Archive for March, 2010
Insurance Planning for Graduating Medical Residents Pursuing Locum Tenens Work
Tuesday, March 23rd, 2010
March 23, 2010
Congratulations! Graduation is around the corner and the next phase of your life is beginning. You spent years training, and invested substantial resources to acquire your profession. You now stand to reap the personal and financial benefits of your chosen field of medical practice. As part of your transition planning, it is important to ensure you have prepared your insurance benefits to account for your new circumstances.
As a medical resident, or fellow, your disability, life, and health insurance benefits are typically chosen, and paid for, by your residency program. However, most of these benefits terminate on your last day or residency. As a locum physician, your employer may not provide these essential benefits, and you will need to take responsibility for your own insurance coverage. A failure to review your insurance plan could cause a catastrophic financial loss to you, or your dependents, in the event of a serious injury or illness.
As a graduating medical resident or fellow pursuing locum tenens work, what should I consider at this stage when it comes to planning?
Health Insurance
When you finish your medical residency, your health insurance benefits will probably terminate the last day of the month. Most residency programs will allow you to continue your health insurance. However, this can be very expensive.
If you, or your dependents, have pre-existing conditions, you will need to consider continuing your residency health insurance as you may not be able to qualify for individual coverage. It is important to sign up for this coverage prior to your departure.
If you are healthy and can qualify for individual benefits, you ought to consider applying for coverage prior to your graduation date. It may save you a significant amount on your premiums. Depending on the length of your locum work, you can apply for a short term, major medical policy (up to 6-12 months), or an individual policy where the rates are guaranteed for up to a year and the coverage is more comprehensive.
Health insurance rates, policies and provisions vary from state to state.
If you have dependents, then you need to consider what would happen to them financially if you die prematurely. Life insurance is strongly recommended for you. No one likes to dwell on the worst, but avoiding responsibility for those you love, and who depend on you for their economic well being is unimaginable. Don’t procrastinate about this issue!
However, if you are single, and have no dependents (husband, wife, significant other, children, parents, siblings) that rely on you for financial support then life insurance may be unnecessary at this stage of your life.
As a physician, you are more aware than most people in the general public of the tragedies that can unfortunately occur since you deal with the sickness, and injuries, of your patients daily. Few of your patients ever expected their medical condition to occur to them, don’t be naïve and assume that it couldn’t possibly happen to you.
New physicians spend a long period of time training and, most likely, a large amount on educational expenses. Further, you deferred significant earnings until this point in time in the expectation that your future earnings in medicine would recoup your significant investment. If you suffer a premature death, then that expectation will never be realized. You will be gone, but your family will lose the economic value that you, through your earnings in medical practice, would have brought to them. No one can replace you, but life insurance can shift the risk of economic loss from your loved ones to an insurance company.
The good news is that life insurance rates have actually come down over the last decade as life expectancy has improved. The decreased rate of mortality experience is translated to you in the form of lower premiums for life insurance.
There are two general types of life insurance; permanent and term, but a discussion of all the varieties is beyond the scope of this article. Permanent life insurance (such as whole life, and universal life) covers you for the duration of your life, and if properly implemented, will be there to pay your beneficiaries a death benefit whether you die in the near future, or decades from now. Permanent life insurance, depending on the type, may also develop cash value at guaranteed rates which can be used on a tax favored basis to supplement income in retirement, pay state and federal estate taxes upon your death, or provide cash for your liquidity needs in the future. Permanent insurance is also generally the most expensive since it will definitely pay a claim. Term insurance provides a set death benefit for a specific term of coverage, generally, 10, 15, 20, or 30 years. Term insurance does not accumulate cash value, but it has significantly less expensive premiums. If you have a large near term insurance need (typically with young children), and are just starting out, then term can be an effective form of coverage.
