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Should residents get disability ins. BEFORE graduating?

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  • Should residents get disability ins. BEFORE graduating?

    Hi all. First time long time...

    I'm a graduating resident this July and have begun navigating the disability market.  I have read the 5 part WCI post on disability and spoke to several attendings and insurance brokers/FAs re: various riders etc... My question is kind of straight forward: Should residents signup for disability prior to completing residency?

    Not sure if you know this but there is a push for residents to sign up for disability prior to graduation, the two major points are to:
    1) Lock in a resident discount that amount to 10-20% off
    2) Avoid having to factor in group disability provided by your post grad employer
    I will do my best to explain my understanding/misunderstanding and possible issues with each. Again the big question is should I move forward with this now or wait?

    Thanks in advance.

    -----------------------------------------------------------------------------------------

    Locking in a resident discount that amount to 10-20% off:
    - Many of the major insurance carriers offer resident specific discounts ranging up to 20% off the total premium (inc riders) for the policy in perpetuity.  We are told this is to establish a relationship early with the expectation that most doctors do not switch providers.
    - The policy would initially be written to cover a resident salary and therefore would require an FIO rider to allow you to increase the coverage as your income increases. The discount would continue to apply with the new premium.  But this rider, like all riders is not free and comes at a cost, which may offset the discount
    - Is this "discount" akin to a mattress companies seemingly never ending discount?  On July 2nd will there be a new "new attending discount" for 10-20% off?
    - Locking in a discount seems like it may be good but I would be tied to a carrier and when it comes time execute the FIO rider to increase my coverage I'm concerned they will not have an incentive to offer a competitive premium.

    To avoid having to factor in group disability provided by your post grad employer:
    - The way this was explained to me is you are only eligible for a certain amount of total disability and this factors in any and disability coverage you receive.  My new group has a group disability policy which provides very strong short term disability but the long term disability ends after only 2-3 years of payouts. I’m told this would interfere with the coverage I would be eligible for receive and if I suffered a major injury since the group policy would end after 3 years I would not be fully covered.
    -  The counter to this would be that if you do not plan to max out your coverage this may be a moot point.  That seems like that may vary depending on your fams financial insurance.

    If you made it this far, thanks again and forgive my ramblings

  • #2
    My answer is no.  Good disability insurance isn't cheap and there's no reason to get it when you're only making 50k a year as a resident.  Wait til you sign your first attending contract.  They offer a discount because they know you don't need it and they are just trying to lure the extra business.

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    • #3




      My answer is no.  Good disability insurance isn’t cheap and there’s no reason to get it when you’re only making 50k a year as a resident.  Wait til you sign your first attending contract.  They offer a discount because they know you don’t need it and they are just trying to lure the extra business.
      Click to expand...


      While it's possible I was misled, I was taught to lock in that lower rate in training because of the significant price spike as an attending.

      Also, the amount you can get in disability as a resident is out of proportion to your actual resident/fellow salary.

      Also, the chance of disability is much higher than the chance of death during training, so I don't consider it bad advice.

      I did have a financial advisor from a giant "physician" specific firm tell me in fellowship that if I had to choose between funding a Roth and disability, to get disability.  And this company was going to manage my investments with a giant AUM fee.  For mostly unrelated reasons I dropped that company and recommend against working with them, however everything I've learned elsewhere is that getting disability while in training is a good move.
      An alt-brown look at medicine, money, faith, & family
      www.RogueDadMD.com

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      • #4
        Interesting.  I don't see how or why it would be cheaper to get a policy in residency unless you're buying less coverage than you actually need as an attending. But, I honestly don't know the answer.

        Let's say you're buying a policy that pays $8000/month if you become disabled.  Are you saying the premium on that policy would be cheaper for a resident than it would be for an attending that buys the exact same policy?  Why would they sell a resident a cheaper policy for the same coverage?

         

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        • #5
          it is cheaper to buy disability insurance as a resident because the insurance company's liability is less while you are a resident. You may be buying a $10k/month policy, but it is likely something like a 60% of wages, $10k/mo max, not a guaranteed $10k.  If you are making $60k/ as a reisdent, 60% of 5k/month (your actual salary) is $3k.  $3k/month is not going to protect you financially if you get disabled before finishing residency.  Wait until you are an attending.  Regarding the FIO rider, you only need it if you accept a job offer where there is an expected large rise in income later on, such as making partner.  Therefore, it makes no sense to buy the rider until you have a job offer in hand to know whether it applies.

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          • #6


            it is cheaper to buy disability insurance as a resident because the insurance company’s liability is less while you are a resident. You may be buying a $10k/month policy, but it is likely something like a 60% of wages, $10k/mo max, not a guaranteed $10k.  If you are making $60k/ as a reisdent, 60% of 5k/month (your actual salary) is $3k.
            Click to expand...


            I'll have to see if I still have my original paperwork somewhere (probably not).

            This is subject to memories that are years old and which I rarely think about, but my recollection was my payout as a trainee would've  been more than 60% of my salary.  When I became an attending my payout didn't actually increase substantially.

            I would imagine one of the many insurance people/advisors around here could answer this fairly quickly.
            An alt-brown look at medicine, money, faith, & family
            www.RogueDadMD.com

            Comment


            • #7
              I was pressured by a bunch of suits from Northwestern Mutual when I was finishing my fellowship. That was in 1994! I never bought disability insurance. I have been self insured (wife makes $$$). I just didn't want to spend $6k a year. I put that money into my Schwab account and bought SPY.

