Financial Resources for Early-Career Physicians

Life Insurance

Cover Yourself: Insurance Must-Knows for Early-Career Physicians

James Pommert, CFP

Real talk: for financially-inexperienced early-career physicians, knowing what insurance you need and getting that insurance without getting misled or ripped-off can feel tricker than juggling a fistful of scalpels. But you've heard those horror stories—like the one about the newly-minted attending whose house burned down (true story) or the resident who got hit by a car and had to withdraw from residency (also a true story)—recognize the importance of making sure you're covered when live serves you lemons.

You've spent years working hard, studying tirelessly, and surviving on a diet of hospital cafeteria mystery meat to get to where you are. And it's all been worth it because you're finally a doctor! You're ready to save lives and make a difference. But you want to make sure that the things you've worked so hard to attain—the professional credentials, the earning potential, and the lifestyle it affords you—are all protected. You recognize that, "$#!+ happens," as they say. And you want to know you're covered.

But it all feels so complicated, and they never taught you this stuff in med school. The insurance shop has more flavors than the Kardashians have controversies. There's term life insurance, whole life insurance, universal life insurance, short-term disability insurance, long-term disability insurance, personal umbrella insurance, and plenty more. Lions and tigers and bears, oh my!

Indeed, navigating the ever-complicated insurance world is enough to make even the most accomplished early-career physian break out in a cold sweat.

But sweat not, my friend. We've spent years guiding early-career physicians through the insurance maze, and wrote this article to break the vast and confusing world of insurance down into the must-knows for early-career physicians: the basic types of insurance most physicians need, what to look for, what to stay away from, and how to get it.

Building Your Fortress

Because I can't let an opportunity to use a good metaphor escape, think of insurance like a 4-walled fortress you're building around your assets—your physical assets (like your home, auto, etc.) and your intangible assets (like your earning potential and the lifestyle it affords you).

Wall #1: Property and Auto Insurance

This includes automobile, homeowners, renters, and flood insurance protecting your physicial assets. Not a lot to say here. You need it, you probably already have it, and the good news is: the market for property and auto insurance is fairly competitive and transparent, which lower the risk that you're getting ripped off.

Wall #2: Disability Insurance

One of the Top 2 most common financial topics we get questions on from physicians in training is disability insurance. Do I need it? If so, how much? What should I be looking for?How do I get it without getting ripped off by some insurance agent... or being sold something I don't need? What in the world does "own occupation" mean? How do I know if the policy I bought has me covered?

Disability insurance exists to protect the above-average income you earn as a physician, and the lifestyle you can or will be able to afford with that income. For early-career physicians, it’s pretty widely understood that disability insurance is something you should have (except in extreme cases where your parents own the Yankees or you won the Powerball).

There are logical reasons why getting disability insurance is a smart thing to do—the income protection, the risk mitigation, and the peace of mind. You probably understand these benefits already. But the most powerful reason usually comes by way of real-life scenarios we've all heard about—the stories about the young doctor whose life was turned upside down by an unexpected illness or injury. We've known several.

So except in rare cases, we almost always recommend that early-career physicians get a personal disability insurance policy. Oftentimes, employers will offer disability insurance, but the coverage is generally insufficient.

When it comes to what to look for, if you don't deal with insurance policies every day like we do, the details of a disability policy can feel confusing. We wrote an article—6 Things to Look For in Your Disability Insurance Policy—that will help you sort through the fine print and make sure that the policies you're considering actually have you covered.

Wall #3: Life Insurance

Truth bomb: painful as it is to acknowledge, we never know when our time is going to be up. And if, god forbid, you croak before you reach financial independence, you'll want to make sure your loved ones are taken care of. This is where life insurance comes in. You pay monthly premiums to the life insurance company in exchange for financial protection in the unfortunate event that you die early.

There are lots of different types of life insurance—each of which is its own spin on the basic concept above. You'll see whole life, term life, universal life, and guaranteed life, to name a few. For a detailed rundown on the different types of life insurance, and the pros/cons of each, check out this article from White Coat Investor.

But here's the bottom line(s): 

Bottom line #1: Unless you're financially independent (which most early-career physicians are not), assuming you have others—spouse, children, etc.—who depend on your income, you should really have life insurance.

Bottom line #2: For most early-career physicians, basic term life insurance is sufficient. Term life insurance is generally affordable and accomplishes the goal of protecting your loved ones.

Bottom line #3: We generally recommend young doctors stay away from whole-life insurance.

Whole life insurance provides the benefit of term life insurance, but also accumulates “cash value” as time goes on—and unlike term insurance, this cash value is yours to keep if you surrender the policy. This may seem appealing, but whole life insurance is understandably much more expensive as a result. If you're a resident, chances are: you've been approached by some insurance salesperson hawking an expensive whole-life insurance product. But except in rare cases, we almost never recommend young doctors obtain whole life insurance.

Wall #4: Medical Malpractice Insurance

Like it or not, patients sue doctors. It happens. But medical malpractice liability insurance has your back in the unfortunate event that a patient alleges medical negligence or professional misconduct.

Good news is: most doctors do not have to go through the process of obtaining their own malpractice insurance since it is almost always provided by their employer. But there are a few important things you should know to make sure you're covered:

Tail Coverage: As you progress in your medical career, you may change employers or retire. It's important to understand whether your policy includes tail coverage, which provides protection for claims arising from incidents that occurred during the policy period but were reported after the policy's expiration. This coverage ensures you're protected even after you've moved on from a particular practice.


Important Note: This blog post is intended to provide general information and should not be considered as professional advice nor investment advice. Please consult with a qualified financial or insurance professional for personalized guidance based on your specific circumstances.

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Cover Yourself: Insurance Must-Knows for Early-Career Physicians

James Pommert, CFP