Heading into Intern year -- Do I need speciality-specific disability insurance?

[Diggidy]

4th year medical student here, about to start a 5 year Orthopedic Surgery residency this July. I do not have specific details yet on the disability insurance that will be provided to me by my residency program; however, I'm assuming that it will not be adequate given the field I'm going into. Do you recommend paying for specialty specific disability insurance while a resident? I am not married (in a serious relationship headed that way though) and without children, if that makes any difference.

 

Also, if the answer is yes, do you have any recommended companies I should look at purchasing through?

 

Thanks!

[willpmd]

If you can in any way shape or form afford it, I would say purchase it.  I was diagnosed with a rare sarcoma my PGY-4 year, and so far everything has been good, but I will tell you for all of the heartache and stress it caused it would have been a million times worse if I had not purchased disability and life insurance prior. If you are married and/or have children buy a cheap term life insurance policy and regardless buy disability...

WCI has several good articles on it...

[LBKCLU]

You should purchase disability insurance as soon as possible. Based upon your medical specialty, I would strongly suggest that you purchase two policies from two different companies. This will allow you to potentially reach $25,000-$30,000 month in the future, regardless of your health, as your income rises. This combined maximum is higher than any one company will allow on their own ($15,000-$17,000 month). The cost of purchasing two polices is about the same as the cost of purchasing only one but you are provided with much more protection and flexibility in the future.

Since you will be starting residency in July, you can now apply for up to $5,000 month of coverage ($6,000 month with MetLife).

For orthopedic surgeons, I tend to focus on Berkshire (Guardian), MetLife, Standard, Ameritas, Principal or a combination of two of them. Which one(s) you prefer or I recommend are all based upon your individual needs, goals and budget. Discounts should be available on most, if not all of them.

 

[Diggidy]

I know in the WCI book he states that unlike many other types of insurance, with disability you get what you pay for -- with that said, what should I be looking at paying per month? I will be making ~42k/year after tax; however, I unfortunately am going to be living in a pretty expensive city, and with student loan payments, contributing to a Roth, having a small car payment, and other expenses, I will not have a massive amount of extra cash to throw around.

Can you explain the two policies a little more? I would just have a lesser policy with two different providers compared to a more comprehensive plan with one?

[LBKCLU]

Yes, between the two policies, you could not exceed a total monthly benefit of $5,000 ($6,000 month with MetLife). However, there are several ways to reduce your premium rates. For example, instead of using the resident physician limits, you could use the limits for senior medical students, which is lower. If you purchase policies from carriers that do not use a multiplier to determine the amount of increase option available (ie. not a function of the starting benefit level), you can minimize the amount of coverage that you purchase now, lock yourself into a large amount of increase option for the future, and then adjust your coverage when you can better afford it or when you complete your training.

There are several ways to structure things in order to meet the minimum amount required to allow for the increase options.

You can also potentially use a graded (annually increasing) premium structure to further reduce costs. The premium rates can literally range from $20 month to $200 month.

If you want to email me, I can ask you a few questions and then provide you with illustrations of coverage with a few ideas as to how to minimize your premium outlay but still allow you to potentially reach significant monthly benefits in the future, regardless of your health, as your income rises.

[Ben]

Buying early as possible is a nice idea, but you'll need to look at your finances to see how feasible it is. I know plenty of residents who are forbearing their loans due to cashflow issues and would have zero chance at affording disability insurance (particularly as interns on the coasts). If/when you have a spouse who is counting on your income or kids (who automatically do), you'll want life insurance as well. If not, that can wait a few years.

[BCBiker]

Also, many programs offer disability insurance as a benefit.  My GME actually offer $4k per month until age 65 for my PGY level with ability to convert on graduation to own occupation without additional health exam etc. I still haven't got my own policy for this reason.

[AlexxT]

Which companies sell to medical students, and which to residents, and which if any will cover for anticipated salaries, or do all require signed contracts to cover future attending salaries?

[LBKCLU]

All carriers will sell policies to both medical students and residents.

Using the resident limits, one can purchase $5,000 month of individual coverage ($6,000 month with MetLife).

An increase option can also be added to allow the insured to increase their monthly benefit to $15,000-$17,000 month, depending upon the specific carrier.

So, while this does not reflect the full future earning potential, under normal circumstances, an income of about $100,000 annually is required to purchase $5,000 month of individual coverage (assuming no other disability insurance is inforce).

Carriers also ignore group LTD coverage provided by institutions for residents and fellows when making individual coverage available.

[LBKCLU]

BCBiker-

I don't think that having a group LTD plan with a conversion option is a great reason for not purchasing individual coverage now.

1. Many hospitals that had these types of plans no longer offer them. If a certain participation limit is not met, that option may not be available in the future. This has happened many times in the past. Although the total number is consistent, I can't tell you how many hospitals that had GSI plans with Standard have lost them due to lack of participation.

2. How do you know that the company that the plan is convertible to is actually the right policy for you and the carrier that you should purchase based upon your medical specialty?

