Disability Insurance

[vanfanal]

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I'm 5 years out of training. I won't dwell on how I missed the boat to buy a policy in training. Bottom line is right it would cost me about $3300 annually for own occupation policy with all the necessary riders etc. I've asked around and most of my colleagues don't have it and some do. My guess is the level of disability/injury would have to be grave to not be able to work as a psychiatrist as compared to some other fields. I value the wisdom of some of you on this forum, was wondering what you all think/did for yourselves?

 

[calvnandhobbs68]

Always have own-occupation disability insurance, especially when you’re making a physician level salary.

Look at it this way, when you’re in a professional field like this you’ve essentially made an investment to the tune of 7+ years between med school and residency and possibly hundreds of thousands of dollars in debt/deferred wages just to start making however much you’re making now. You can now pay maybe 1% of your income a year to protect a significant portion of your wages (return on investment) essentially indefinitely.

Yes the risk is rare but if it happens it’s catastrophic and you’re much more likely to become permanently disabled than die. That’s why life insurance is so much cheaper.

3300 isn’t that bad I think I pay 4400 annually with the cost of living adjustment every year bumping it up a little since I first got it. Keep an eye on what it actually covers and how much of your income it’s covering plus if it includes things like an annual automatic COL adjustment up, presumptive disability benefit, regular occupation rider (so Id still get paid if i was working for target but couldn’t work in my field), etc.

 

[G Sheb]

It's non-negotiable really, unless you're close to retirement or sitting on so much money that you don't care if you stopped working. You have to cover your income for accidents or illness, even if temporary (usually they kick in after 3 months).

 

[Stagg737]

Agree with above. Unless you’re single and close to FIRE then it shouldn’t be a question. Just do it, not everything has to be a grave disability to be unable to work. For example, I see patients with back problems unable to sit for 30 minutes at a time, plenty of ways for that to happen and it would prevent someone from being a FT psychiatrist. Make sure you’ve got someone looking over those riders for you though, as those are extremely important for this type of policy.

 

[FlowRate]

I'm 5 years out of training. I won't dwell on how I missed the boat to buy a policy in training. Bottom line is right it would cost me about $3300 annually for own occupation policy with all the necessary riders etc. I've asked around and most of my colleagues don't have it and some do. My guess is the level of disability/injury would have to be grave to not be able to work as a psychiatrist as compared to some other fields. I value the wisdom of some of you on this forum, was wondering what you all think/did for yourselves?

The cost per month is hard to compare without knowing what the waiting period and actual income replacement are.

I don't think it's particularly necessary to always have maxed out OODI. For example, if you hit a good coast investment number then you're effectively self-insured at least as far as retirement contributions are concerned.

A lot of employers have DI which is often more restrictive than a true portable OODI but replaces some of the benefit you might need otherwise.

I'm comfortable with the combination of my employer's DI benefit combined with the portable OO benefit I got in training. Combined I think they make about $120k of income replacement (post tax/untaxable IIRC.) I could apply for an increase but I don't feel the need to fully insure my total income currently and it is a $150/mo drag for ~$60k OODI benefit already.

 

[Psych19]

If it's helpful to hear about a situation where a psychiatrist has benefitted from disability insurance, I'd be happy to share my story. I bought an own occupation policy shortly after finishing training in 2019. I was pretty healthy at the time and certainly never expected to need the policy. Six years later I was diagnosed with Hodgkins Lymphoma and subsequently began 6 months of chemotherapy, during which time I could not work. I'm in remission now, but still recovering from some of the side effects of chemo. My personal experience working with disability insurance has been unexpectedly positive and non-adversarial. The decision to get a policy years ago worked out pretty well for me and my family. If someone else depends on your income, I'd definitely recommend you go get yourself covered.