The first step, regardless of the type of life insurance you are considering, is to determine the appropriate death benefit. This is absolutely vital, and also the most difficult and individualized part of life insurance planning. If you have inadequate life insurance coverage, then you insurance plans will not be realized. You should always plan as if your death was going to occur now. Why? Because you don’t know when your death will occur (barring the prescience of a Cassandra) and the failure to plan for the worst contingency will leave your plan underfunded, and thus unable to achieve your goals. An individualized insurance plan should analyze your human life value, accounting for your liabilities (such as a home mortgage and other debt that remains after you’ve died- most public student loans die with you, but private ones may not!), capitalize your future earnings through your anticipated age of retirement, estimate the probable growth of your future earnings, account for the effects of inflation, and finally it should arrive at a present value using discount rates. Other factors may also be appropriate to include in the analysis, such as receipt of pension, or government benefits.
Obviously, no person or computer simulation will be able to precisely calculate all of these future unknown variables, but a plan should provide adequate flexibility to allow for variances. General rules of thumb, such as having a life insurance death benefit equal to a certain multiple of your earnings, such as 10-20 times earnings, are imprecise. But, in the absence of individualized planning are better than nothing at all!
Finally, it pays to shop around for life insurance! It can be difficult to compare between the type of products, and companies, in permanent life insurance since there are many variables to consider. However term life insurance is easier to comparison shop. Therefore, be aware of the premiums and what you are getting in return. Don’t overextend yourself on premium commitments on permanent policies, since you don’t know what your future holds. Also, especially in light of recent developments in the financial world, investigate the financial ratings of the life insurers you are considering. And remember, life insurance should primarily be about the death benefit. Don’t buy a life insurance product that inadequately insures your family with death benefit.
Right now, your biggest asset is your ability to work and produce an income. Statistically speaking, you have approximately a 1 in 3 chance of becoming sick or injured and not being able to work at some time between ages 30 and 65. Therefore it is important to protect your current and future income to be able to sustain your lifestyle and pay back your student loans.
Most residency programs offer a group disability policy that covers you during residency if you become totally disabled. Some of these programs allow you to convert the policy to an individual policy. However, it is important to shop around and make sure this convertible policy is the most suitable for your situation compared to purchasing a policy on your own.
Reasons to purchase a policy before graduation:
- No financial underwriting necessary. As a resident, income verification is not necessary. As a locum physician, it may be difficult to qualify financially without a guaranteed salary.
- Discounts. Many resident programs have discount available. These may be set up if 3 or more residents purchase a policy while in residency. Discounts can save you from 10-40%.
- Benefits available. As a resident, you are eligible to purchase up to $6000/monthy benefit without verification of income. If you apply as a locum, you will need to verify consistent income and may not be eligible for the same level of benefit.
What to look for when shopping for disability insurance.
- Work with a broker instead of an agent. An agent works for one insurance company and will only show you one company which may or may not be the best fit for your situation. A broker represents multiple companies and will work on your behalf and find the best policy for your needs.
- Specialty specific definition of disability. Make sure the policy covers you if you are too sick or injured to work in your medical specialty.
- Increase options. These allow you to purchase benefit in the future without further medical underwriting.
- Non cancelable, guaranteed renewable. This clause means your policy can never be changed, modified and the premiums are guaranteed typically to age 65.
Individual policies are portable. You can take them with you throughout your career even when you settle down with a full time position.
Taking care of your health, life and disability insurance needs prior to graduation will provide you with the protection and peace of mind needed to pursue the next, most exciting phase of your career. Best of luck!
When Is The Best Time For Medical Residents to Purchase Disability Insurance?
Monday, March 15th, 2010
Medical residency can be a very trying time in your career. There’s lack of sleep, lack of money – and the accumulation of student loans. It may feel overwhelming to even think about your financial future when you are trying to get through your day-to-day responsibilities. Yet your world may be turned upside down if you became too sick or injured to work. Statistically speaking, you have approximately a one in three chance of losing your income to a sickness or injury between the ages of 30 and 65.
