How much individual disability insurance benefit should a medical resident purchase?
Medical residents may purchase up to $5000/month benefit during their medical residency regardless of income and group disability benefits in force. Residents in their last 180 days of training may purchase up to $7500/month benefit.
When should you purchase the full amount of benefit? When should you consider a smaller policy?
If you are finishing your medical residency or fellowship, you may want to consider purchasing the full benefit amount. If you are concerned about paying the premiums, you could request the effective date of the policy to be up to 90 days from the application. For example, if you apply on April 1st, you could request the effective date of the policy to be July 1st. That is the date the benefits will be effective and that is the date when premiums are due.
Here are the advantages of purchasing the full benefit amount:
- Premiums are locked in at the current age and rate and guaranteed to age 65 or 67, depending on your benefit period.
- If you don’t yet have a contract or permanent job position, this will allow you to obtain a large policy without having to prove income.
- If discounts are available, you may be able to lock in the discounted rate by applying during residency.’
- Chances are as a medical resident you already have a group policy in force but it might have some limitations. If you have a large need for benefits (eg. you have a family, mortgage, student loan payments, etc…) you may need to insure the full amount.
Even if you are eligible for the full benefit, you may want to consider a smaller benefit while in training to reduce your monthly costs. Determine how much monthly income you would need (after taxes) to pay your fixed expenses. This will help you determine how much benefit you would need during residency.
Here are some considerations if you are NOT graduating and still have years until your training is complete:
- The minimum size disability policy is $1000/month benefit. If you start with a policy this small, make sure it has the ability to increase to the maximum level (current maximum level is $15-$17k/month benefit depending on the company) without further medical underwriting. Some companies only allow you up to $3000 of increase options with a base policy of $1000/month.
- If you are in a lucrative medical specialty such as surgery, dermatology or anesthesiology, consider purchasing a small policy from more than one company (example $1000/month benefit from 2 companies). This can pre approve you for an aggregate benefit of up to $25k/month. If you only carry one policy, you will be limited to up to $15,000/month with one company. As such, if your income will be greater than $350k, you may need more than one policy from multiple companies.
- The most important reason to purchase your policy during medical residency is to protect your medical insurability. If you are on a tight budget, you may not need to overinsure yourself at this time.
- Make sure you can obtain a policy with permanent discounted rates. Even if you start with a small policy, make sure these discounts will apply to any future increases when your residency is complete.
For more information about disability insurance for medical residents and to determine how much benefit to purchase, contact Set for Life Insurance today!