Disability insurance options

[creeker]

I have a disability insurance questions that I would like to bounce of people.  I am a 3rd year emergency medicine resident who is graduating this summer.  I'm trying to decide what disability insurance makes the most sense for me.

I had atrial flutter develop in medical school which has since been ablated and have had no issues since then. I am otherwise very healthy and extremely active.  When I applied to get disability, I was rejected by Guardian and offered a policy through Ameritas that had a benefit period of 5 years.  My residency fortunately has a Guardian policy we are eligible for that does not require medical underwriting.  The two policies are markedly different in price though and am having trouble deciding between the two.  I'll put the details below:

 

Ameritas: $127/month premium. $5k/month benefit.  No possibility of increase.  Benefit period limited to 5 years

Guardian: $265/month premium.  $5k/month benefit. Can be increased to maximum of $10k/month.  Benefit to 67 years

Other than the differences mentioned above, they appear to be pretty similar.  They both have riders for cost of living and partial disability. What I am truly debating between is obtaining the Ameritas policy with 5 year limited time frame PLUS $5k Guardian policy.  Versus obtaining the Guardian policy but then increasing it to $10k after I graduate when I can afford it.  They both would provide $10k per month but for quite a bit of price difference.  I know that it would be gamble that if I became disabled for greater than 5 years but my understanding is that most claims last for fewer than 5 years.

A few other details about me. I am in California so policies tend to be more expensive than some other places.  Also my wife is a physician (OBGYN) and we do not plan to have kids.  We are currently reasonably frugal and don't plan to go crazy with a big house and cars (that's what they all say, right?).

Thanks for any opinions people can provide on the best way to protect my income in my situation.

[Scott at MD Financial Services]

If you need the $10k then buy both, at the end of each year have Ameritas review the policy to see if they will then extend the benefit period based on no claims having been made.  If they do extend your benefit period in a few years then great but if they don't then maybe you drop them at some point.  You might also check out removing the COLA, that usually costs 15-18% of the contract and if you reduce the benefit period down to age 65 vs. 67 it will save 10-15% as well.  The final thing you might look at is extending the elimination period from 90 days to 180, that can reduce the premium by 10-17% depending on if you are Guardian vs. Ameritas.

Let me know if I can help further.

[G]

Gosh, with your wife an OB, you guys can probably (mostly) self-insure.  I know there is always chatter about replacing income etc but if you get disabled so that you can't bring in any cash, how much money are you going to need that the other spouse cant cover?  (Also making assumption that there won't be a divorce--I know a couple guys that have collected on disability and several dozen who've had to deal with marriages ending.)  I never understood these guys that are covered for 20-30k/mo.  In other words, for me, I have enough to cover my true expenses.  If I can't work, I won't be flying business class to Scotland, staying in castles, and drinking limited release whiskys...but I will be able to stay in my house and drink bottom shelf scotch.

Having a 5 year cap is kind of a drag, particularly for that premium (1.4k/yr for max 300k payout).  That Guardian policy also sounds pretty pricey for only 5k of coverage, but perhaps that reflects the fact I havent bought insurance in awhile; I like Scott's ideas of decreasing the cost--again, this is for disasters, not convenience.

If you and your wife feel you need that kind of monthly money in a worst case scenario, get both for now.  Save aggressively with a plan to ditch one of them ASAP.  If you guys are pulling in double-specialist income and are truly frugal, you can save equivalent of that Ameritas 300k very quickly.  Also don't forget to check out your benefit at social security, another level of disaster protection.

Good luck.

[childay]

Agree you should plan on self-insuring at some point.  We are also dual-physician couple and currently have 2 policies.  I elected for the graded premium guardian policy as I plan to be cancelling it prior to the inflection point.  So you might look into that as well.

[Scott at MD Financial Services]

That is true.  The 3 options for premium structure are Fixed, Projected Level (GR), or Graded (annually increasing).  Typically the Projected level contracts are 17% less than the fixed rates, Graded are another 5%.  What I find is that graded (annually increasing) takes about 3-5 years on average before they become more expensive than the level contracts.  Lots of options to reduce your cost, I hope your rep has or will present these options to you for review.

[The Physician Philosopher]

Read this. Had the same thing happen. guaraunteed policy in residency does not mean guaranteed.

I am not able to get disability after being denied twice. I have a (non-noticeable, well treated) essential tremor.

https://thephysicianphilosopher.com/2017/11/21/disability-insurance/

[creeker]

Thank you for everyone's input.  This is all very helpful