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              • #8
                I agree with the conclusion but not the rationale.  I bought disability insurance as a resident for a simpler reason:  I wasn't disabled, knew the odds of becoming so, and had no prophecy regarding the following day.

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                • #9
                  Didnt read all the comments.

                   

                  But I def vote yes:

                  -you're younger and healthier NOW (you will be surprised what the companies ding you for)

                  -not so much a resident discount, but you'll get institutional discounts of your residency program that may not be available in your attending job

                  -State matters. If you're moving FROM CA (and maybe FL) then you'll prolly wanna wait till you move to another state. CA has prolly the highest premiums. My graduating resident moving back to CA (from NY) made sure to secure coverage in NY first.

                  -I have mandatory group DI through my current job but I was still able to get a "New in Practice" coverage amount that was more than I'd be allowed otherwise.

                  I did not personally get DI until I just started my first (and current) attg job. But the main reason was because I was doing residency in CA and moving back to NY.

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                  • #10
                    Thanks everyone for your responses.  You can see how there is no conclusive/unanimous answer even among our forum of experts for what I should be a a relatively simple question.

                    I agree that my rate quote should not magically change on July 1st when I'm no longer a resident.  Just not sure if the discount is truly unique (ie I will not be able to get it moving forward). I'm also not sure exactly how the FIO is implemented.  In very short time I will have a significant increase and would expect to execute the FIO so I think this would pay off but again not sure.  Below is a brief summary of my policy. What do you think? Any other advice would be great.

                    I'm 35yo M w/o PMHx and my quote is:
                    - 5k a month own occ policy            $115
                    - Enhanced partial                          $22
                    - FIO for increase of 12k (to 17k)    $38
                    ============================
                    Total:                                            $175
                    After 20% Discount ($35):              $140

                    *You can see the the FIO (assuming no additional riders) would cost me an extra $3 despite the discount.  That said I would execute the FIO rider in a few months, where I think the savings would then be greater since the premium would increase...

                    Any more thoughts? Any riders you think are a must?  I'm thinking just specialty/own occ and enhanced partial.

                    Comment


                    • #11
                      What is enhanced partial? What company is this? About riders, consider COLA?

                      I personally think every resident should have a good DI policy in place. Yeah, not much, but in case of a catastrophe $4,000/month tax free for the rest of your life is better than a kick in the teeth.

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                      • #12
                        Talk it over with your agent and see what they say, maybe they could run quote using your attending numbers.  I say just do it now as you never know what can happen and you can always change or shop around in the future.

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                        • #13




                          Talk it over with your agent and see what they say, maybe they could run quote using your attending numbers.  I say just do it now as you never know what can happen and you can always change or shop around in the future.
                          Click to expand...


                          Agreed. Get it now. You can always drop it or change companies or increase the amount with the FPO at a later date.

                          Comment


                          • #14
                            Maybe I can help clear the air a bit on this question. The reason it is good to buy early is you are probably as healthy now as you ever will be thus you will have less, if any issues to deal with in underwriting medically. The discount that is in place while at a facility is usually available to you for 30--80 post finishing a program, if the rep does not know that then you should probably move on to a more knowledgeable rep. In addition once you are past that window the reality is there are discounts to be had all over the place, they are not in short supply. Another reason to buy it early is every year you wait the costs just go up, if you ever look at total premiums paid between 30-65 (assuming you kept it hat long) they are about the same as paying from 40, 45, 50, or even 55 to age 65, that is due to the increased premiums you will incur if you wait to lock it in. Based on the numbers alone, if you are going to buy coverage at some point then get it sooner rather than later as total premium paid is about the same regardless of age started and you will have less medical risk.

                            There was a comment about you could buy something that you are not eligible for, where that is the case for group coverages if you are buying an individual policy that is not the case, what you buy is what you get regardless of the then current income. Group and association based plans will underwrite benefit eligibility at claim time. Essentially what happens is at claim time the carrier states 'you purchased up to $X of benefit please prove to us via your tax return how much of that you qualify for'. In an individual policy you have done the financial underwriting /qualification up front. We have had claims where a physician has been on claim getting $20,000 per month but his prior income had only be $50k annually due to his participation in medical mission work. The individual market place is you get what you bought.

                            Most of the carriers guidelines for policy issue are about $6k for residents/fellows, $7500 for new physicians in practice without a signed employment contract. Practicing physicians will be offered coverage based on the 'issue and participation' guidelines set by each individual carrier so most will participate with other carriers and group coverage to between $25k and $30k per month of benefit for those that need that capacity.

                            I hope that helps and sorry for any typos as I am on my cell phone at a conference out of the country but an active participant with the forum emailed me about this thread and asked if I would respond.
                            Scott Nelson-Archer, CLU, ChFC
                            303-953-0263 Direct / [email protected]

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                            • #15
                              I can not imagine not getting it now. The discount is nice but the big reason is that you are not disabled now. If something happened to you next week, would you regret that decision?  If you find out you have hepatitis, forget about ever getting insured.

                               

                              The second point is very valid. I have told residents this for years. Some have not taken the advice and have had much less private coverage. One I know left his job with group insurance but had developed a medical problem and could not get more private insurance later.

                               

                              It doesn't seem worth the risk to me and these policies are all about limiting the risk of things that are hopefully never going to happen anyway.

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