disability insurance as resident to save $$ later

[tomplatz]

A financial planning company I'm considering working with is advising me that purchasing disability insurance now (I'm completing residency in 57 days, thank goodness) will "lock in" my disability rate at a much lower rate as a resident for the next 10 years.

I'm active duty military, so I don't really need disability insurance until 4 years from now.

Question: I've heard other residents say this, but never gotten it from an authoritative source. Anyone know for sure about this? (Please no speculation or "I've heard", I'd like to KNOW.

Thanks.

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[lord_jeebus]

The advantage to buying it early is that you will be able to continue your coverage if something happens to you later that would make you uninsurable. As a resident you can pay a low rate for a low level of coverage, but purchase a rider that guarantees you the right to increase your coverage to a much higher level in the future.

For example, I pay $80/mo for a policy with Guardian. My current disability payment is $4000/mo, and regardless of what happens to me, I have the right to increase my premium to cover increases in salary up to $11000/mo. That new premium is "locked in" whether I stay healthy or develop a chronic disease.

 

[DI EXPERT]

The DI contract provision that will "lock in" your premium is termed Noncancelable & Guaranteed Renewable. Be sure to have this provision included in any policy you consider. It's true-premium savings are experienced by "locking in" at a younger age.

Additionally, secure a policy that contains a military service premium waiver provision. This will allow you to suspend premium payments while your covered under the military benefit package.

Lastly, seek a policy that contains contract language recognizing medical specialties.

 

[TysonCook]

Agree with above because it happened to me....

I kept my policy from residency (it is specific, non-cancellable with guaranteed renewal).

When I went to buy a new policy, they would insure everything EXCEPT for my back (4 years ago I had a back strain, it had resolved even before I saw my MD, but on my record it was noted as Hx of a back strain).

As an EP my back is what would most likely go.

So I kept my policy from residency, and have an additional one to cover everything else.

Another option is to keep the policy from residency UNTIL your new one is approved and covers everyting.... but DO NOT cancel the first until you are fully covered with the second.

 

[Arch Guillotti]

For example, I pay $80/mo for a policy with Guardian. My current disability payment is $4000/mo, and regardless of what happens to me, I have the right to increase my premium to cover increases in salary up to $11000/mo. That new premium is "locked in" whether I stay healthy or develop a chronic disease.

The policy I had during residency required that you go through medical screening prior to upping the coverage. Most everyone will stay healthy during residency and it won't be an issue, but if this policy is similar to the ones I am familiar with, there is no free pass to the upgrade in coverage.

 

[MR Insurance]

Tomplatz, these are some great responses to your initial post.

The Financial planning firm is doing a good job in recommending Disability Insurance - it is something that every professional should have. However, you also mentioned that you do not need the coverage for another 4 years.

There are many benefits to applying for coverage today:
1) You can save money by locking into inexpensive premiums today.
2) Eliminating the risk of changes in health, such as the back Hx noted in this thread.
3) Guaranteeing your ability to increase your monthly benefit in the future.

It is a good idea to purchase coverage sooner than later, but there is one thing that was not mentioned. Many insurance companies offer a Graded premium schedule, which begins with extremely low premiums when you are young and slowly increases every year. Additionally, this premium schedule can be changed to a level schedule at anytime (like 4 years from now).

My recommendation would be for you to consider using this as a way of taking advantage of the many benefits in purchasing coverage today, but also reducing your premiums to the lowest possible. Four years will not make a tremendous difference in premium cost, but it can make a big difference in relation to your health.

Ask your financial planning firm to show you a graded premium plan. Feel free to PM any questions or issues you encounter.

 

[SmoothOps]

I'm an incoming intern, and I've also been advised to purchase DI outside of what is offered by my program. I was told the benefits would be lower rates and lifelong insurance. Does it make sense to purchase insurance outside of my program now, or should I wait until I'm near the end of my training like the OP?

 

[southerndoc]

You'll need to wait until your last year of training. Disability is limited to 2/3 of your income. They wouldn't write a policy for me until I had my contract signed with my group.

 

[MR Insurance]

I'm not certain of what insurance company you worked with, SouthernDoc but you should have been eligible for individual coverage prior to finishing up school. There are a few insurance carriers out there that will offer around $2,500 of monthly benefit to Senior Med students prior to finishing.

SmoothOps, you mentioned that you are going to be going into an intern program. Depending on how long you intend to do this prior to doing residency, and also if you will be doing residency at the same place, you may even qualify for a bit more coverage.

Whether you should purchase coverage now instead of waiting is up to you. There is certainly a benefit to doing so which have already been mentioned in this thread.

If you decide to look further into it, feel free to message me if you need advice. Essentially you want:
Pure Own-Occupation definition
Noncancellable and Guaranteed Renewable
Future Increase Option
Cost of Living Adjustment
Residual Disability rider, with recovery benefits

If the proposed policy includes each of these, you're off to a good start. Additionally try finding a policy that does not limit benefits for mental illness. Many carriers do that now a days.

Hope this helps. 🙂

 

[southerndoc]

I'm not certain of what insurance company you worked with, SouthernDoc but you should have been eligible for individual coverage prior to finishing up school. There are a few insurance carriers out there that will offer around $2,500 of monthly benefit to Senior Med students prior to finishing.

My policy is for $10k/month. They wouldn't offer that policy during residency until after I signed my contract. I am using Guardian/Berkshire Life. My residency provided disability insurance through us free of charge through Unum, which I had to sign a waiver stating I would cancel that insurance once my personal policy went into effect.

 

[MR Insurance]

My policy is for $10k/month. They wouldn't offer that policy during residency until after I signed my contract. I am using Guardian/Berkshire Life. My residency provided disability insurance through us free of charge through Unum, which I had to sign a waiver stating I would cancel that insurance once my personal policy went into effect.

Good work in going with Guardian/Berkshire - It is my preferred contract.
I understand why now, most carriers do not offer more than $5,000 of monthly benefit prior to becoming a Practicing Physician.

Depending on the carrier:
$5K for PGY 3+
$4K for PGY 2 or less

There is still some benefit to having done it during Residency (i.e. good health, younger age, etc.) however the coverage is structured differently. Rather than qualifying for the $10K benefit, you would have applied for $5K and included the Future Increase rider to your policy. This rider allows you to increase the monthly benefit when your income goes up, without requiring new medical information, just financial information to prove income.

The benefit of doing this is that you lock the initial $5K at the lower price and only pay the higher price, at time of residency completion, on the second $5K benefit.

It may sound complicated, but can easily be explained by most insurance advisors and may work well for some individuals.