Military resident and Disability/life insurance

[ashleyrose007]

I'm a new military intern (active duty) and was wondering if i should be buying disability insurance. I have been quoted a policy for around 3000/year for 5000 a month coverage. What do you all think? Does the military protect me enough and there is no need for disability insurance? Or should I be getting it because I can lock in up 10000 at that rate for once I have served my time in the military.

My second question is about life insurance. I have no dependents and was quoted around 500 dollars for 2 million dollars worth of life insurance. I was also told that I can "hide" money into a life insurance policy that acts somewhat like a roth IRA except you can withdraw the money whenever you want it without penalty unlike a roth. Has anyone heard of this? Do I need to be concerned about life insurance?

Thanks  in advance for any advice!

[jfoxcpacfp]

Re: your 2nd question -

1. Why do you need $2M of life insurance with no dependents?


2. $500/year? A month? Your insurance "friend" is not talking about term life, so I will presume the rate is per month. Please don't bite. Whole life is not a magic formula for a hocus-pocus-presto-chango Roth IRA.

I'll save the disability part of your question for the insurance experts.

[LBKCLU]

As an Active Duty Military Resident, there is only one individual disability carrier that I would recommend - Standard Insurance Company. MassMutual also has an offering for military physicians but it is very limited.

While you might be covered by a military pension if you are disabled or may potentially have a group LTD plan at your hospital, it makes sense to purchase an individual disability policy when you are young to lock into the lowest rates and to protect your ability to perform the duties of your medical specialty even if you could work in another occupation or medical specialty.

With no dependents, I don't see the need for life insurance. However, if you want and can afford it, term life insurance is not a bad idea.

There are many other things that you can do with your money and, based upon your situation, I would not recommend that you consider anything else.

There are several posts on the WCI blog about Whole Life insurance, including this one https://www.whitecoatinvestor.com/8-reasons-whole-life-insurance-is-not-like-a-roth-ira/ that you should read prior to making any decisions.

[DMFA]

Remember when factoring in life insurance, you get $400k of SGLI for $29/month in the military.  Who is this life insurance going to pay if you don't have a spouse or kids, though?

Whole life is usually only a good idea for very high earners, I think.  WCI generally recommends against mixing insurance and investments for residents.  I'd take that money and put it into Roth TSP; you can stuff it pretty well even as on O-3 without dependents with 1 year of service.  Also, I'm pretty sure you can withdraw principal from a Roth without penalty.

WCI was in the military himself.  He's got some really good military-specific posts, too.

[Scott at MD Financial Services]

Larry is correct, the insurance offerings for active duty military is very limited.  The reason for that is the potential for risk compared to civilian can spike so high (deployment) that the insurance companies can not actuarially account for that risk.

Not that this helps you but one of the things I recommend to clients is if they know they are going to become active duty at some point is to go ahead and get your policy then when active duty starts they will suspend the policy benefits and premiums while active duty.  By doing this one can essentially buy a policy, get it in place, then suspend while active and regardless of duration or any aliments incurred while active they can then automatically re-start the policy once they have been discharged....all at the same price, design and amount of coverage they had originally prior to active duty.

[ashleyrose007]

Hi Scott,

Are you saying that the disability insurance does not cover me while I'm active duty? Because the one he quoted me right now is supposed to but maybe that's not right?

Thanks!

[ashleyrose007]

Standard was the one I was quoted. Do you think its advisable to pay 3000 dollars for 5000 dollars/month worth of coverage?

Thanks!

[Scott at MD Financial Services]

The only way to know exactly what the right price is by running a quote.  If you want to PM me your dob, state, med specialty, gender, and any health issues I will let you know.

[Scott at MD Financial Services]

It really depends on when you bought it generally speaking if you bought it prior to active duty or call up orders then yes, please see an exert from the Standards guide on issuing of a new policy.

Per the Standard guidelines they will issue a policy for those in the reserves and medical residents or fellows who are not active duty or have call up orders even if they have pay-back obligations.  Military are considered government employees so they fall under their guide 9251REF.

[LBKCLU]

Does the Standard policy include any type of discount like the Preferred Producer Multi-Life Discount (PPMD)?

Yes, Standard's policy would cover you while you are Active Duty. Some other carriers require a suspension of the policy while on Active Duty which is what Scott mentioned in his previous post.

[DMFA]

Through four years of talking about money with fellow military docs, I don't know of anyone in the military that has disability insurance, if that's worth anything.  Although, I guess that doesn't necessarily mean that it's a bad idea or that no one does it, it just seems really weird that someone would give me disability insurance when I'm going to be working in a place where people are trying to blow my head off or knock my plane out of the sky.

Residents in a military program (or a civilian sponsored program) are considered active duty, and the start date is usually a few weeks before you actually start for orientation (mine was 11 June for a start date of 1 July), so unless you're civilian deferred (getting paid by your program and technically being on IRR), you're active duty.  What they quoted you re: civilian residents/fellows is consistent per 9251ref, max incl SSI $5000/mo.

I just read Standard Insurance's "The Protector Series(SM) Online Reference Product Guide", form 9251ref, as mentioned by Scott above.  Military Personnel are marked as "NO" on page 77 in the Occupation Classifications List (as are motivational speakers and fashion models).  I've included a screenshot from https://www.standard.com/di/forms/di/mkt/9251ref.pdf. I don't know if that means that they're not coverable; I'm just a guy who read a document, not an insurance professional.  Take the professional experts' opinions over mine.

[DMFA]

LBKCLU wrote:

Does the Standard policy include any type of discount like the Preferred Producer Multi-Life Discount (PPMD)?

Yes, Standard’s policy would cover you while you are Active Duty. Some other carriers require a suspension of the policy while on Active Duty which is what Scott mentioned in his previous post.

Click to expand...

Yes, according to p. 36, but only for the Protector Platinum plan...well, also for the Business Overhead plan, but military residents probably won't own any businesses for 30 hours a week.

[LBKCLU]

I have a fairly large number of clients that have Standard policies that were purchased during residency - even though they are considered Active Duty.

I was only asked about the PPMD as it provides a 10% discount  to make sure they were being quoted the lowest premium rate. It is definitely available as I have used it previously.