 

[TexasPhysician]

I'm 5 years out of training. I won't dwell on how I missed the boat to buy a policy in training. Bottom line is right it would cost me about $3300 annually for own occupation policy with all the necessary riders etc. I've asked around and most of my colleagues don't have it and some do. My guess is the level of disability/injury would have to be grave to not be able to work as a psychiatrist as compared to some other fields. I value the wisdom of some of you on this forum, was wondering what you all think/did for yourselves?

The level of disability is not far off from other specialties, assuming we have similar plans. Mine pays if I lose a limb or an eye. Anything cognitive or mental health affects all physicians. Something like a tremor would affect surgeons and likely not us.

As far as own-occupation, I have zero interest in non-cognitive occupations if I were to become too disabled to be a psychiatrist but not disabled enough to do basic, manual labor.

I have had my policy since PGY-2, and I plan to keep it. Thankfully I have never needed it, and I hope I never do. I do know someone that has needed it and now collects $5k tax free every month.

 

[calvnandhobbs68]

I have had my policy since PGY-2, and I plan to keep it. Thankfully I have never needed it, and I hope I never do. I do know someone that has needed it and now collects $5k tax free every month.

5K is honestly kind of low, I don't think my family could live on 60K a year right now haha.

I just looked and mine is $14710/month plus another $8000 a month with the catastrophic disability benefit which is:

"in addition to your monthly disability benefit (and social insurance substitute benefit if on the policy) in the event you become catastrophically disabled due to an Injury or Sickness and you lose the ability to perform two or more Activities of Daily Living without Assistance; or become Cognitively Impaired; or become Presumptively Disabled.".

So OP that's also what I mean in terms of seeing how much the monthly payout is, you can usually choose what percentage of income you want to cover.

 

[VA Hopeful Dr]

5K is honestly kind of low, I don't think my family could live on 60K a year right now haha.

I just looked and mine is $14710/month plus another $8000 a month with the catastrophic disability benefit which is:

"in addition to your monthly disability benefit (and social insurance substitute benefit if on the policy) in the event you become catastrophically disabled due to an Injury or Sickness and you lose the ability to perform two or more Activities of Daily Living without Assistance; or become Cognitively Impaired; or become Presumptively Disabled.".

So OP that's also what I mean in terms of seeing how much the monthly payout is, you can usually choose what percentage of income you want to cover.

Mine is about the same level as @TexasPhysician , but you also have to factor in social security and, if an option, employer policies.

Also spouses. If you're the sole breadwinner in solo practice you'll need a larger policy than if you're employed with a working spouse. I have both so get away with less.

 

[anonperson]

I'm 5 years out of training. I won't dwell on how I missed the boat to buy a policy in training. Bottom line is right it would cost me about $3300 annually for own occupation policy with all the necessary riders etc. I've asked around and most of my colleagues don't have it and some do. My guess is the level of disability/injury would have to be grave to not be able to work as a psychiatrist as compared to some other fields. I value the wisdom of some of you on this forum, was wondering what you all think/did for yourselves?

It's Annoying to pay for disability insurance but a necessary evil.

I pay around $7000 a year. Own occupation. Will cover me if I can no longer work in my specialty. There was a specific exclusion due to prior health history but nothing I can do about it.

It will also kick in if I have to quit working to care for a family member ( spouse, child).

I believe the monthly amount is $10000. I had tried to increase it but my current W2 job also provides disability insurance and my personal carrier wouldn't let me increase coverage.

It is painful to cut a check each year but as my income has grown, it's a smaller percent. Plus with a wife and kids, can't take the risk.

 

[finalpsychyear]

I think when your yearly investment income is very close to your yearly gross income then you may be able to stop the policy.

 

[Mad Jack]

I'm 5 years out of training. I won't dwell on how I missed the boat to buy a policy in training. Bottom line is right it would cost me about $3300 annually for own occupation policy with all the necessary riders etc. I've asked around and most of my colleagues don't have it and some do. My guess is the level of disability/injury would have to be grave to not be able to work as a psychiatrist as compared to some other fields. I value the wisdom of some of you on this forum, was wondering what you all think/did for yourselves?

