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Insights to help you protect your career and family.

Young Physician: Protect Your Income and Your Family’s Future

Young Male Physician

Mathematicians call it an inflection point, the point at which the direction changes. You, as a finishing resident or newly practicing physician, have reached this point at significant financial and personal cost. It’s taken years to get here, more than most other professions.

Now, you can begin to enjoy the fruits of your efforts, but this is also the time to make plans to protect your investment in your career from the financial impact of long-term illnesses or accidents.

The first step is to take a good, hard look at your current situation. According to the Education Data Initiative, today’s medical school graduate owes on average slightly more than $241,000 in total student loan debt, six times that of the average college graduate.[1] Paying this student loan debt down may be one of your priorities, but don’t overlook your need to protect your income.

[1] Hanson, Melanie. “Average Medical School Debt” EducationData.org, December 9, 2021, https://educationdata.org/average-medical-school-debt

As a new physician, you may be employed by a hospital or group practice. According to data collected by the American Medical Association, more physicians are now employees than ever before, and this trend appears to be increasing.[1]

Whether you are in private practice or employed, it’s smart to take a look at your life and disability insurance policies.  For employees, these are common components of benefits packages, and it is easy to take them for granted.

Remember, however, that neither employer-provided life insurance nor disability insurance are “portable,” and you will not be able to take these coverages with you should you change employers or go into private practice.


Life Insurance

Employer-provided life insurance benefits may not be adequate to provide your young family with the standard of living you want for them. It’s likely that you will need a far greater amount than many benefit packages provide.

How much will you need?  Expert estimates vary, and even expert estimates are just that, estimates. You should consult an insurance specialist, especially one who is familiar with the specific needs of physicians, to determine your family’s unique needs.

The good news is that life insurance is relatively inexpensive for people in their 30s. Also, this age group is less likely to have medical conditions that would increase premiums or limit the ability to get life insurance. Life insurance premiums are determined by age and other risk factors, so the most economical time for you to buy life insurance is now, before a birthday ages you into a higher premium.

You will want to consider the difference between term insurance and whole life insurance.

Term insurance covers you for a given period, defined in the policy. It offers lower premiums than whole life insurance, and typically does not accumulate cash value. Whole life insurance remains in force as long as premiums are paid on a timely basis, and accumulates cash value.

Both may fit into your portfolio—term insurance is the most economical to cover obligations with “end dates”, such as mortgages or education expenses for children.

Disability Coverage

You may have little time to spare, but the minutes you invest in carefully reviewing your disability coverage, especially employer-provided coverage, will be time well spent. It may prevent some very unpleasant financial surprises should you ever make a claim.

First, you need to understand the amount of the disability benefit, when the payment starts, and especially when it ends.

While your disability policy may describe the benefit as, say 60% of your salary, the 60% is generally figured on your base salary with no consideration of bonuses, overtime, or incentives. Furthermore, if the employer pays the premium, your benefit may be taxable. (By all means, check this out with your tax advisor.)

If you have employer-provided disability coverage, watch for the words “any occupation.” Those words mean benefits will stop when the claimant is able to perform any kind of employment suitable to your education. You need to supplement it with “own specialty” physician disability income coverage that will pay benefits until you are able to resume the work you were trained for.

There are other resources for disability income, such as Social Security, but these benefits do not begin immediately and in a recent two-year period, only 34% of claims were approved.[1]

[1] Center on Budget and Policy Priorities, based on data from the Social Security Administration, gathered between 2014 and 2016, CBPP.org 2022

Stepped premiums vs. level premiums

Young physicians usually benefit from stepped premiums. Stepped premiums are lowest early in the policy life, when risk is also low, increasing at defined periods, called “age bands.” Level premiums are designed not change over the life of the policy and are likely more expensive at younger ages.

Combine group rates with personalized solutions.

Look at your professional association first for trusted advice specific to your needs. Working in the best interest of members, your association will work with top-rated insurance providers and negotiate favorable rates. Finding a trusted source may help you determine what coverages you need and practical ways to address them with policies underwritten by solid, highly respected insurance companies.

One final note:

Your insurance needs are dynamic. Every time you change positions, have a child, move, or make any significant change in your life, your insurance needs change. It’s smart to review your coverage.