Disability insurance - when, how much?

[RPedigo]

Before residency begins, I was considering getting a disability insurance policy. I read the article on the White Coat Investor which strongly advocates for it. However, do you feel that it is necessary to start as a resident to lock in a low-price policy? Currently, Guardian would insure me for $60/month for $4,000/month of coverage with ability to increase coverage, coverage to age 65, portable, and non-cancelable. What are others here doing / what have others done? I could fit it in my budget, but it would come out of attempting to fully fund my Roth IRA or employer-matched 401k.

Edited to add: also covers partial disability and is own-occupation

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[winkleweizen]

Does your school not offer you one?

 

[RPedigo]

Does your school not offer you one?

They do, residencies typically do offer disability with their benefits. However, it's not portable, so when you graduate you have to start from scratch again. In that time if you develop any medical problems or exclusions (and are just older, in general), my understanding is that your coverage may be limited and/or your premiums might be much higher. Some financial planners have told me to get a policy earlier rather than later that is portable and non-cancelable, so you can lock yourself in and when you go to buy more coverage, it will then be based on your health from when you started the policy and not when you increase coverage.

 

[jbar]

For the reasons you have listed this is why I got disability insurance before residency, because I will never be healthier than I am now. Also it's not just about after residency, there is a chance of getting sick or injured during residency in which case you'd be totally hosed financially. Make sure that you get one that specialty specific. Mind says if I can't practice emergency medicine, I get my full benefits. So even if I lost a hand or something happened that I had to become a radiologist I would still get paid out. If you don't do this and just get general disability insurance they can deny your claim if you are physically able to do another job.

 

[gman33]

My dad's in the insurance biz.
If you can afford it, it's a good idea to get a policy as early as you can.
When you are young and healthy, it seems like a waste of money.
Hopefully you will never need it, but you never know.

Find a good insurance agent who can explain the benefits.

Northwestern Mutual has some new products geared specifically for physicians.
Not trying to plug anyone, just the only place I'm aware of.

 

[Birdstrike]

.

 

[8654Marine]

It's called "Own Occ" or "Own Occupation" disability insurance.

Make sure it's true own occ. Not "Income Replacement" insurance.

The crux of the issue is that a disability may prevent one from practicing EM, but may not be an obstacle to being a Rad or Path.

Own Occ gives you the benefits that is specialty specific, no matter if you are employed in another specialty.

Look for words such as "...as long as you are not gainfully employed..." or "...so as long as you are not engaged in any other occupation/specialty..."

That is not own occ.

Look for words similar to "...we will consider you to be totally disabled even if you work in some other capacity..." or "...so long as the disability prevents you from performing/practicing in your original occupation/specialty..."

At least that is what I've learned. There are very few insurance companies that provide own occ. I got it in residency. Peace of mind.

 

[EM_Rebuilder]

Nobody responded 'how much'.... I got mine at the end of my third year of residency (4 year program) at a 5K benefit per month. After being an attending a few months, I upped that to 10k/mo benefit. The guy I bought it from wants me to increase it more, but I really doubt I will..

Its tax free if it ever goes into affect, so essentially I will get 120K per year. I am rather certain my family could survive on that with minor (virtually no) lifestyle changes... probably would get a slightly smaller house or move to a place without such high property taxes. I really questioned if I needed to go from 5 to 10 as there are PLENTY of people more than 'happy' at 60K per year. It came down to costing less than one shift for the entire year and in the event something happened, the comfort level will just be that much better at 120K.

Personally, I am not a huge fan of insurances... but I think the whole DI thing does make sense... I also did buy 1mil in life insurance; my wifes dad was an engineer and ended up with cancer and died when she was 12; there were 4 other siblings and a mother who was a HS teacher. They had a nice sized policy which ended up putting all 5 kids through college and still is being used by her mother to live on. Obviously, my wifes family is MUCH better off today because of the insurance policy... So, its important..

