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PGY1 Cost/Benefit of Delaying Disability Insurance Purchase

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  • PGY1 Cost/Benefit of Delaying Disability Insurance Purchase

    Hey all. I'm a PGY1 in internal medicine (most likely eventually doing IM or non-invasive cardiology). I decided to really start educating myself about personal finances at the end of my fourth year of medical school.

    For two months out, I feel like I'm doing pretty well with everything. I'm budgeting, saving, I even started my Vanguard Roth IRA. I recently started thinking about disability insurance and I wanted hear peoples' thoughts on the pros/cons of delaying DI coverage. My broker needs to get back to me with official quotes, but I believe we were toying with a policy from Principal for $115/mo and $94/mo with Guardian. Guardian is also offering a graded premium policy; my premium would be $51/mo for this first year (although subject to go up each year thereafter until I decide to lock in). These rates are for $5k policies with all the lovely riders WCI says we should have. I was also told I'm likely to face either a one ear or two ear exclusion on the policy as I wear a hearing aid in my left ear for moderate hearing loss, so essentially my ears are not insurable due to pre-existing condition.

    On a PGY1 salary a premium ~$100/mo comes out to roughly 2.9% of my net salary. This hurts just enough to give me pause, especially when my monthly budget leaves so little wiggle room. I understand that in delaying my purchase of DI many things can happen:

    1) The longer I wait the more monthly premiums will be as the older we get the more likely we are to claim disability

    2) Like every other uninsured person out there - I might have the need to claim disability in the coming years and will be without a policy

    3) In the interim I might develop a new pre-existing condition making it harder to insure myself down the road

    So given this, whats the harm in say getting disability insurance as a PGY3 if I'm not planning on fellowship, or getting it in fellowship? I really suppose this all comes down to how risk adverse you are so I apologize if this is a silly question.

    Also FYI - I'm turning 27 in two weeks. Single, no kids, renting, own my car, $190k student loans.

    Further FYI - My residency program does offer a "free" group disability benefit. Predictably it sucks. Would not consider it adequate. 180 day elimination. Their definition of disability is as follows: "1. unable to perform the material duties of any occupation for which you are, or may reasonably become, qualified based on education, training or experience; and 2. unable to earn 80% or more of your Indexed Earnings."

  • #2
    Most get it right at the end of residency. Should be fine.

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    • #3
      I got it mid residency.  Just remember, your health can change over the next 3 years (usually negatively) due to the stress and burden of training.  Thus, your rates could go up.

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      • #4
        I got it early in residency, but everyone's cost/benefit differs.  I felt I had a very low likelihood of needing it, I was young, healthy and the the benefits ($60k/yr) weren't mindblowing, but for $1k+/yr in premiums, it gave me peace of mind in case something major did happen and protected future insurability.  I felt it was worth it over putting that $1k into savings, which would net ~$6k after 30 years and 6% returns.  Despite the low likelihood of needing it in residency, I actually knew a few people in my program who had pretty severe injuries/illnesses that probably affected their DI situation, whether they had it or not.  $1200k/yr for Guardian, is a good deal, especially if it's provider plus.

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        • #5
          I got a policy mid residency also.  Since you are single you have no second income to fall back on if something happens.  It gave me peace of mind.  When you become an attending you need to increase it.  Once you reach FI you can drop it.  If you stay single you can save by not buying life insurance.

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          • #6
            I deferred until the end of training, but only because my residency/fellowship group disability plan was reasonable.  Also, what is the "occupation" that is being listed in your individual policies?  Are they allowing you to list yourself as a cardiologist?

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            • #7
              Delaying is a good idea until something happens and doubles or precludes you from getting DI, or worse you end up needing it.

               

               

               

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              • #8
                I am certainly not saying you should buy it now vs. try to buy it later but over the last 10 days I have had 3 people in residency or fellowship come to me asking for coverage that can't get it now due to health issues.  One was a melanoma, one was Type II diabetic with a 8.1 A1c, and the third was a needle stick 40 days ago.

                The reward is you are not out the money for the premium if you don't buy it.  The risk is you might have something happen after the event that precludes you from ever getting it in the future.  You can actually do some product design where you can lock in the coverage and future purchase options for about $30 per month....
                Scott Nelson-Archer, CLU, ChFC
                303-953-0263 Direct / [email protected]

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                • #9
                  Thanks all. Spoke to my broker today, had an earnest discussion regarding my budget restraints and we'll see what we can come up with especially regarding an exclusion regarding my ear, and we will go from there. Currently looking at offers between $50-70/mo which seem more reasonable.

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