Disability Insurance: The Cost Of Waiting

By Jimmy Turner, MD
The Physician Philosopher

Editor’s Note from Jimmy: This article was written by Larry Keller at Physician Financial Services.  Larry was the first sponsor on The Physician Philosopher and remains one to this day for a good reason.  I hope you enjoy this post about weighing the costs of waiting to get disability insurance at the end of (or after) training.  It is a common question that I get about physician disability insurance.  

Occasionally, a prospective client will inquire about purchasing disability insurance only to decide to wait to purchase their policy until after they complete their training. I believe the rationale behind this is that once they graduate, they feel they have “made it” and have a career and income worth protecting. 

You Have Already Made It!

The 2016 New York City Marathon’s initial count was 51,388 finishers, out of 51,995 people who started—a 98.8 percent completion rate. 

According to the National Resident Matching Program, 96.2 percent of medical school graduates were matched with a residency program in 2018, the most successful year on record. 

Doesn’t this sound like getting to the starting gate in and of itself puts you in the position of likely finishing?

An Arrival Fallacy?

After years of grueling training, sleepless nights, and a mountain of student loan debt, you made it, you are now an Attending Physician. You have arrived and can see the light at the end of the tunnel which includes a large paycheck. Life couldn’t be better!

Then six months later, to your surprise, you are no happier than when you were as a struggling Resident or Fellow. 

The big house, the nice cars, the bigger paycheck, they apparently are not going to be great sustainers of long-term satisfaction. 

Unfortunately, it’s at this point that you have officially experienced what most people experience, an arrival fallacy. Dr. Tal Ben-Shahar coined this term and says an “Arrival fallacy is the illusion that once we make it and once we attain our goal or reach our destination, we will reach lasting happiness.” 

Why Purchase Disability Insurance Early In Your Career?

It would seem to make sense that a person who buys disability insurance at an older age would, in the long run, pay fewer premium dollars over their lifetime when compared to an individual who purchased the same policy at a much younger age.  Does this make sense? 

Most people don’t realize the cost of purchasing disability insurance is increasing when purchasing it at older ages and, at the same time, the amount of potential benefits is declining.

Let’s look at the rates for a 26 year old male Plastic Surgery Resident in New York that purchases a policy from Berkshire Life Insurance Company of America (a Guardian Company) with a monthly benefit of $5,000, payable after 90 days, to age 65 with an Enhanced Partial Disability Benefit, a 3% Cost Of Living Adjustment (COLA) Rider and a $15,000 Future Increase Option (FIO) Rider. The annual premium would be $2,158.50. The same policy purchased at age 36 would be $3,177.61 or approximately $1,019.11 per year more.

Assuming this insured kept his policy to age of 65, he would pay a cumulative premium of $84,181.50 over 39 years for a potential cumulative benefit of $4,319,054. However, if he waited until age 36 to purchase the same policy, he would pay a cumulative premium of $92,150.69 over 29 years for a potential a cumulative benefit of only $2,698,131. 

In this example, by waiting, our Plastic Surgeon would spend more money over his career for a significantly lower potential cumulative benefit. Therefore, if this client knows these facts, why would he not want to be insured during the years that he is in training?  

Why would he want to take the risk that his health could change and that he might not qualify to purchase the coverage that is available to him today while he is still in good health?  

What’s the “Break Even” Point?

While most potential disability insurance purchasers never see themselves as being disabled or that purchasing coverage is “too expensive”, is this really the case? From the chart below, we can see that if the above Plastic Surgeon paid his premiums for 25 years, it would take a disability lasting just under one year to return all the premiums he had paid, not including any “time value of money”.

Cost vs. Benefits

Years of Premium Paid Months of Benefits Received to Break Even
2 Years 0 Months 27 Days
5 Years 2 Months 7 Days
10 Years 4 Months 14 Days
20 Years 8 Months 28 Days
25 Years 11 Months 7 Days

* 26 year old Plastic Surgery Resident. Monthly Benefit $5,000. Monthly Premium $185.27 (Guard-O-Matic premium for Provider Choice (181D NY) for male age 35, class 3M, 90 day Elimination Period, to age 65 Benefit Period with Enhanced Partial, 3% COLA Rider, $15,000 FIO Rider, Level Premium, Select Rate with a 10% Student/Resident Discount and a 10% Preferred Occupation Discount. 

Start Before You’re Ready, Start by Starting, Start Now!

You have spent more time preparing to earn income and, as a result, you have less time to accumulate wealth. You might love what you do, but you are likely working because you need to generate an income. You need to protect that income and one of the most effective ways to do that is to purchase disability insurance. 

If the time and money spent on medical training was viewed as an investment, the return on that investment would be the future income generated from your ability to practice medicine. 

So, what would happen if that ability was compromised due to an accident or illness?  

Where would the money come from and how long could you meet your financial obligations without a paycheck? Having a properly structured disability income insurance policy will make sure that you have the money that you need, in the event that you are too sick or injured to work.

Purchasing adequate insurance protection is a fundamental component of a physician’s financial plan. The purpose of insurance is to protect against risks that would be financially devastating to you and/or your family. Here, the risks of many individuals and business entities are transferred to an insurance company or other large group in return for a premium.

When it comes to insurance, most physicians don’t pay much attention to details. 

They are more concerned about saving money in income taxes, investing in the stock market or looking for new opportunities to increase their income beyond the practice of medicine. Unfortunately, this is equivalent to putting the roof on a house before its foundation has been laid.

Your Health Is Your Wealth

While I hate to sound too much like an Insurance Agent, sometimes we must go back to the basics. 