EDIT: Funny we were talking about all this and my bill came in today. I pay $4019 for the year for the 10k/mo benefit. It has a cost of living adjustment and is own occupation meaning I can go be a radiologist if I wanted to and still get the benefit. Mine with with Mass Mutual. When I bought it, I compared several and found them all to be nearly similiar and similiar costs. I honest went with MM because I liked the guy that was pitching it to me versus the other companies reps..

 

[strongboy2005]

So what companies offer own-occupation disability insurance?

 

[jendc08]

I have guardian which is own occupation. I got it the end of my 3rd year of residency. For now I have it at $5000/month because I have other DI through my employer but if I leave I will still have the guardian one which I can increase as I need to.

 

[Arcan57]

I'd say as much as possible. Unless you're living well below your means (not a bad idea), the upper limit on disability is still not going to provide you with the standard of living you have now. Throw in the chance that your disability may include costly long-term care and it starts getting hard to justify skimping.

 

[EM2BE]

Trust me from my personal experience. Get it now, and get what you can. See if you can get a plan that allows you to increase the amount without physical reassessment. Get something that is outside the hospital too if you can. If you don't think about getting it, it will be too late. When I asked for a quote from the rep at my hospital that also did outside plans "you couldn't afford it." Not what you want to hear. Do it while you are healthy!

 

[JacobMcCandles]

I'm in the same boat and I think I'm going to go ahead and pull the trigger on it. I've been getting some quotes from several different companies so hopefully I'll come to a choice in the next few weeks.

I'm also going to go ahead and get term life insurance while I can get it for cheap. $1M, 20 year term for $35 is about as good as it's going to get, I think. For those thinking about it, term4sale.com is a great website. I have no affiliation with the website but saw it on Whitecoat Investor's blog and it blew the quotes I had been getting out of the water.

 

[MR Insurance]

Glad to see some comments regarding Whitecoatinvestor.com – it is a great website with lots of great advice for docs of all ages and stages of training/work.

Here is a quick (hopefully quick) rundown of some concerns mentioned.
When to get it? Simple answer – the younger, the better. This is for two primary reasons including lower cost and less complex medical history (hopefully).
-Generally speaking the cost of disability insurance will increase by about 4-5% each year. So, a 28-year old may pay $1000 annually for X amount of coverage, but a 32-year old will pay $1200 for the same amount. Now multiply that by a 25-year long career and the cost is $5,000, without counting the losses based on time value of money. Furthermore, apply this to a higher annual premium and the difference is more significant.
-More important than pricing however, is good health (if you have it). I can’t tell you how many graduating residents or fellows I speak with that had something happen during residency which ended up landing them an exclusion or worse even, a limited benefit period when they applied for disability insurance. Had they applied before-hand, they would have been better off.
Here is an interesting study from a few years back. http://archpsyc.ama-assn.org/cgi/content/abstract/67/6/557
- Of course there is always the one story I’ve heard from a client who’s good friend in med school was hit by a car the first week of residency (practically non-existent statistical chance) which caused TBI amongst other things. Not a great picture, needless to say.

How much? If you haven’t already been told, the amount of coverage offered to young docs is based on “Special Limit Programs” that will be unique to each insurance company. To simplify:
Sr. Medical Students: $2,500 monthly benefit (can apply for more at this point in the year)
Residents PGY1 and 2: $4,000-$5,000 monthly
Residents PGY3+ and Fellows: $5,000 monthly
Final Training Year: $6,000 - $7,500 monthly depending on specialty

What Companies? This is clearly going to depend on who you are speaking with. Someone representing Northwestern Mutual will rant about their policy, while someone representing Guardian will rant about their policy. Regarding True Own-Occupation however, these companies are currently offering it:
Guardian/Berkshire and Standard: Generally included in their top-tier policy
MetLife, Principal, Union Central, Mass Mutual: Offered as an optional rider
Furthermore, some include the “medical specialty” language referred to: Guardian, Standard, Union Central(optional rider)
Tip: The definition of total disability is indeed very important, but there are more things that must also be considered. Ask your agent/advisor to compare them with you, and try to really understand it before making a decision.

