Disability Insurance for Medical Residents
Graduating soon? Apply prior to graduation to get the best rates!
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.
Set for Life Insurance has specialized in helping medical students, residents and physicians for over a decade. Based on our experience, we understand your unique situation, needs and complexities and can guide you to the most beneficial disability insurance policy.
Why Do I Need Disability Insurance?
Physicians’ jobs are very physically demanding. Consequently, they are at a much higher risk than other professionals to become disabled in some capacity.
Plus, your most valuable asset is your ability to earn an income. Your student loans do not go away if you become disabled, and for medical residents like yourself, future income is the payoff for your years of training, hard work and accumulated debt.
Often, your residency program will already have a group policy in force, typically around a $2,500/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.
Why Can’t I Wait to Get Disability Insurance?
The best time to purchase any insurance is before the claim occurs. If you smell smoke, it is too late to purchase fire insurance. The same holds true for disability insurance. Before you strain your back or are diagnosed with an illness, get your disability insurance in place. Not only will your income be protected, but so will your insurability, your ability to purchase more in the future as your income increases.
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.
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.
Qualifying for medical residency 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.
If you are considering going on to do a fellowship or a riskier specialty (example surgery, anesthesiology or emergency medicine), it 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.
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.
By making a responsible decision early on to purchase a policy, you build the platform to have your policy follow you for your career.
Get Help Paying Back Your Student Loans
Did you know that most student loans must be repaid in the event you become disabled?
According to the American Medical Association, medical student loans are on the rise. Here are some sobering medical student debt statistics:
- $156,456 is the average educational debt of the class of 2009
- 79 percent of graduates have debt of at least $100,000.
- 58 precent of graduates have debt of at least $150,000.
- 87 percent of graduating medical students carry outstanding loans.
Source: Association of American Medical Colleges (AAMC) 2009 Graduation Questionnaire
These extra payments can be burdensome to pay back as you start to earn an income. What would happen to you if you became sick or injured and couldn’t work? How would you repay these loans? Disability income insurance policies are now available to cover student loans. This can be a much more cost effective way to insure that extra $1-2000/month you are paying for your loans.
Why has medical education debt increased?
Medical education debt is driven by rising tuition. AAMC data show that median private medical school tuition and fees increased by 50 percent (in real dollars) in the 20 years between 1984 and 2004. Median public medical school tuition and fees increased by 133 percent over the same time period. Other recent 20-year periods show similar trends.
Tuition is just one source of increasing debt burdens. Other causes include interest accrued on loans over time, additional education debt from undergraduate education, and increasing numbers of “non-traditional” students who have children to support.
How does it work?
A loan policy works to protect the duration of the loan. For example, if you have $100,000 of student loans and are expected to be paid off in 10 years, the policy would pay the monthly benefit (debt payment amount) to pay off the loan. If you became disabled in the third year, the policy would pay off the remaining 7 years.
How much does it cost?
To insure a $2000/month benefit, 10 year total disability policy for a 30 year old female surgeon, the premium would be $67/month. To insure $2000/month to cover a 10 year loan, the premium would be $28/month.
Keep in mind the first policy would cover for 10 years regardless of when the disability occurred whereas the latter would only cover the duration of the policy. However, it significantly reduces the premium needed to cover the monthly loan repayment expense.
For more information on insuring your student loan payments, please contact the Set for Life Insurance office today.
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.
- Future Increase Options
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.
Set for Life Insurance has discounts set up at numerous medical resident programs and hospitals throughout the country. These discounts can save you from 15-55% on your premium, depending on your gender and medical specialty. Typically the discounts are approximately 15% for men (men’s rates are usually 40% less than women’s rates) and 55% for women. Once the discounts are on the policy, they are permanent and apply to all future increases.
Disability Insurance Options for Medical Residents Finishing Training
If you are in your last year of training, you have a few different options:
- You can take the special resident amount of $1,000 (minimum) to $5,000 a month regardless of current income or group benefits.
- Residents in their last 180 days of residency may purchase up to $7,500/month regardless of income or group benefits in force. No financial underwriting is necessary.
- 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.
- First-year attending physicians can automatically purchase up to $7,500/month benefit (depending on specialty and company) regardless of your new income and without evidence of a contract. To qualify for more benefit, income documentation is necessary.
If you choose to take a smaller size policy, make sure you have the ability to increase the policy as much as possible in the future without further medical underwriting. Ideally up to $15,000/month.
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 $1,000/month benefit. If you decide to purchase a $1,000/month benefit policy, be sure there are enough increase options available to you to purchase more in the future without undergoing medical underwriting.