The biggest asset you have as a young physician is your ability to generate income. As you start your career you probably cannot self-insure. Plus add the fact you have high student loan balances, a disability at your age can be financially devastating.
Seriously, think about it. What are you going to do if you become disabled? Where are you going to get money from? How are you going to live?
Income When You Need It
As a young physician, the risks are high that if an unexpected event were to occur where you became disabled and unable to work it would surely cause you financial stress. A disability insurance policy is designed to provide you with income if an injury or illness prevents you from working.
Employer Disability Insurance
Although having Disability Insurance “DI” policy through your employer is a good thing, it will most likely not offer enough coverage. On top of that, the benefit will be taxable. Also, DI premiums through your employer can change annually and if you change employment it is not portable. Ideally, you’ll want to purchase your own to complement any existing policies you might have.
Features and Benefits
There are lots of differences between Disability Insurance policies. It's important you read the entire policy contract before committing. But generally speaking, you want to make sure the policy has the following benefits and features:
- Non-Cancellable: This feature prevents the insurance company from canceling or changing the policy as long as the premiums are paid on time.
- Elimination Period: A typical policy should include a 90-day elimination period (period of time when benefits are not yet payable). Consider an 180-elimination period if you think you can wait that long without causing too much financial hardship as the premiums will be a little lower.
- Benefit Period: This is the period of time your benefits will be paid. Consider policies that pay up to age 65 or longer.
- Own Occupation: The insurance company will pay benefits if you are unable to work in your medical specialty even if you can work elsewhere or decide to do something else.
- Future Increase Option: As your income increases this option will allow you to increase you DI benefit without additional medical screening.
- Cost of Living Adjustments: You benefits will increase throughout your disability claim.
- Partial Disability: This occurs when you are not fully disabled and because of this are not working full time due to injury or illness.
If you purchased “DI” during residency you’ll need to increase your disability benefit as your income has probably increased significantly. Hopefully, you purchased a policy with a Future Increase Option which allows you to increase you DI benefit without additional medical screening.
Physician Financial Advisor
I work exclusively with physicians, helping them avoid costly financial mistakes by establishing clear financial goals that lay the foundation for the accumulation of wealth. After analyzing every aspect of your financial life (investments, taxes, employee benefits, student loans, insurance, estate planning, debt, mortgages) I recommend all the necessary action steps needed to organize your finances and accomplish your goals.