Discounts. Just about anywhere you look, agents and websites are advertising discounts. It’s out there, whether through your GME program, professional association, or whatever else. Don’t pay more than you need to for this stuff, but also don’t get so overly hung up on pricing that you sacrifice the quality of benefits.

Additional Considerations. Multiple comments were made on buying a policy that allows you to “increase your benefit in the future”. This is called a Future Increase Option, or Guaranteed Purchase Option (depending on the insurer). It is an optional rider that allows you to increase your benefits in the future without requiring additional medical screening - VERY important for younger docs. Some companies have a defined benefit amount that can be exercised ($5,000 for example) and some do not. Some allow for increases at every policy anniversary (assuming your income allows for it), while others only allow increases every three years. Some allow you to increase by the full amount, while others restrict you to only a portion of the full amount. Again, my advice is to understand how it works before making a decision.

Graded Premiums. Not every agent/advisor will tell you about this, but I think it is worth consideration. Some companies offer graded premiums, which basically start out very inexpensive but continue to increase in cost each year. For those considering this during the first years of residency, the graded premium option is a great way to secure coverage while in great health without restricting your cash flow too much. Hence allowing for Roth contributions, 401(k) contributions, etc. You can then level the premium as an attending, when cash flow is hopefully less restricted.

Work with someone who shows you multiple options and can help you understand why one or two options are better than the rest. If they only show you one company, ask them to explain in detail why it is better than what other carriers offer. It could be that you are working with someone who truly is showing you the best options, but could also not be the best options. Again, you should have a complete understanding of your options before you make a decision.

 

[The White Coat Investor]

Before residency begins, I was considering getting a disability insurance policy. I read the article on the White Coat Investor which strongly advocates for it. However, do you feel that it is necessary to start as a resident to lock in a low-price policy? Currently, Guardian would insure me for $60/month for $4,000/month of coverage with ability to increase coverage, coverage to age 65, portable, and non-cancelable. What are others here doing / what have others done? I could fit it in my budget, but it would come out of attempting to fully fund my Roth IRA or employer-matched 401k.

Edited to add: also covers partial disability and is own-occupation

Be careful with that White Coat Investor fella, he's creepy.

Disability insurance is one of those strange things. The younger you are, the greater than potential benefits, yet the cheaper the price. Buy as much as you can as a resident, then buy some more when you get out of training. I don't know if I'd buy it during med school with borrowed money, but I'd certainly buy it by intern year.

I just had a call from a friend the other day who put it off and now has pretty severe radiculopathy and wants the coverage. He's trying to figure out how to get it without actually lying. He'll probably end up with an exclusion for neck/back pain.

 

[MR Insurance]

I just had a call from a friend the other day who put it off and now has pretty severe radiculopathy and wants the coverage. He's trying to figure out how to get it without actually lying. He'll probably end up with an exclusion for neck/back pain.

Hmm. Radiculopathy is probably too severe to avoid an exclusion, but there are some carriers offering simplified underwriting for groups of 3+ applicants. Might be worth a shot.

There are also options for Guaranteed Standard Issue, but they are more complicated.

 

[anonymousEM]

I will be taking a position where my paid job is in international EM specialty development full time in a developing country. Up to this point I've just stuck with my university faculty provided disability insurance and didn't buy a personal policy. As I change where my paycheck is coming from, I'm reassessing this decision but also realize that my full time residence abroad for 1 year will likely make it much more difficult to find a personal own-ocd policy--even though the assignment abroad is a function of my US university based job. I don't yet have a contract signed for the new position. Any advice on the best way to approach this situation or what to say/not say in applications? particular companies I should look into besides Guardian and metlife?

 

[MR Insurance]

In which developing country will you be based? This will have some impact on the options available.

 

[pinipig523]

Max out your DI. No one can tell you when to get it.

