What do I need to know about disability insurance?

My residents often ask me, “what do I need to know about disability insurance?” Given that a large part of this website is preventing students and residents from making mistakes, I have an opinion on this. In fact, I have a very strong opinion after getting hosed by an agent from a very prominent insurance company.

More on that below.

What do I need to know about disability insurance?

If you want the cliff notes to answer the question – “what do I need to know about disability insurance?” – here they are:

  1. Guaranteed insurance coverage offered in training (residency/fellowship) is only “Guaranteed” if you have NOT ever been denied by another disability insurance carrier.
  2. If you have medical problems that you are seeking documented treatment for, it may be best to wait for residency to get the guaranteed policy.
  3. Once you get the guaranteed policy, apply for another one.  If you are denied, you get to keep the guarantee.
  4. If you don’t have any medical problems at all, get disability insurance whenever it is convenient for you, but at minimum after you have your first kid!  Disability rarely gives you a warning shot across the bow before it sinks the ship!
  5. Two Facts: The Insurance Person gets paid commission to sell you a product.  The best person to keep your best interests first is YOU.
  6. Personal Policy + Group Policy = Monthly Income.  Disability insurance is stackable and the goal is to get to your monthly income.

Thinking Man

Thinking Man on Disability Insurance

The adjacent statue is a “thinking man” statue.  I bought it on a medical missions trip to Ghana.  At many moments in life, I’ve found myself in this exact situation. Hand in my hair.  Elbow at the knee.  Thinking.  (Cogito Ergo Sum, anyone?)

One of my “Thinking Man” moments includes when I was a fourth year medical student with a newborn.  This was the moment it dawned on me that it was not just my spouse and me.  We were responsible for someone else physically, spiritually, emotionally, and even financially!

I had a friend in medical school class who sold insurance products through Northwestern Mutual (a very well respected, “top-notch” insurance company. Seriously, it is.).

I told him I needed life insurance.

He said sure.  He told me I needed disability insurance.

I told him “no” (three times in fact).

He asked if I was healthy.  To which, I mentioned a couple of medical problems. The most important one being that I have an essential tremor – and I take propranolol.

This didn’t phase his attempt to get a commission on my behalf. He said,  “What could it hurt to try….”

It Hurt A Lot

Apparently, it could hurt a lot!

Come to find out, anesthesiology is one of the most difficult fields in medicine to obtain disability insurance (their are tiers for this, apparently).

That coupled with my essential tremor led me to being outright DENIED by the aforementioned company.  At the time, I thought, no big deal!  I’ll just get it later in life.

Fast forward to residency where I meet the next “insurance guy.”  I tell him I’ve had difficulties.  “No problem,” he says.  He has a guaranteed issue disability insurance product just for me!  Well, that is unless you’ve been denied by an insurance company before.

That was the day I found out that guaranteed policies in training are only guaranteed if you have NOT been denied before!  

So, lesson learned the hard way:  Don’t apply before residency for disability insurance if you have medical problems that could potentially disable you from working!

Ouch.  So, now I am stuck with just life insurance (I was healthy enough for that, at least!).  Two kids later (that’s a total of three, if you’ve been keeping up), and I still do not have any disability insurance outside of my employer.

Fortunately, this provides a 60% coverage from my base-salary.  After tax, that’s about $10,000 per month.  Not bad, but certainly not good enough to cover all of my expenses when you include loans.

My real disability insurance plan (If you’re curious, yes I applied again with a different company = Denied x 2) is to now live within our means and to make sure our monthly necessary spending does not go past $10,000 per month.

In the end, this helps me practice a good practice.  I get to keep living like a resident for a few years after residency.  This will keep costs down, allow me to hammer away at my loans (more to come on this later), and achieve wealth faster.  It also helps hedge against the chances of me becoming disabled with monthly payments I could no longer afford.

What do I need to know about disability insurance?

  1. If you have other mouths to feed AND you are healthy, then get disability and life insurance immediately!  People are depending on you whether you are dead or alive.
  2. If you are not completely healthy, and receive some treatment for medical problems, then it may be prudent to wait for residency to get the guaranteed policy. Once in hand, apply for the not-so-guaranteed policy.  Nothing is lost at this point if you get denied.
  3. I got life insurance through Northwestern mutual, and even recently increased its value after finishing training.  Apparently your ability to get life and disability insurance vary depending on lots of things, including which insurance product you are wanting.

If you want to learn more about disability insurance, you can check out some other posts on the topic.  And this one for residents and fellows.

So, what do you think?  Have you learned a similar lesson?  Do you have mouths to feed and not yet have disability insurance?

TPP

2 thoughts on “What do I need to know about disability insurance?

  1. My wife has disability insurance, and we both have life insurance. If she becomes disabled, we’d really miss her income. If I become disabled, I guess we’d miss the $0 I’ve made so far on my blog…

    Thanks for sharing your experience on the guaranteed policy, that’s something of which I was not aware. Though it’s in our rear view mirror now anyway, might help someone else.

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