It would cost me wayyyy more than that with my current policy to cover my entire income but I got one out of fellowship that required no workup that ran me a decently high amount. Paired with my work policy I'm covered for around $250k but much of it is tax free. I doubt I'll need it but much better to have and not need than need and not have, I've heard too many friend-of-a-friend horror stories. Figure once I've got a couple million in the bank I'll drop the separate policy and just use the work policy. Total cost is a little over 4k a year. I was also older at policy start which worked against me

 

[finalpsychyear]

It would cost me wayyyy more than that with my current policy to cover my entire income but I got one out of fellowship that required no workup that ran me a decently high amount. Paired with my work policy I'm covered for around $250k but much of it is tax free. I doubt I'll need it but much better to have and not need than need and not have, I've heard too many friend-of-a-friend horror stories. Figure once I've got a couple million in the bank I'll drop the separate policy and just use the work policy. Total cost is a little over 4k a year. I was also older at policy start which worked against me

At what point do most people drop any disability policy? if someone had yearly expenses of 100k then a liquid investment portfolio worth 2.5m using the 4% rule or a portfolio worth 1.5m with a conservative 7% average return giving you 105k?

 

[Mad Jack]

At what point do most people drop any disability policy? if someone had yearly expenses of 100k then a liquid investment portfolio worth 2.5m using the 4% rule or a portfolio worth 1.5m with a conservative 7% average return giving you 105k?

That's really a personal decision and kind of depends on what your goals are. My take is that if you hit your FIRE number you can probably drop it, unless you want to spend lavishly and want to keep doing so even if you're disabled (and there's nothing wrong with that, solve people love nice things). I live off of around 72k/year post-tax for everything except vacations, so 2 million at 4.7% (updated rule per the most recent research) is theoretically enough to get by on. If I had more family obligations I would probably need closer to 3.5-4 million. Some on the anesthesia forum are insisting they need at least 10 million.

 

[finalpsychyear]

That's really a personal decision and kind of depends on what your goals are. My take is that if you hit your FIRE number you can probably drop it, unless you want to spend lavishly and want to keep doing so even if you're disabled (and there's nothing wrong with that, solve people love nice things). I live off of around 72k/year post-tax for everything except vacations, so 2 million at 4.7% (updated rule per the most recent research) is theoretically enough to get by on. If I had more family obligations I would probably need closer to 3.5-4 million. Some on the anesthesia forum are insisting they need at least 10 million.

gotcha. Personally If i am sub 50 yo i would probably go with 3% baseline swr at least for 3-5 years and work my way up to the 4-4.7% swr. Of course with big crashes as long as you can vary the swr you are very protected from what i read. Well pretty much everyone in anesthesia is making 400-500k minimum and likely living a lifestyle of decent luxury fro the get go.

 

[Mad Jack]

gotcha. Personally If i am sub 50 yo i would probably go with 3% baseline swr at least for 3-5 years and work my way up to the 4-4.7% swr. Of course with big crashes as long as you can vary the swr you are very protected from what i read. Well pretty much everyone in anesthesia is making 400-500k minimum and likely living a lifestyle of decent luxury fro the get go.

Personally I run a 25/75 income/growth mix that I will likely gradually shift to 75/25 in retirement. My dividend and distribution producing assets average around 8% and are pretty stable in payouts and dividend growth, so if anything 4.7% would be quite low for my portfolio. I'm all about sacrificing growth for income when the time comes though

 

[vanfanal]

Thanks for the input everyone. I'm moving forward with it then.

 

[mistafab]

At what point do most people drop any disability policy? if someone had yearly expenses of 100k then a liquid investment portfolio worth 2.5m using the 4% rule or a portfolio worth 1.5m with a conservative 7% average return giving you 105k?

I think some people feel safer with the policy even after being self-funded. To each their own though.

To OP: I definitely have an own occ. Seen too many horror stories where people get absolutely boned and don't have a policy. I won't risk that for my family or spouse.