As you move into practice, this is a good time for you to revisit your financial plans and update or fill in any gaps you may have in your insurance coverage. The risks to your income, family’s financial wellbeing, and practice livelihood don’t diminish with time and now – while you’re young and healthy – securing your financial future with comprehensive insurance protection makes sense. Here are three insurance plans you should consider as foundational to a healthy insurance protection plan.
1. Disability insurance—protection for your income
Whether you are an employed physician or a practice owner, the need for disability insurance remains the same—income protection. Disability income insurance protection is designed to provide you a portion of your income if you become disabled and are unable to work due to illness or injury. The average length of a long-term disability claim is nearly three years. * Without an adequate monthly disability income benefit, your ongoing living expenses—housing, utilities, food, childcare, loan payments, etc.–might quickly become a burden.
If you’re relying on your employer-provided disability insurance, you may find yourself underinsured. What’s more, your employer-provided coverage may not offer you the benefits and features you need as a practicing physician. On top of that, if your employer-provided coverage is paid for with pre-tax dollars, any benefits you receive may be taxed, which reduces your available monthly benefit. And, that disability insurance coverage generally isn’t portable. If you decide to change employers, your coverage usually ends with your employment. Your employer-provided disability insurance should be thought of as a base to build from and supplement by adding physician disability income insurance to your portfolio.
The right supplemental, personal disability income insurance plan can offer you the disability income benefits and features you need as a physician throughout your career. It’s not enough for you to have disability insurance, you need protection that meets your specialized needs.
Choose disability income insurance designed for physicians. As a physician you should purchase supplemental disability income insurance that offers 'own-specialty' protection. This is an important distinction, a plan that includes an “own-specialty” definition of disability pays benefits for a covered disability if you’re unable to perform the duties of your own medical specialty, even if you could work in another job inside or outside of the medical profession.
When shopping for physician disability insurance, don’t overlook additional benefits, features, and optional riders. Choosing benefits and riders such as a future increase option, student loan payoff provision, cost of living adjustment rider, and a catastrophic disability rider can help enhance your disability coverage.
There are two types of disability insurance plans that you are likely to encounter as you shop for coverage—individual disability insurance plans and association group disability insurance. These plans may vary on benefits and features, and most notably in their premium structure. Individual disability insurance plans offer level premiums over the life of the policy—an attractive feature, but expensive at younger ages. Association group insurance plans usually offer step rate premiums—less expensive in the early years of coverage and increasing at specific age bands. In some cases, pairing different disability plans together can help you secure more coverage while keeping your overall premium payment affordable.
No one can predict when a disabling injury or illness might occur, so It’s important that physicians maintain the right amount of disability insurance. Buying disability coverage when you are young and just starting out makes sense. Also, the younger you are when you buy your disability insurance, the more affordable the premiums will be. Building an income protection plan with physician disability insurance is not a one-time event. Instead, you should review the plans you have annually to make sure your monthly benefit amount meets the growing demands of your career. An insurance specialist knowledgeable in physician disability insurance can help you establish a solid income protection plan for your particular needs.
2. Life Insurance—protection for your family and their financial future
If there is someone who depends on you for financial security—a spouse, partner, child, or aging parent—you may need life insurance. Life insurance is a cost-effective way to protect your loved ones from current debts—final expenses, medical student loans, credit card balances, car payments—and provide for future needs—ongoing living expenses, child’s education—in the event of your death.
Term life insurance is typically the best value for a young physician. A term life insurance plan can provide a high amount of coverage at a more affordable premium than other types of life insurance.
A term life insurance plan pays a cash benefit to your beneficiary if you die during the term of the policy. It’s as straightforward as that. Level term is a popular type of term insurance and it offers a set premium and death benefit. Most level term life insurance plans offer 10-, 15- or 20-year terms and during that time your premium rate is locked in and does not change. Beyond its affordability, a level term life insurance plan allows you the flexibility of choosing a term period that works within your family’s financial needs and goals—you might choose a term that continues until your children finish their education or your mortgage is paid off.
The amount of life insurance you buy depends on your goals—who you want to provide for and how long. A common formula used to determine the level of life insurance you may need requires you to take the total of your financials resources (savings, investments, spouse’s income, other life insurance) and subtract from that the total of your financial obligations (current and future expenses such as mortgage, student loan payment, education expenses). The difference is the approximate amount of life insurance to purchase. A trusted insurance professional can help you determine the amount of life insurance coverage you may need.
3. Office overhead expense insurance—disability insurance for your practice
If you are a practice owner, you are key to the success of your medical practice. If you are on leave due to a disabling illness or injury, your practice is likely to suffer. Even if you have partners, your inability to treat patients will result in lost revenue; revenue used to pay for practice expenses.
An office overhead expense insurance plan can protect your medical practice by providing you with a monthly payment to help cover the business expenses of running your office, including hiring a locum tenens physician to fill in for you. It’s important to understand that an office overhead expense plan only covers your operating expenses. It does not provide coverage for any personal expenses—your personal disability insurance helps with that.
As a physician, it’s important for you to choose an office overhead expense insurance plan that offers 'own-specialty' protection. Under an “own-specialty” definition of disability you will be eligible to receive benefits if you are unable to perform the material duties of your specialty.
When you purchase your office overhead expense insurance, you will be given the opportunity to select your waiting period, benefit period, and benefit amount. The amount of coverage you choose should be equal to the total amount of business expenses you’re responsible for—100% of expenses if you’re a solo practitioner or your share of expenses if you have partners. The waiting period is the period of time from the start of total disability during which no benefits are payable. Most office overhead expense plans offer waiting periods between 30 and 90 days. You will pay more in premium for a shorter waiting period. Choose an waiting period that works with your ability to cover your business expenses without your income. The benefit period is the length of time that benefits will be paid. Plans offer benefit periods between 12 and 36 months. Keep in mind, your benefits will end when your disability ends or the benefit period ends, whichever comes first. A qualified insurance specialist who understands your needs as a physician can help you build an office overhead expense plan that meets your needs as a practice owner.
Partner with a trusted source for your insurance needs
There are any number of resources you can turn to for insurance, but how many of them truly specialize in insurance solutions for physicians? The unique character of your career path, years of training, and financial investment require more than off-the-shelf products and services. Tailored physician-focused insurance solutions are recommended throughout your medical career. Finding an insurance specialist with physician targeted expertise is an important resource for your professional and personal journey.
* The Council for Disability Awareness, 'Overview,' 2019