Financial Resources for Early-Career Physicians

Disability Insurance

The RIGHT Way to Get Disability Insurance as a Young Physician

Want to learn the RIGHT way to get disability insurance without being sold something you don't need, and without being had? We've got you.

James Pommert, CFP
Nov 30, 2018
6 min

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. I’ve known several.

We work with a physician, for instance, whose co-resident had to leave residency after being hit by a car while biking.

Another one of our physician clients herself was diagnosed with Spontaneous Carotid Artery Dissection in her 30's, and was unsure whether she’d be able to continue practicing medicine.

Yet another client of ours, a hand surgery resident at the time, injured the ligaments that connect his thumbs to the hand in a car accident. Thankfully, he recovered. But through the ordeal, we discovered that his old disability policy would not have covered him due to exlusions in the fine print.

These examples reveal the cold, hard reality of life: $#!+ happens. It is impossible to know if/when you'll need insurance... but if you do, you're going to be darn sure you have it.

If you’re reading this, you probably know you need disability insurance. But what’s often the challenge for early-career docs is figuring out what you actually need… and sifting through the BS of the insurance industry to get it. 

Perhaps you’re the DIY-type and want to figure it out on your own… in which case, more power to you. But as smart as you are, the system doesn’t really favor Everyday Joes and Janes figuring this out on their own. The insurance industry has a tendency to make these things super-confusing, especially for people who have never dealt with insurance before. And you don’t want to be left with these lingering questions of: 

  • Am I being sold something I don’t need? 
  • Am I getting taken for a ride by this insurance salesperson?
  • Am I missing something in the fine print that is going to come back and bite me? 

Want to learn the RIGHT way to get disability insurance without being sold something you don't need, and without being had? 

Read on.

There’s No Time Like the Present

The one financial thing that most of the physicians we work with seem to agree about is the importance of getting disability insurance. And it makes sense. Of all the "financial assets" you have... your training, and ability to generate a physicians income from that training, is the most valuable. And if that income goes away (god forbid) your financial plan could quickly go sideways.

But when you get disability insurance matters. The benefits of obtaining disability insurance while you're still in training are significant:

Benefit #1 - It will never be less expensive.

As you know, insurance premiums increase as you get older. The older we get, the more likely we are to suffer from illness or injury, and the higher the risk we therefore pose to the insurance company. Higher risk = higher rates. So the longer you wait to get insurance, the more expensive it will usually be, plain 'n' simple.

What's more, disability insurance will get noticeably more expensive the day you finish residency because you'll no longer be eligible for attractive resident/fellow discounts.

Benefit #2 - Underwriting is wayyyyy easier.

By applying for disability insurance while you’re still in training, you likely won’t need to endure financial underwriting, and will often be exempt from medical underwriting (or at least subject to ligher medical underwriting). 

However, if you wait until after training, you’ll have to provide more detailed financial documentation to verify income and justify the amount of coverage you’re applying for. You’ll also more likely to be subject to more extensive medical underwriting, including paramed exam, blood work, and possibly other medical tests. How fun.

Your life is complicated while you're in training, but getting disability insurance will never be simpler.

Benefit #3 -You’ll eliminate the risk of catastrophic financial loss early in life.

You know you’ve either thought about how much money you could make during your career or sketched it out on paper. Yes – impressive. Most physicians' compensation can make a lot of things possible in life.

I’m not trying to back the hearse up to the door, but here's the thing: in the (hopefully unlikely) event of an unexpected illness or injury, it could all be gone in a split second.

According to the Health Insurance Association of America (HIAA), during the course of your career, you’re three and a half times more likely to be injured and need disability insurance coverage than you are to die and need life insurance.

Your most valuable asset at this stage in your life and career is your earning potential. The earlier you protect that earning potential, the sooner you get the peace of mind that comes along with doing so.

Two Must-Know Tips for Getting Disability Insurance

Given the benefits above, feeling inspired to get yourself insured, but still wondering how to do so without getting ripped off, or buying the wrong thing? Before you do anything, two important tips to consider: 

Tip #1: Only pay for what you need.

Yes, I borrowed that line from a Liberty Mutual property and casualty insurance commercial. But it’s also great advice when it comes to buying disability insurance.

The truth is: most doctors are overinsured and overpay for their disability insurance. Some agents will sell you a boatload of coverage to pad their commissions and keep their manager at bay. 

The amount of coverage you buy should be needs-based and take into account other factors, such as:

  • savings/investment accounts that could offset lost income
  • the amount of coverage you have that is employer-provided
  • whether you’re single or a dual-income family

At Equitta, we do a thorough needs analysis to make sure our physician clients are getting what they need, and don't end-up over- or under-insured. (Grab time on our calendar if you want help working through this. We don't charge for it.) 

Tip #2: Get insurance from an independent agent.

Ask a Mercedes car salesperson which is the best car for you, and it will, of course, be a Mercedes. The same goes for someone working at a BMW or Lexus dealership. In their eyes, their brand is always indisputably the best brand.

But ask a luxury car expert which car would best meet your needs, and they’ll give you the pros and cons of various makes and models, along with a personalized recommendation, after asking you questions about your situation.

The same sort of thing applies to disability insurance. In the insurance world, there are captive agents (who work for one insurance company, and are usually incentivized to push that company's product) and independent agents (who can source and offer insurance policies from a variety of different carriers, giving you access to a wider array of options).

Ask a captive agent that represents only one insurer who has the best disability insurance, and you know whose policy they’re going to try to sell you (whether it fits or not).

But an independent agent will not try to fit a square peg into a round hole. They represent multiple disability insurance companies and will match your coverage and financial needs with an insurer that is the right fit.

Full disclosure: Equitta is licensed to sell insurance as an independent agent. We never got into this business to sell insurance, because our physician clients consistently needed it, and we didn't want to throw them to the insurance wolves... so we brought this in-house. But whether you work with us or not, whatever you do, only seek disability insurance from an independent agent.

The Bottom Line

Being a physician is hard – so make buying disability insurance easy by following these tips: 

  • Get it while you’re still in residency, and while the cost is the lowest it will ever be.
  • Only get as much coverage as you absolutely need. If an agent doesn’t take the time to get to know you and your situation, run the analysis, and makes a recommendation based strictly on your income, they’re misdiagnosing and prescribing irresponsibly.
  • Get coverage through an independent agent representing multiple insurance companies, who can provide alternatives that are in your best interest, not theirs.

 If you're ready to get disability insurance checked off your list, grab a time on our calendar here.

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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Want to learn the RIGHT way to get disability insurance without being sold something you don't need, and without being had? We've got you.

James Pommert, CFP
Nov 30, 2018
6 min