to another plan, but even then, the value decreases significantly.
- Renewal rates rise sharply after the initial term, making it more expensive as you age.
- Conversion options do not extend to permanent life insurance, limiting the policy’s long-term estate planning benefits.
The OMA Term Life Plus 75 plan is another option that offers coverage up to age 75 but with limitations. The coverage is reduced by 10% annually after age 66, leaving only 10% by age 75. Plus, the premium refund options have been decreasing over time, and no conversion to permanent life insurance is available.
Why Physicians Prefer Individual Life Insurance Plans
Private insurance policies, such as those offered by RBC, Manulife, and Canada Life, often provide superior coverage compared to OMA’s offerings. Here are the key reasons why many Ontario doctors choose individual policies over OMA group insurance:
- Guaranteed Premiums: Individual life insurance policies offer guaranteed premiums that remain the same throughout the term, whether for 10, 20, or 30 years, or even until age 65 or 75.
- Higher Coverage Limits: Physicians can access tax-free coverage limits as high as $25 million, much higher than OMA’s coverage options.
- Full Conversion to Permanent Life Insurance: Individual plans are fully convertible to permanent policies (whole or universal life) without medical underwriting.
- No Membership Fees: Unlike OMA, individual policies are portable and don’t require ongoing membership dues to remain active.
- Customization: With individual policies, you can tailor coverage to your specific needs, including options like child riders, critical illness coverage, and more.
As a result, private life insurance offers more flexibility and protection, ensuring that your coverage keeps pace with your changing financial situation.
Case Study: Dr. Mehta’s Switch from OMA to RBC Life Insurance
Dr. Mehta, a 39-year-old cardiologist in Toronto, initially opted for OMA’s Term Life Plus 75 plan and disability insurance during his residency. However, as his income grew and his responsibilities increased, he realized his OMA coverage wasn’t meeting his needs.
- His life insurance would expire at age 75 with a significant reduction in coverage.
- His disability insurance premiums were set to increase by 40% once he turned 40, and the terms would shift to a broader “any occupation” definition after just 24 months, reducing the long-term benefit.
- His OMA plan had limited flexibility and wasn’t aligned with his financial goals.
After consulting with an independent advisor, Dr. Mehta switched to RBC’s Term 20 Life Insurance, which locked in his premiums until age 59 and provided a higher coverage limit. He also upgraded to RBC’s Professional Series Disability Insurance, which offered guaranteed premiums, inflation protection, and coverage based on his true occupation.
While the switch cost him a bit more monthly, Dr. Mehta now has greater peace of mind knowing that his insurance will adapt to his needs as his career progresses.
Why Individual Disability Insurance Is a Better Option
OMA’s group disability insurance is provided through Manulife and offers up to $25,000 per month in coverage. However, it lacks essential features that individual disability policies provide:
- Guaranteed Premiums: OMA’s premiums are not guaranteed and can change at any time, while individual policies are non-cancellable, ensuring your rates won’t increase.
- True Own-Occupation Definition: OMA’s plan lacks true own-occupation coverage, meaning that if you can work in another field, you may not receive full benefits. Individual policies maintain a specialty-specific own-occupation definition for the entire benefit period.
- No Inflation Protection: OMA does not offer guaranteed inflation protection, but individual policies usually include a minimum annual increase to ensure your benefits keep pace with rising costs.
- No Recovery Benefits: OMA’s plan doesn’t provide recovery benefits if you return to work part-time after a claim, whereas individual policies typically include partial and residual disability benefits.
- Portability: OMA’s disability coverage is tied to your membership, meaning you must continue paying fees to keep it active. Individual policies are fully portable, allowing you to maintain coverage regardless of employment or membership status.
Critical Illness Insurance: OMA vs. Individual Coverage
OMA’s group critical illness coverage has several significant limitations compared to individual policies:
- Limited Duration: OMA’s coverage expires at age 70, while individual policies can extend up to age 75 or even lifetime.
- Rising Premiums: OMA’s premiums increase every five years, whereas individual plans allow you to lock in level premiums for the long term.
- Return of Premium Option: Some individual critical illness policies offer a return of premium feature, which OMA does not provide.
- Long-Term Care Conversion: Individual plans like RBC’s Critical Illness Recovery Plan allow for conversion to long-term care insurance, providing flexibility as your needs change.
With OMA’s critical illness insurance, you also face pre-existing condition clauses and limited coverage, making individual policies from providers like RBC and Sun Life a more attractive option.
Conclusion: The Value of Private Insurance for Ontario Physicians
While OMA’s group insurance plans may seem convenient, they often fall short in providing the long-term protection, flexibility, and coverage that Ontario doctors need. Private insurance policies from top providers like RBC, Manulife, and Canada Life offer better options with guaranteed premiums, higher coverage limits, and greater flexibility.
If you’re a physician looking for more comprehensive protection and peace of mind, it’s worth exploring individual life, disability, and critical illness insurance. A customized policy can provide the stability and security you need, no matter how your career evolves.