Financial Planning for Doctors

When should a resident get disability insurance? What do I need to know about disability insurance?  These are two of the most common questions that I get from residents.

Lawrence B. KellerGiven that a large part of this website is meant to help prevent students and residents from making mistakes, I have an opinion on this. In fact, I have a very strong opinion after experiencing a disability insurance disaster caused by a conflicted insurance agent from a very prominent insurance company.

More on that below.

Thinking Man

In my office, I have a Ghanaian “thinking man” statue.  I bought it on a medical missions trip to Accra.  At many moments in life, I’ve found myself in this exact situation. Hand in my hair.  Elbow at the knee.  Thinking.

Such a moment occurred when I was a fourth year medical student with a newborn little girl.  This was the moment it dawned on me that it was not just my wife and me.  We were responsible for someone else physically, spiritually, emotionally, and even financially!

Serindipitously (and later I’d say “unfortunately), one of my friends in medical school class knew someone who sold insurance products.  In fact, it was my friend’s brother.  The brother of my medical school class mate seemed like a pretty safe person to trust.

The rest of the story isn’t so peachy.

I told him I needed life insurance.

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

I told him “no” (multiple times).

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 – for which I take propranolol.

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

When should a doctor get disability insurance?

Apparently, it could hurt a lot!

I later 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 disability insurance later.

Fast forward to residency where I meet the next “insurance guy.”

I tell him I’ve had difficulties.

No problem,” he says.  “I have a guaranteed issue disability insurance product that would be perfect for you!” 

That sounds great, I say.

Only one box we have to check just for formality’s sake… you haven’t been denied disability insurance before, obviously, right?”

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

I learned an important 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!

Two kids later – that’s a total of three, if you’ve been counting – and I still do not have any disability insurance outside of my employer.

Fortunately, my employer’s disability insurance provides 60% coverage from my base-salary.  After tax, that’s about $10,000 per month.  Not bad, but this led to a very harrowing 19 months while we paid off student loans I wouldn’t have been able to afford if I became disabled.

My real disability insurance plan (If you’re curious, yes I applied again with a different company, and was denied again) is to now live within our means and to make sure our monthly expenses never go north of $10,000 per month.

In the end, this helps me practice relative frugality, which is a good thing. This keeps costs down, allowed me to hammer away at my student loans, and achieve wealth faster.

It also helps hedge against the chances of me becoming disabled with monthly payments I could no longer afford.

Answering the Questions

What do I need to know about disability insurance? When should a doctor get disability insurance? For those that like the cliff notes version, here it is:

  1. Guaranteed insurance coverage offered in training (residency/fellowship) is only “guaranteed” if you have NOT been denied by another disability insurance carrier.
  2. If you have medical problems for which you are seeking documented treatment, it is best to wait until residency to get the guaranteed policy.
  3. Once you get the guaranteed policy, you are free to apply for less expensive policies with a recommended independent insurance agent.  If you are denied, you get to keep the guaranteed policy.
  4. If you don’t have any medical problems, get disability insurance as soon as you can afford it.  Disability rarely gives you a warning shot across the bow before it sinks the ship!
  5. Two Facts: the insurance sales 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 be able to replace your monthly income.

Take Home: When Should a Doctor Get Disability Insurance?

Make sure to educate yourself about this stuff.  Of course, you can do this by reading The Physician Philosopher’s Guide to Personal Finance, which will teach you the 20% of personal finance you need to know to get 80% of the results.

The above facts about disability insurance are definitely a part of that 20% you need to know.

If you want to learn more about disability insurance, you can check out some other posts on the topic.

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


11 thoughts on “When Should a Doctor Get 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.

  2. I was aware of your personal issue with Disability Insurance and it still irritates me that someone screwed your chances just at a chance for a commission.

    I might be wrong, but I was under the impression that additional disability insurances are not quite stackable in the terms that you can’t get several policies from different companies to match your salary exactly.

    I think there is some sort of catch in the policy (at least the one I got) where if I had a different policy it would reduce the payout of the first. I think the rationale is that someone won’t get policies that add up to their monthly income and just get an excuse to claim it.

    • It depends on what your salary is… Most companies have a limit on your total disability payment. Often times this is around 30,000 per month. So, if you make more than that, it may be challenging to get to your exact salary.

      However, a personal policy certainly will stack on top of group policy. If the personal policy is paid with post tax dollars, it also won’t get taxed (unlike a group policy paid for by your employer).

      The goal is to get as close to your post tax take home pay as possible, of disability comes knocking.

  3. A friend of mine had to go through lawyers with collecting from a prominent own-occupation disability insurance. They were a practicing dentist who ended up with hand pain and having to sell their practice.
    Unfortunately, their doctor at the time completely botched the documentation and stated they could work in their regular capacity. It took a year before they corrected the medical records and received the back pay.
    If you become unable to perform the duties of your occupation, make sure you contact your agent. Hopefully they have dealt with this before as some are just commissioned salesman who don’t know how to deal on the other end of the transaction.
    Your physician should have the regular physical requirements of your occupation so they can comment on what you can and cannot do.
    If the insurance company gives you pushback, don’t be afraid to contact a disability attorney. The insurance companies are behemoths and have significant legal resources at their side. You might as well have representation on your side to make them listen.
    This individual’s situation has made me realize that similar things can happen to us and the only way to be prepared is to work towards FI. That way, you don’t have to depend on these contingencies for very long.

  4. I had a few questions:
    1) Why is your chances of being denied disability insurance lower during residency compared to before residency? Do you think you still could have been denied even if you wanted until residency to apply?
    2) Is you employer group disability own occupation? I am under the impression that a lot of group disability policies won’t pay out if you can work in some capacity as a physician.

    • Thought I responded to this, but most not have gone through:
      1) Much lower in residency because of the guaranteed policy where there is no medical exam or medical history taking. You simply get it so long as you have not been denied by an insurance carrier for disability insurance in the past.
      2) Employer policies are not usually as good. Unfortunately, I do not have a choice given my bad experience. It is one of the reasons I created this blog – I never want this happening to anyone I know.

  5. It is a tricky and important issue.

    I have a few horror stories for sure. One friend is stuck in his current job because he can’t leave his disability policy that is tied to his job.

    I still have my disability policy from residency. It was a good one so I kept it.

    I have been uninsurable for life insurance for 18 years now though. I have been denied so many times I stopped trying. Apparently, I’m supposed to be dead by now. I saved a fortune in policy premiums that I would have been willing to pay over the last 18 years.

  6. Does it matter what you were denied for previously when applying for disability insurance (i.e. for not being a US citizen or permanent at that time)? I was a foreigner when first applied.

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