Editors note: This guest post on disability insurance riders and the various DI discounts was written by Chris Wimberly (A.K.A. The Disability Doc on twitter). Chris is an independent insurance agent, which is the best kind of agent to get when looking for disability insurance. This means he can shop around products for you and is not attached to an individual insurance company. You can find out more about him at his website called The Disability Doc. As many of you know, I had a rough experience with a disability insurance salesman. So, getting this information early is important. We do not have a financial relationship at this time.
Great news for all of you MD’s and DO’s out there who have already experienced the thrill and rewarding feeling of completing med school. I’m sure you can remember the excitement of opening your NRMP announcement regarding the program and specialty of medicine you had been matched to. Now… fast forward a few later, and you are completing your physician training. Where has the time gone? Many would say it’s gone towards a majorly valuable accomplishment in life.
With that said, for any of you graduating residents and fellows expecting to finish your program in June, you will finally be transitioning from “trainee” to “attending”. Well done! Not only that, you will surely be earning an income that finally matches (or exceeds) the hours you’re putting in. You might be saying, “it’s about time!”
Also, as a resident or fellow, you may have already attended some sort of financial seminar. You’ve likely been informed of the value of emergency savings, managing debts, planning for long term savings, and of course – disability insurance.
Riders and Discounts
By now, you have undoubtedly had financial advisors showing up at your residency program ready to give you advice and even recommending certain products or strategies along the way.
When it comes to disability insurance, here are four things you need to be aware of before you leave your program. They all fall under the following umbrella:
1) Rates and Discounts
Disability insurance rates are based on your age and health when you initially apply. They are then locked in for your entire medical career. [TPP: This assumes that you are healthy. If not, getting the guaranteed policy many training programs offer may be your best bet before applying privately]. Getting a policy while you are still in training will insure that you get the best “age rating” possible.
Also, with disability insurance, it is important that you obtain the right discount on your plan so you can save serious money. Having a good discount on your policy can literally save you tens of thousands of dollars over the life of your medical career.
The best discounts are only available while you are still attending your residency or fellowship program. Once you’ve left the program, those discounts will no longer be available. Applying before you officially graduate in June makes a considerable difference in how much you will spend on a plan.
This is especially important if you are a female, because if “unisex” rates are available. It could save you close to 40% in premium costs. Choosing not to evaluate these discounts before your graduate, can end up costing you significantly in higher priced premiums down the road.
2) Future Increase Riders
As a graduating resident or fellow, you can apply for an initial benefit of anywhere between $500 and $7,500 in monthly benefit (depending on the carrier).
Some individuals opt for the higher benefit amount to lock in as much coverage as possible at the youngest age rating possible. From a long term perspective, this is a very cost effective decision.
Regardless of the benefit amount you start with, a “future increase rider” is an essential component of your plan. This rider locks in your health at the time you initially apply.
So, when it’s time to increase your benefits later, you will not have to go through any health questioning (meaning a negative health event would not prevent you from obtaining additional coverage).
3) Student Loan Riders
It’s no hidden secret that young physicians carry one of the highest student loan balances of any profession in the world. It’s critical that you protect yourself from this massive burden in the event you become ill or are injured and cannot generate an income. A few carriers offer a “student loan protection rider” for a small additional cos. It is well worth looking into.
[TPP: Many student loan refinancing companies now have policies that discharge your debt upon death or permanent disability as well]
4) Inflation Protection
The Cost of Living Adjustment Rider (also known as “COLA”) protects your benefits from inflation. If you look at any 20 or 30 year snapshot of time, you will see that costs always rise. Housing prices go up, gas prices increase, and groceries don’t cost the same as what they used to.
A COLA rider is designed to isolate your benefits from being gobbled up by inflation. For example, if you have the COLA rider on your plan, and you become disabled, your benefits would increase each year to keep up with inflation.
Roughly 50% of all disability policies purchased by residents contain the COLA rider. The younger you are in your career, the more necessary this rider is. The older you are, the less time there is for this rider to be as impactful. One good strategy is to select this rider initially, and then once you are further along in your career, drop the rider from your plan to reduce premiums at that time.(TPP: In other words, when you become financially independent, you can drop this).
As you can see, there are a lot of choices to make regarding income protection. It’s imperative that you reach out to a trusted agent before graduating to secure the best discounts available in the market.
Playing the “discount game” correctly will save you significantly. And a knowledgeable agent will help you lock in the ideal plan. This way you don’t have to keep re-examining your options again and again down the road. As long as you pay the premiums, the policy will remain in place, protecting your income and securing your future.
Now it’s off to your physician career you go!
I was hosed by a disability insurance salesman as a fourth year medical student. To this day, I do not have a personal disability insurance policy. I got denied and you cannot get the resident policy mentioned above if you have been denied. So, now I have to depend on my good wits and my group policy. Chris is someone worth checking out for your disability insurance needs. Please, visit his site!