Disablity Insurance for a Doctor: A Necessary Expense
I am currently in year 8 of my post college education and the only asset I have accumulated in that time is my ability to earn an income as a skilled worker. I am completely dependent upon my ability to work to repay my debt, pay my expenses and accumulate wealth(just like most other Americans).
Since I have devoted so much time, energy and money to learning a specific skill it is important to insure that it will not be for naught if I were to get injured. This has become particularly important now that I am married and will need to support a family in the future.
After much research this is what I have learned:
- As a resident I am in the most vulnerable financial portion of my career. I have already invested over $120,000 in my education but I am yet to see a return on that investment until I become a board certified physician. It is important for me to insure my ability to earn the income I have invested years into learning how to earn.
- Some physicians have physically demanding jobs. When you read the statistics available on disabilities, some of them are very high. For example; 1 in 7 people between 35-65y/o can expect to become disabled for 5 years or greater. Take these two items together and it is highly likely that I could suffer a disability at some point in my career that will prevent me from physically performing my duties at a sufficient level to continue my career.
- Insurance Companies base their rates on several factors, including age, occupation and health status. At this time I have all three of those factors on my side. I remain young and healthy and I am a couple of years from finishing my training, this is an ideal time to purchase a non-cancelable and guaranteed renewable policy.
With that in mind, I have decided that I was looking for the following in a policy:
- Non-cancelable and guaranteed renewable rider This way once I purchase a policy the insurance company cannot cancel, change the provisions or add restrictions to it.
- An “own occupation” definition of disabililty. Most insurance plans will consider you able to work if you and perform any form of medicine. For someone who has devoted years to learn a very specific skill it is important that you are compensated if you cannot perform that skill.
- A cost of living adjustment rider this will keep the value of my benefits from being eroded by our very real risk of inflation.
- A Future Increase/Purchase Option Rider; this rider would allow me to increase my coverage and maximize the amount of disability insurance I can carry.
- With a Financially Sound Company: my policy will only be as good as the finances of the company writing the policy. If the company is going to go bankrupt in 10years, my policy will not mean too much.
After much time and effort I was able to purchase a policy with all these desirable features. Interestingly there were only 2 companies that carried a policy with all those features resulting in not much of a choice.
The cost of my new policy is such that I will have to temporarily divert my monthly Roth IRA contributions to pay for my disability insurance premiums for the time being.
This will cause a slight delay in my accumulation of retirement assets in 2008 but it does not prevent me from realizing my dream of financial independence in the near future. Not to mention I now sleep much better at night.
January 3rd, 2008 at 3:19 pm
This is something I got in 2005 and while it is expensive, I have no regrets paying it. I am single with no other income coming in if I get hurt, so I wanted to be covered. My emergency fund would only last so long!!
I would have thought that you’d be covered through the hospital you work at though??
January 3rd, 2008 at 8:09 pm
I am currently covered as a resident with a bare bones policy and once I get out most groups and hospitals have a standard group policy.
I will likely change jobs multiple times over my career and I wanted a policy that I would have no matter where or with whom I worked.
I really feel that this is one form of insurance that I didn’t want to take any chances with. Currently only 2 companies write the coverage that I wanted(own occupation) and there is a good chance that they will stop as well in the future.
The only reason I started my policy before the end of my residency was the birth of our child.
February 5th, 2008 at 2:55 am
if you pay for your policy, the payouts will be tax free. if your employer provides it, you are on the hook. most employers cannot afford to provide all their physicians the best disability plans. make sure you figure out what you need based on your expenses. as a resident, make sure you get the rider guarantee for what you anticipate needing. terms will change in the future, as you noted.
investigate what your total protection can be. in some cases, work provided + personal provided > 100% income, and some insurances do not allow this and will reduce their payment by some formula.
February 5th, 2008 at 11:37 pm
thanks for the feedback,
I did sign up for an “own occupation” policy that is paid for with my post tax earnings to provide the flexibility I will need if I change jobs multiple times throughout my career.
I also have a future increase rider that I will exercise once I am out of residency and earning a full salary.
I am not sure if i would be able to purchase coverage greater than 100% of my income.
If I do sign with a group that has a disability policy I guess I will see if I can opt out and keep the payments as part of my salary.