Individual disability insurance can help offset this risk. But when is it ideal to start this process? The answer is the sooner the better.
Individual disability insurance requires medical underwriting asking you about your medical history. Therefore the ideal time to purchase a policy is when you are healthy and can qualify.
- Purchase a minimum size policy with the maximum amount of increase options available. This will reduce your current cost but will lay the foundation to purchase more in the future without further underwriting. The maximum size policy on an individual policy is $15,000/month.
- If you are considering a fellowship or a subspecialty, purchase your policy earlier rather than later. General specialties such as internal medicine and pediatrics will cost less than surgical subspecialties. However, the policy premiums are based on your specialty at the time of your application. This can provide you with significant savings.
- Don’t be enamored by policies that don’t require underwriting. These policies may have limitations and/or exclusions since they can’t underwrite. Furthermore, they may limit the amount you can increase your policy in the future which will require future underwriting at a later time.
What to look for in a disability policy:
When purchasing a disability insurance policy during residency or fellowship, it is important to look for the following:
- Specialty Specific definition of disability. It is important that your policy cover you in your medical specialty without restrictions if you can work in another medical specialty or occupation. This type of definition comes in sever different names: Own occupation, transitional occupation, regular occupation. Each company has slightly different names. It is important to read this part carefully. With a specialty specific definition, it will cover you in whatever specialty you are practicing in just prior to your claim. For instance, if you purchase a policy while training in internal medicine and go on to gastroenterology and later become disabled, it would cover you if you couldn’t practice as a gastroenterologist.
- Non cancelable, guaranteed renewable. With this provision, as long as you pay the premiums, the company can never cancel your policy or raise your premiums.
- Ability to increase the policy in the future.. It is important that your policy has the ability to increase in the future as your income increases without having to go through future medical underwriting. If your health or situation changes, you are safe and able to increase your policy.
- Residual Rider. This allows you to receive a partial benefit if you have a 15-20% (depending on the company) loss of earnings or more.
- Cost of Living COLA Rider. This keeps your benefits up with inflation if you are on claim for more than one year.
- Company Has High 3rd Party Ratings. It is important to check the company’s 3rd party ratings to ensure quality. http://www.setforlifeinsurance.com/disability-insurance/companies. Ideally, look for a policy with AM Best Ratings of A+ or better.
Discount rates for medical residents
Set for Life Insurance has discounts set up at numerous resident programs and hospitals throughout the country. These discounts can save you from 10-40% on your premium, depending on your situation.
Please contact us to find out if a discounted program is already available to you. If not, we can help you put together a discount for your program.
About group disability benefits
Often, your residency program will already have a group policy in force. These typically offer a $2500/month benefit. Because group policies can’t discriminate regarding who they offer coverage to, they often lack the important provisions of a personal policy.
- Your group policy may require you to be totally disabled and not able to work in any capacity before you can receive any benefit.
- The benefit may be taxable income to you if the employer is paying the premiums.
Affording your premiums
If you are concerned about paying for your disability insurance during residency, there are several things we can do to reduce your premium as much as possible.
- Some companies allow a “graded” or increasing premium. This is initially less expensive and your premium will increase each year. If you wish to lock it in at a later time, you may do so on any policy anniversary.
- You may choose to simply supplement what your group policy already offers and load up your policy with increase options. This will allow you to keep your premium low during residency and still reserve the right to increase it in the future without any medical underwriting. The minimum size policy is $1000/month benefit. If you decide to purchase a $1000/month benefit policy, be sure there are enough increase options available to you to purchase more in the future without undergoing medical underwriting.
Options for residents finishing training:
If you are in your last year of training, you have a few different options:
1. You can take the special resident offer amount of $4000 a month regardless of current income or group benefits.
2. If you are graduating and already have an employment agreement signed for your first year income outside of residency, we can use that agreement as income verification to issue you a higher amount of coverage now.