Case in point - my best friend who is an ER PGY2 resident, had DI in place since PGY1 year... dx w liver cancer this year.

Me? I got DI when I was 6 months from graduating (PGY4)... so had I had a catastrophic injury or disease earlier in my career, I'd be out of luck.

Never say it will never happen to you, cuz you never know.

I'm maxed out at 66% of my pay as replacement.

 

[ORL10]

I bought through the Metlife (MD essentials) program because I did not have to do a medical screening exam. Its currently about 150/month for 5000/year in coverage. You can increase after first 6 months (premiums go up accordingly). It has a guaranteed renewable and own occupational rider in the contract.

Its a little more than my co-residents paid, but if you have pre-existing conditions you really can't beat it.

 

[JediZero]

Random thought: do the ACA provisions regarding pre-existing conditions apply to disability as well? Or is DI considered totally different from health insurance?

 

[pinipig523]

Random thought: do the ACA provisions regarding pre-existing conditions apply to disability as well? Or is DI considered totally different from health insurance?

Different.

 

[joeDO2]

I don't know if I'd buy it during med school with borrowed money, but I'd certainly buy it by intern year.

My school requires students to carry disability insurance. Apparently they had a student a while back that was out on rotations and became disabled and couldn't afford to pay loans, prompting them to add the requirement. It was pretty catastrophic. Even if you haven't graduated yet, the hit can be just as bad.

 

[OCA-Peter]

Before residency begins, I was considering getting a disability insurance policy. I read the article on the White Coat Investor which strongly advocates for it. However, do you feel that it is necessary to start as a resident to lock in a low-price policy? Currently, Guardian would insure me for $60/month for $4,000/month of coverage with ability to increase coverage, coverage to age 65, portable, and non-cancelable. What are others here doing / what have others done? I could fit it in my budget, but it would come out of attempting to fully fund my Roth IRA or employer-matched 401k.

Edited to add: also covers partial disability and is own-occupation

If you put off getting DI, at least make sure you get it before leaving residency (or fellowship). Some providers give a pretty substantial discount (that you keep your whole career) just because your in residency when you get the policy. For example, we had a client who got a quote and was underwritten while in training. Her price was in the $200~$250/month range. She decided to not take the policy (even though she went through the whole underwriting process).

2 months later, she decided she wanted the policy, but her offer from the company had expired and she had to be underwritten again. This time her price was ~$400/month range. The only thing that was different was that she didn't get her resident/fellow discount, her health was still that same.

Crazy!!

I bought through the Metlife (MD essentials) program because I did not have to do a medical screening exam. Its currently about 150/month for 5000/year in coverage. You can increase after first 6 months (premiums go up accordingly). It has a guaranteed renewable and own occupational rider in the contract.

Its a little more than my co-residents paid, but if you have pre-existing conditions you really can't beat it.

If this is the same policy I'm thinking off, this isn't an own-occupation policy (IE as a physician, you don't want it). Metlife has several different policies. The one offered through the AMA is NOT own-occ (kinda funny seeing its the AMA). You might want to get some quotes on a true own-occupation policy.

Random thought: do the ACA provisions regarding pre-existing conditions apply to disability as well? Or is DI considered totally different from health insurance?

I know this was answered already, but I'll give a little more info. DI companies are completely separate from this and can approve/decline whomever they wish. This is a BIG reason to get disability insurance early.

We just had a client apply for DI. Two weeks before he applied, he then decided he was snoring a lot so decided to do a sleep study. The day after he applied for disability insurance, he was notified that he had sleep apnea. He went from being able to get DI at a great rate, with all the needed features, up to age 65/67... to NOT being able to get DI at all.

 

[lawj]

I'm being quoted $720 for 15,000/month coverage. Own occ. Does this seam excessive? If so, what are others paying?

 

[MD Financial Services Scott]

$720 if per month is probably to much if you are under age 40, most will be in the $300-$400 range for that quantity ($15,000)....assuming you are getting a fixed rate and true own specialty definition. Let us know if you have other questions.