Many doctors wonder, should I buy disability insurance as a Fellow? Long-term disability insurance protects the most viable financial asset of a doctor, your ability to earn an income at a high rate for the next 30 to 40 years. There is a reason it is not cheap. Expect to pay 2 to 5% of your income, depending on riders to be protected, because doctors use it. Some estimates are as high as one out of seven doctors will receive benefits from their long-term disability policy at some point during their career. And if done correctly, this will be tax free.
Most savvy doctors consider this their most important insurance policy. It’s certainly one of the most complicated, because disability, unlike death, it’s not black-and-white. We have access to unique discounts and the policies of one of the big six companies, Ameritus Berkshire Guardian, Ohio National, MassMutual, Principal, and Standard Insurance Company, offering true own occupation, specialty specific policies for doctors.
The reason I generally recommend most doctors wait until Fellowship to buy disability insurance is Fellow has an income and medical students generally do not. While it is entirely possible to get disabled as a student. I can’t justify telling a student to use borrowed money or money that should be going towards food and housing on disability insurance. Besides, you’re going to need to buy a policy in Fellowship anyways because the ones they sell you as a student won’t fit your needs. Buy insurance to fit your Fellowship paycheck because now you have an income.
Most important reason to buy a policy in Fellowship is that you may get disabled during Fellowship. It happens all the time. The whole point of the policies to protect your income in the event of a disability. Almost all 17-year-olds think they’re invisible, a 28-year-old Fellow taking care of ill and injured people all day. It could be as simple as a back injury or anxiety. Or something more life changing like Michael J. Fox (Teen Wolf, Back to the Future) was diagnosed with Parkinson’s at age 29.
Fellows are generally younger than attendings. Perhaps not for every situation but certainly you’ll be younger as a Fellow than you will be as attending. The younger you are, the cheaper the policy. That’s just the way they are priced. In fact, it is so much cheaper to buy when you’re young that if you multiply your entire career, even though you were paying premiums for more years than you would be if you bought it later, you still pay less than total premium. If you’re a super saver aiming for early financial independence and early ability to cancel your disability policy, you might be able to save even more with a policy that offers graded or increasing premiums.
Most disability insurance policies will pay out until your 65 or 67, or for minimum of two years whichever is longer. That means a policy bought at age 27 could pay out for 40 years. A policy purchasedat 37 could only pay off for 30 years. Thus, a policy purchased during Fellowship simply is more valuable. Two companies offer lifetime benefits with a maximum benefit of $10,000 per month. In addition, your need for disability insurance is never higher than when you are young and have little to live off for your entire life. You would think that a policy bought at that age would cost more money, right? But that’s not the way it works.
As you go through life, you’re more likely to pick up serious medical illness or injuries. These either increase the cost your insurance or create exclusions. Some disabilities, due to their condition, offer no benefit, or keep you from getting insurance at all. It’s best to get your policy in place before developing these issues. No time like the present.
Do you know what else is frequently excluded from Disability Income policies?Disabilities due to engaging in dangerous hobbies like skydiving, rock climbing, flying, scuba diving etc. Most Fellows have neither the time nor the money to do any of these activities, so now is a great time to get coverage without those exclusions. Even if you pick up the hobbies later, they will be covered. Even if you engage in those hobbies you are far more likely than any other time during your life to be taking a break from during Fellowship. If you haven’t done these in the last 12 to 24 months and have no plans on doing it for the next six months to 12 months you can honestly answer the question no. This would eliminate an exclusion. Plus, you may have relocated for Fellowship to a place where the opportunity to go climbing or scuba diving are practically nonexistent.One nice benefit is if you do engage in these activities currently, you can get them removed in the future.
When you’re a Fellow, you can have 60% of your income covered on an after-tax basis. As your income grows the percentage of coverage goes down.
Disability income insurance costs more for some than it does for others. An obstetrician/gynecologist, interventional cardiologist, emergency room doctor, orthopedic surgeon and anesthesiologist will pay more than an internist or family practice physician. However, sometimes the Fellow version of a doctor might be considered a different, cheaper specialty than the attending version. This can save you more money in the future. Yes, the policy will pay out just fine based on your CPT codes since it is an own occupation policy based on your occupation at time of disability, not your occupation at time of purchase.
A Fellow typically works at a large medical institution. This often qualifies for discounts that are increasingly rare but cheaper. These discounts often are invaluable after you leave your Fellowship and become an attending. Many riders are not available when older.
Some residences now offer group long-term policies as a standard benefit to the Fellow. Some of these policies are even own occupation specific policies and allows the Fellow to assume the payments and take the policy with them when they leave. However, most group policies are inferior to a solid individual long term individual policy in significant ways particularly definition in the portability. Yes, portability matters more to a Fellow because almost all Fellows go on to a different job after their graduation. Buying a policy before arriving at a new institution that offers a group policy is also important that the group policy could keep you from qualifying for buying as much individual disability insurance as you would prefer.Either way, best buy during Fellowship.