3. First year physicians can automatically purchase $5000-$7000/month benefit (depending on specialty and company) regardless of your new income and without evidence of a contract.
Benefits:
First-Year physician: $5000-$7000/month coverage
Fellows and residents in their third year or greater: Up to $4,000/month over and above any group coverage
Residents: eligible for up to $4,000/month benefit (regardless of any group benefits)
Considering disability insurance? Consider the facts.
Your most valuable asset is your ability to earn an income. For medical residents like yourself, future income is the payoff for your years of training, hard work and accumulated debt.
Physicians’ jobs are very physically demanding. Consequently, they are at a much higher risk than other professionals to become disabled in some capacity.
Your student loans do not go away if you become disabled.
There is no better time for a physician to consider purchasing a personal disability policy than during residency. Since policies are based on your situation at the time of application, you have the opportunity to put yourself in the best light and lock in a policy based on your current age, health, and many other benefits.
You will never be younger than you are now so rates will be less expensive.
Qualifying for disability insurance can be difficult, so it is important to apply before you have any medical problems or conditions. Once you have the policy, insurance companies can’t take it away from you as long as you pay your premiums.
Insurance companies realize that medical residents have great earning potential. Therefore they allow you to purchase over and above what another professional would normally qualify for.
If you are considering going on to do a fellowship or a riskier specialty, if may make sense to purchase your policy early since you may be in a better occupational class, giving you better rates. Once you have your policy at those rates, you will still be covered in your new specialty, but possibly at a reduced rate.
By making a responsible decision early on to purchase a policy, you build the platform to have your policy follow you for your career.
The Truth About Life and Disability Insurance Quoting Websites
Monday, March 15th, 2010
Choosing the right websites to research and purchase life and disability insurance is one of the biggest challenges facing consumers today. There are hundreds to choose from. Most of them state they have the most competitive rates available and advertise you won’t have to work with a salesperson.
However, you may not be aware that your privacy may be compromised. Some websites sell your information to multiple agents. Other websites may not offer the full line of life insurance products available. Most major insurance companies try to direct you to their products only without a comparison of other company’s products.
Therefore, is important to choose your insurance website carefully.
- Look for a company where you will work with their brokers directly and won’t sell your information.
- Look for a company that works as independent brokers that can guide you to find the best products for your needs.
If you find a website with these qualities, you will not need to shop further!
Here is a brief description of the different types of websites:
- Life Insurance Lead Generation Website
These lead generation websites are owned and operated by people who are not licensed life insurance agents or brokers. These websites sell your information to multiple insurance agents and even some marketing websites. They try to get you to complete their online life insurance “quote request page” by promising spectacular discounts and offering cheaper and more comprehensive life insurance coverage. Once you complete their quote request form they sell your information to multiple insurance agents in your area. Subsequently you can expect to receive a series of phone calls from these local agents all competing for the sale.
2. Insurance Company Websites
The websites of major insurance companies will collect your information and send it to their local agents. The majority of these agents are captive. This means they are employees of this particular insurance company. This typically does not result in the agent shopping around for the best fit for the client. Typically, agents sell one company and do not shop around. This may result in a non-competitive policy for your situation. The product may or may not be the most suitable for your needs.
3. Term Life Only Website
These websites are properly licensed to sell life insurance and most handle leads by themselves and do not sell your information. However, depending on your situation, you may or may not be a candidate for term insurance. It is important to work with a professional to determine if term, permanent or some combination is best to fit your needs.
Set for Life Insurance is unique and can guide you to find the best fit for your needs.
- You will work directly with one of our experienced professionals. Our brokers all have at least a Master’s level of education as well as professional designations.
- All of the information you provide us is kept strictly confidential. Your information is never sold or distributed elsewhere. Your information is safe and secure in our hands.
- We work as independent brokers. We work on your behalf to find the most suitable product to fit your needs and budget.
For more information, contact us today at 888-553-3559.
