Disability Insurance Advice

[jsr52]

A few questions about Disability insurance:

I am a rising second year GI fellow

Current Disability Policy: Total Monthly Indemnity Amount$ =2,500.00 monthly - I pay $37.5/month.  Current income ~$4500/month - ~$7500 month when moonlighting is included.

Just received a letter from Guardian my insurer stating my policy has a future increase option giving me the right to buy additional insurance without proving good health (I'm healthy for the record, but it only takes one bad basketball game), I can purchase the entire option now ($7500/month) or can purchase a smaller additional monthly benefit and make additional purchases on future option dates.

Not sure how fellows should approach disability, realistically I don't want to pay more than 75-100/month at this point. Thoughts appreciated.

Happy Father's Day!

[hightower]

$37.50 seems like a pretty good price for a $2500/month policy.  Makes me wonder if I'm paying too much.  I think I pay $337/month for a $9800/month policy.   Hmm

[jsr52]

My policy is graded for what it's worth.

[nachos31]

They should be able to give you a cost estimate for different levels of coverage--eg $1000/mo more in benefit will cost $20/mo more, etc. I would strongly consider bumping up your benefit to at least match your current income ($4500-5000/mo). At the time you complete fellowship there should be a "New in Practice" option you can exercise to get up to the full $7500 knowing you will have attending salary starting that year.

[jsr52]

Thanks everyone, that seems very reasonable.

[Scott at MD Financial Services]

Based on what you are saying it sounds like you have $2500 of coverage with $7500 of options and they sent you a letter stating you can buy $7500 but the letter probably goes on to say with financial justification somewhere somehow in that letter.  When you look at $90k of annual income (residency/moonlighting combined) by using that income it justifies (via the Issue and Participation limit provided by the carriers) about $5k of coverage so I think you might be limited as to the total benefit they will actually issue at the moment.  Now as a resident, fellow, or new physician in practice there are different guidelines that are put in place that are based on a fixed amount rather than income.  The carriers do that because they know you will make more money when you are done with residency and thus they really are not at any risk for over insuring you in the long term.

An idea you might want to think about while thinking about coverage.  Currently you have $4500+$7500 (FPO) which means a total of $12k total capacity.  Instead of buying more on your current policy you might want to purchase another contract with more FPO capacity IF you ever think you will need or want more than a total of $12k.  If you don't think you will need or want more than $12k then stick with what you have.  In addition, be mindful that where the graded (love the marketing behind that policy term....graded not increasing because increasing sounds bad) is cheaper at initiation, it does typically cross the projected level rate at about 4 years and crosses the fixed rate at about 6-7 years depending on the age you were when you bought it.

Let me know if we can help further.

[TheGipper]

Good for you for being smart enough to go with the graded premium policy.  Wish I had been.  Keep savings and drop that sucker in 10-15 years far below the break even point!