When should a doctor get disability insurance? And what type should they get?
I got mine in residency, and I got a true, own-occupation / own-specialty policy that I carried for about a dozen years until I reached financial independence and decided it was no longer necessary to insure my income; we would be fine without it.
Dr. James Turner, the author of today’s Saturday Selection has never had a policy, much to his chagrin, for reasons he’ll outline below. If you happen to be finishing residency or fellowship about a month from now, I strongly encourage you to look into securing a policy beforehand; rates can go up when you graduate and/or cross state lines.
This was post originally published on The Physician Philosopher.
When should a resident get disability insurance? What do I need to know about disability insurance? These are two of the most common questions that I get from residents.
Given that a large part of this website is meant to help prevent students and residents from making mistakes, I have an opinion on this. In fact, I have a very strong opinion after experiencing a disability insurance disaster caused by a conflicted insurance agent from a very prominent insurance company.
More on that below.
In my office, I have a Ghanaian “thinking man” statue. I bought it on a medical missions trip to Accra. At many moments in life, I’ve found myself in this exact situation. Hand in my hair. Elbow at the knee. Thinking.
Such a moment occurred when I was a fourth year medical student with a newborn little girl. This was the moment it dawned on me that it was not just my wife and me. We were responsible for someone else physically, spiritually, emotionally, and even financially!
Serendipitously (and later I’d say unfortunately), one of my friends in medical school class knew someone who sold insurance products. In fact, it was my friend’s brother. The brother of my medical school classmate seemed like a pretty safe person to trust.
The rest of the story isn’t so peachy.
I told him I needed life insurance.
He said sure. He told me I needed disability insurance.
I told him “no” (multiple times).
He asked if I was healthy. To which, I mentioned a couple of medical problems. The most important one being that I have an essential tremor – for which I take propranolol.
This didn’t phase his attempt to get a commission on my behalf. He said, “What could it hurt to try….”
When Should a Doctor Get Disability Insurance?
Apparently, it could hurt a lot!
I later come to find out, anesthesiology is one of the most difficult fields in medicine to obtain disability insurance (there are tiers for this, apparently).
That coupled with my essential tremor led me to being outright DENIED by the aforementioned company. At the time, I thought, no big deal!
I’ll just get disability insurance later.
Fast forward to residency where I meet the next “insurance guy.”
I tell him I’ve had difficulties.
“No problem,” he says. “I have a guaranteed issue disability insurance product that would be perfect for you!”
That sounds great, I say.
“Only one box we have to check just for formality’s sake… you haven’t been denied disability insurance before, obviously, right?”
That was the day I found out that guaranteed policies in training are only guaranteed if you have NOT been denied before!
I learned an important lesson the hard way: Don’t apply before residency for disability insurance if you have medical problems that could potentially disable you from working!
Two kids later – that’s a total of three, if you’ve been counting – and I still do not have any disability insurance outside of my employer.
Fortunately, my employer’s disability insurance provides 60% coverage from my base salary. After tax, that’s about $10,000 per month. Not bad, but this led to a very harrowing 19 months while we paid off student loans I wouldn’t have been able to afford if I became disabled.
My real disability insurance plan (If you’re curious, yes I applied again with a different company, and was denied again) is to now live within our means and to make sure our monthly expenses never go north of $10,000 per month.
In the end, this helps me practice relative frugality, which is a good thing. This keeps costs down, allowed me to hammer away at my student loans, and achieve wealth faster.
It also helps hedge against the chances of me becoming disabled with monthly payments I could no longer afford.
Answering the Questions
What do I need to know about disability insurance? When should a doctor get disability insurance? For those that like the cliff notes version, here it is:
- Guaranteed insurance coverage offered in training (residency/fellowship) is only “guaranteed” if you have NOT been denied by another disability insurance carrier.
- If you have medical problems for which you are seeking documented treatment, it is best to wait until residency to get the guaranteed policy.
- Once you get the guaranteed policy, you are free to apply for less expensive policies with a recommended independent insurance agent. If you are denied, you get to keep the guaranteed policy.
- If you don’t have any medical problems, get disability insurance as soon as you can afford it. Disability rarely gives you a warning shot across the bow before it sinks the ship!
- Two Facts: the insurance salesperson gets paid commission to sell you a product. The best person to keep your best interests first is YOU.
- Personal Policy + Group Policy = Monthly Income. Disability insurance is “stackable” and the goal is to be able to replace your monthly income.
Take Home: When Should a Doctor Get Disability Insurance?
Make sure to educate yourself about this stuff. Of course, you can do this by reading The Physician Philosopher’s Guide to Personal Finance, which will teach you the 20% of personal finance you need to know to get 80% of the results.
The above facts about disability insurance are definitely a part of that 20% you need to know.
PoF: See our additional posts on the topic before consulting with one of our vetted, independent insurance agents who regularly work with physicians.
So, what do you think? Have you learned a similar lesson? Do you have mouths to feed and not yet have disability insurance?