Being a Locum Physician Has Its Benefits; Life, Long Term Care and Disability Insurance Benefits that is.
Monday, March 8th, 2010
Being a locum professional has its benefits. You have ultimate flexibility in your schedule. You have the ability to shape your lifestyle and to try new practice areas in different areas of the country. Perhaps you are in a career transition looking at your options before you are ready to commit. Or maybe you decided you weren’t ready to retire. As a locum, you have the opportunity to reap a lot of benefits from your work.
Along with the benefits with being a locum professional comes an opportunity to have the flexibility of your own benefits-insurance benefits that is. As a locum professional, you may not be eligible for the employer sponsored insurance benefits such as health insurance, life insurance, disability insurance and in some instances long term care insurance. The good news is that obtaining your own insurance has benefits to you as well. Having individual insurance benefits provides you with more control, more flexibility, more comprehensive coverage and more options available to modify your benefits in the future.
Life Insurance: Life insurance pays a sum of money to your beneficiaries at your death. It is intended to replace your human life value, the economic value your survivors were counting on while you are alive. If you were previously working full time, you may have had group life insurance, typically a multiple of your salary. Most group life insurance plans are not portable and cannot come with you if you leave your full time employer.
Individual life insurance can be purchased regardless if you are working full time, part time or are a locum professional. The advantage of carrying your own life insurance is the portability and control you have over your policy throughout your life, without relying on your employment status.
Life insurance rates have come down substantially in the last 3-5 years. Depending on your age, gender and health status, your individual life insurance rates may in fact be less expensive than a group insurance policy.
The risk relying on your employer plan and not carrying your own life insurance is if you experience a change in health or lifestyle. Applying for life insurance entails medical underwriting asking about your medical history and lifestyle. If during your locum career you experience an adverse change in health or decide to take up a risky avocation such as skydiving, you may find yourself paying a lot more in premiums for life insurance when it comes time to apply.
Having your own individual life insurance policy provides you with a peace of mind and allows you the portability to take your policy with you no matter where you work. It is recommended that you would need at least 12-14 times your annual income in death benefit to replace your economic value.
Disability Insurance. Disability insurance is intended to replace your monthly earned income if you become too sick or injured to work. Statistically, you have approximately a 33% chance of becoming disabled between ages 30 and 65. If you rely on your income to pay your bills and support your lifestyle, it is imperative your income is properly protected.
The solution to avoid these risks is carrying your own individual disability insurance. The cost varies based on your medical specialty, gender, age and geographic location. The benefit of carrying your own policy is the portability to take the policy with you and the ability to adjust it as your situation changes.
When purchasing individual disability insurance, make sure your policy has a definition of disability that covers you if you can’t work in your medical specialty. For instance, if you work in a surgical specialty, the policy would pay you a monthly benefit if you couldn’t work in that specialty even if you retrained and worked in another medical specialty or occupation. If you are in the early stages of your career, it is important that your policy has the ability to increase in the future as your income increases. Disability insurance premiums vary based on age, gender, medical specialty and geographical area.
Long Term Care Insurance. Long term care insurance is designed to pay a daily benefit if you are unable to satisfy a certain number of activities of daily living such as dressing, transferring, and cognitive impairment. These services are often not covered by Medicare and can wipe out retirement savings if not properly insured. Some employers offer long term care as an employee benefit.
Similar to disability insurance and life insurance, the group policy may not travel with you when/if you leave your job or retire. The ideal time to purchase a long term care policy is while you are relatively young and healthy. Policies become more expensive as you age. Applying for a policy requires medical underwriting looking at past medical history. Rates can be locked in for life or paid up after a set period of time. Discounts may be available if you and your wife both purchase a policy simultaneously.
Being a locum professional certainly has its benefits. It provides you new career opportunities and a lot of flexibility. Taking control over your own benefits can provide you with the peace of mind that your hard work and dreams will be fulfilled and protected.