3. Typically, the amount that is convertible is low and may not meet your needs in the future as your income rises.

4. Rates increase as you get older so, by waiting, not only do you risk your future insurability (your ability to purchase insurance based upon your good health), but your cost of coverage increases over time. I can't even begin to tell you have many calls and emails I receive from young physicians that cannot qualify to purchase disability insurance at all based upon their health or can't qualify for a policy the way they would want to be insured due to pre-existing conditions. For this reason, I would want to make sure that my most valuable asset (my ability to earn an income) was covered. If not for the maximum, at least to a level where my "foot was in the door" and had an ability to increase my coverage in the future, regardless of my health, as my income increased.

Too many of us take our insurability for granted. Remember, it is not your money that buys the insurance. Your health buys the insurance and your money is what allows you to keep your coverage inforce.

[Diggidy]

If I'm trying to prioritize my funds for next year, would you think it better to put my money into disability insurance before a Roth? I plan on contribute to both, but during the first couples of years when I'm making less, it might be difficult for me to max out a Roth given my high cost of living (beyond my control).

[LBKCLU]

No question that I would recommend disability insurance over a Roth IRA. If your health changes, or worse yet you are disabled, the Roth IRA would not provide you with any income besides your contribution plus growth. This would be minimal during your entire residency and fellowship.

If you put away $5,500 into a Roth and are disabled young, you would be SOL. At the very least, you should purchase a small disability policy to make up for the taxes that would be lost on your employer provided group LTD plan and allow you to increase your coverage, regardless of your health, as your income rises. This not only provides you with additional tax-free income but also protects your future insurability.

In fact, there is a statistic that says if you save 10% of your income for 10 years and became disabled, that money would be gone in 12 months.

Depending upon your starting salary and employer provided group LTD plan, you can purchase a minimal amount of coverage to accomplish this. I have done several of these types of policies and the premium is generally $25-$35 month.

That being said, this would not be my recommendation. I think disability insurance and protecting your income and future earning potential is much more important than contributing to a Roth IRA - at least in your first year of training. When you stipend increases, you can always take the increase in salary and put it into a Roth as your cost of living and disability insurance premium would not increase.

[Diggidy]

That makes perfect sense. Going into Orthopedics I also don't imagine that I will have difficulty maxing out retirement accounts and investments later in life, so I'm more willing to contribute a little less than max to a Roth in residency, if need be, if that means I can get into a good specialty specific disability plan intern year. My program is pretty progressive as far as resident salary in concerned, and I will also have the opportunity to moonlight years 3-5, so finances will be less of a concern after intern and 2nd year.

Do you think I can get into a decent plan for 50-100$/month? I'm still confused about your initial suggestion of having two separate plans, and how I could get them combined for a total cost similar to a single policy?

[yspower]

In addition to the above poster's question, do you recommend an individual disability insurance for radiologist?

[BCBiker]

LBKCLU wrote:

BCBiker-

I don’t think that having a group LTD plan with a conversion option is a great reason for not purchasing individual coverage now.

1. Many hospitals that had these types of plans no longer offer them. If a certain participation limit is not met, that option may not be available in the future. This has happened many times in the past. Although the total number is consistent, I can’t tell you how many hospitals that had GSI plans with Standard have lost them due to lack of participation.

2. How do you know that the company that the plan is convertible to is actually the right policy for you and the carrier that you should purchase based upon your medical specialty?

3. Typically, the amount that is convertible is low and may not meet your needs in the future as your income rises.

4. Rates increase as you get older so, by waiting, not only do you risk your future insurability (your ability to purchase insurance based upon your good health), but your cost of coverage increases over time. I can’t even begin to tell you have many calls and emails I receive from young physicians that cannot qualify to purchase disability insurance at all based upon their health or can’t qualify for a policy the way they would want to be insured due to pre-existing conditions. For this reason, I would want to make sure that my most valuable asset (my ability to earn an income) was covered. If not for the maximum, at least to a level where my “foot was in the door” and had an ability to increase my coverage in the future, regardless of my health, as my income increased.

Too many of us take our insurability for granted. Remember, it is not your money that buys the insurance. Your health buys the insurance and your money is what allows you to keep your coverage inforce.

Click to expand...

Our conversion is actually really like converting directly into a normal Standard policy with a rate that is better than on the open market (much, much better for females), with all of the choices of riders (is true own occupation and allows for increase coverage with increase in income) and without medical underwriting.  I agree about the age thing but as I said the rates from the conversion are better than open market.

For me the big reason to wait was that if for some strange reason my application gets declined on a personal policy, I am no longer eligible for the conversion without underwriting...  That to me is a big risk and I am reasonably well covered under the group plan. I am also only a year away from graduation.

To be more general, not all programs offers such a good conversion and there are certain risks.  However, not paying for a personal disability during residency definitely improves the cash flow situation as a resident when money is somewhat scarce.  Thus, it is worth looking into before going out and getting a personal policy.