What if I told you that you could purchase a very small policy and after you are approved, you could potentially reach up to $20,000 month, regardless of your health, as your income rises?

Currently, Standard Insurance Company1 will allow Residents/Fellows to purchase a policy with a monthly benefit as low as $1,000 month. 

This policy for a 30 year old Internal Medicine Resident in New York, payable after 90 days, to age 65 with an Enhanced Residual Disability Rider, a 3% Indexed Cost Of Living Adjustment (COLA) Rider, an Automatic Increase Benefit (AIB) Rider and a Benefit Increase Rider (BIR) would cost $23.73 month for a male or $34.71 for a female with a 24 month limitation for claims related to mental/nervous and/or substance abuse disorders. 

The same policy for a General Surgery Resident would be $25.12 month for a male or $42.10 for a female with a 24 month limitation for claims related to mental/nervous and/or substance abuse disorders. This includes a 15% Resident/Fellow Discount. 

What is the Benefit Increase Rider?

The Benefit Increase Rider (BIR) is a no cost rider. Since this is a no cost option, the insurance company requires that you “check-in” with them every three years and complete an application to increase your coverage. 

If you do not qualify for additional coverage, after the application is reviewed, you do not need to do anything else, and your increase option will be preserved for future use. However, if you do qualify for additional coverage, you must purchase at least 50% of the offered amount or the rider will be removed from your policy permanently. The same is true if you do not apply every three years. 

However, Standard will waive this requirement for Medical Residents and Fellows if they are still in training in any graduate medical education program. To waive these requirements, the policyowner or agent may email The Standard to state that the policyowner is still in residency or fellowship, including their expected graduation date and applicable policy number.

This strategy allows you to lock into the fact you are in good health today, as well as, allows you to increase your coverage substantially in the future. 

While purchasing this limited amount of coverage is not my recommendation, it is a great way for those that genuinely cannot afford to pay a lot in premium or for a “non believer” (one that truly thinks that their health is not going to change or does not think they need disability insurance but are willing to take a “leap of faith” using what I have deemed the “Lease with the Option to Buy” strategy). 

What to Look for in an Individual Disability Insurance Policy

You should make sure that your policy or policies contain a true “Own-Occupation” definition of total disability. A policy with this definition of total disability makes it possible for you to continue working and earn unlimited income, so long as your disability renders you unable to perform the “material and substantial” duties of your occupation. 

Currently, there are only six companies that currently offer this definition of Total Disability to physicians including Berkshire Life (a Guardian Company), Standard Insurance Company, Principal, Ameritas, MassMutual and Ohio National. The availability of this definition may also vary based upon state of residence and/or medical specialty.

Additionally, the policy should include a Residual/Partial Disability Benefit, a Cost Of Living Adjustment (COLA) Rider and the ability to increase your coverage, regardless of your health, as your income rises. 


As a Resident/Fellow you have the greatest opportunity to purchase your coverage with discounts, which can range from 10%-25%, depending upon the specific insurance company. 

These discounts are available from 90-180 days after you complete your training. In most cases, any additional coverage purchased using an increase option will also be discounted. Additionally, many of the discounts available to Residents/Fellows may not be available to you as an Attending Physician.  

All Agents are Not Created Equal

There is no shortage of insurance agents and/or financial advisors that work with or want to work with physicians. 

Unlike medicine, which has a standardized path that physicians must take to gain the education, training, and experience requirements necessary to obtain board certification, the insurance and financial services industry does not. 

Since the industry is heavily regulated, you will not be paying anything more by purchasing your policy form an “experienced” insurance agent than you would be by purchasing your policy from a newly licensed or “inexperienced” insurance agent or broker.


Financial Freedom and burnout are intrinsically linked. 

Whether you are generating income practicing medicine or receiving benefits from your disability policy, either may allow you to maintain your lifestyle and/or reach your financial goals. Don’t take the purchase of disability insurance lightly – your entire financial future may one day depend on it.

Lawrence B. Keller, CLU, ChFC, CFP® is the founder of Physician Financial Services, a New York- based firm specializing in income protection and wealth accumulation strategies for physicians.  He can be reached at (516) 677-6211 or by email to [email protected] with comments or questions.

These are the personal views of the author and may not represent the views and opinions of The Guardian Life Insurance Company of America or its subsidiaries or affiliates thereof.  Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Therefore, the information should be relied upon only when coordinated with individual professional advice.  

Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of The Guardian Life Insurance Company of America (Guardian), New York, NY. Product provisions and availability may vary by state. Optional riders are available for an additional premium.  Some policy benefits and features are not available to all occupations. 

1 Certain product limitations apply. Optional riders may be available for an additional premium. Some policy benefits and features are not available to all occupations. Talk to your financial representative and refer to your individual disability policy for more information.   

Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.

Registered Representative and Financial Advisor of Park Avenue Securities
LLC (PAS). OSJ: 355 Lexington Avenue, 9th Floor, New York, NY 10017, 212-541-8800. Securities products and advisory services are offered through PAS, member FINRA, SIPC. Financial Representative, The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Physician Financial Services is not an affiliate or subsidiary of PAS or Guardian. AR Insurance License #1057229, CA Insurance License #0C37340.

* Potential Cumulative Benefit is based on the coverage illustrated and assumes the following: disability begins at your current age (shown above); you qualify for benefits under the coverage illustrated; benefits start after the elimination period has been satisfied; and benefits continue uninterrupted until the benefit period ends.

PAS is a member FINRA, SIPC

2021-126186 Exp. 09/2023



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