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How to protect your income with disability insurance

February 11, 2020

I got lucky. I ended up buying disability insurance (hereafter shortened to “DI”) of the right kind, with the right company, at the right time. But not everyone is so fortunate. While some employed physicians rely on limited employer-provided policies, others neglect this kind of coverage altogether. But hoping you’ll never become disabled is not a strategy. This is a post about how you can protect your future income with disability insurance. 

A resident lecture clued me in.

One of my attendings in residency gave us a lecture on personal finance and the key types of insurance to have in place as we transitioned from training to the “real world.” Not all training programs included this kind of material, but we were fortunate. That’s how I was already aware of the importance of DI by the time I needed to purchase it. It was a helpful perspective to have, since getting an individual, specialty-specific policy can be expensive. 

The end of training is the best time to buy a policy for many. But at that time, it may not feel like a top priority. At the end of training, the burden of student loans weighs heavy, and that first attending paycheck hasn’t arrived. With a negative six-figure net worth, it can feel like you have bigger things to worry about. But as a new doctor, your future earning power is one of the most important assets to protect. You can insure against the loss of future income with the right disability insurance policy. 

Common objections to getting disability insurance

A common objection to buying DI is the sense that disability is a problem that affects other people. We don’t think it will happen to us, especially if we’re healthy, and have never faced a physical setback. But disability does happen, and disability benefits are utilized. That’s why it’s important to have it in place before you need it. 

Another stumbling block is that to doctors, learning about disability insurance, its features and implications, can feel like learning a different language. It takes some research and working with a knowledgeable professional to ensure you know what you’re buying. This language outlines how the policy will actually function to bail you out in the case of a long-term disability. Now that we’ve addressed some common misgivings, read on for some of the reasons you need it. 

Why you need your own long-term disability insurance policy

As a physician, especially early on, your biggest asset is your ability to earn a high income. You may still have a large student loan balance, and you haven’t yet had the chance to save or invest much, if at all. Therefore, you’re dependent on future income to repay your loans, cover living expenses, and reach your financial goals. That’s why it’s crucial to have DI coverage in place during your early and mid career. 

You should protect your income with a long-term disability policy if:

  • Anyone relies on your income.
  • You’d have to move out of your home if you lost your income.
  • You have student loans. Student debt isn’t discharged in bankruptcy, so if you were unable to practice medicine and had no disability coverage, you could be stuck paying your loans back at a lower paying job.
  • You’re a woman. We are statistically more likely to become disabled (sad, but true). So protect yourself!

The best time to buy it

Most residents and fellows should buy an individual long-term DI policy before finishing training. As a trainee, you’ll be eligible for discounted pricing. Not only will you get a price break when you’re at a lower wage, but the discount may stick with you for the life of the policy. Click here to learn about disability 101 for trainees

Applying for DI involves a medical history, labwork, and a physical exam. That’s another advantage to getting disability coverage in training. You’ll have the best chance of approval, and you’ll get the best rates when you are young and healthy. That’s a win!

More on timing your purchase 

Women who plan to become pregnant should secure coverage before pregnancy. Since growing a human has the potential to bring on pesky diagnoses from gestational diabetes to pre-eclampsia and the like, it’s best to buy DI beforehand. Again, this will help you secure the best rates and prevent any potential disqualification. Unfortunately, these conditions limited to pregnancy can still count against you when applying for DI! 

It may seem unfair to be penalized, but it’s true: a diagnosis like gestational diabetes puts you at increased risk of developing diabetes later in life. Therefore, your risk of disability increases. So please take that into consideration and buy long-term DI before getting pregnant.

My experience buying disability insurance

As we’ve discussed, there are a couple of reasons it costs more to insure a woman against long term disability compared to a man of the same age, health status, etc. Women are more likely to become disabled and use their disability benefits; therefore, their premiums are higher. As a graduating fellow, I was offered a gender-neutral policy. Since then, many carriers have done away with gender-neutral pricing, but may offer gender-specific trainee discounts. Other carriers have gender-neutral discounts for attendings. It’s gotten confusing! That’s why it’s so important to shop around for the best deal for you.

When I was buying my policy, I worked with a financial advisor, but I can’t recall if he shopped around to multiple carriers or not. Thankfully, I ended up with a decent policy at a decent price. 

Optional adjustments to your policy

My policy includes a cost-of-living adjustment (COLA) rider, or option. That means that if I become disabled, my benefit will increase yearly to keep pace with inflation. Another rider I’ve taken advantage of is called the future benefit increase. I used this rider to increase my coverage when planning my pregnancy. Maximizing my coverage was a way to hedge against the unlikely event of a pregnancy-related disability. Later on, I can decrease my coverage to a lower level if I wish. You can discuss options like these with a qualified agent. 

The cost of income protection

My own-occupation (specialty-specific) policy with Principal runs $7-8,000 per year. This means if I’m no longer able to function as a radiologist, or my income decreases due to partial disability, a large portion of my income will be replaced. This may sound like a large premium, but it protects a large income. Your premiums may be lower, especially early in your career. You may opt to pay in installments, or as a yearly lump sum. Installments can take the edge off the cost (but may cost you in additional installment fees).

How it works

DI premiums are generally paid after tax: meaning, they are not deductible. Therefore, the benefits you’d receive in the event of a disability would not be taxed either. That means that the monthly income replacement benefit may appear lower than your current monthly pay, and that’s OK. I know that if I needed it, my coverage would replace most of my income, allowing us to stay in our home and maintain our lifestyle. 

Hindsight is 20/20

My policy is with a reputable company, and I trust it will be there if I need it. But if I had to go back and do it over again, I’d find an independent broker to guide me through the decision. I wish I had known about PearsonRavitz!

PearsonRavitz is a company formed by a former OB/GYN, Stephanie Pearson, and her business partner, Scott Ravitz. I learned about them in the past couple of years, through trusted friends and contacts in the personal finance space. My DI purchase is a done deal, but you may be in a position to work with them.

How do you find the right policy for you?

Your best-case scenario is to work with a knowledgeable, independent broker who can help you compare the best policies for your situation. That’s what you’ll find in PearsonRavitz. I believe in their mission and am honored to partner with them. Here’s a bit about them and how they got started.

Stephanie Pearson, MD, FACOG is an OB/GYN turned physician advocate who puts a face to the issue of DI for physicians. When she got injured in the prime of her career, she was forced to learn the intricacies of her own coverage, and fight for her benefits.

An expert she could trust

With the help of Scott Ravitz, she was able to advocate for herself and ultimately prevail. Since then, she’s helped other doctors to get the coverage they need. To learn more about Stephanie, read her full bio here. It is easy to see why she’s passionate about what she does! 

Scott Ravitz was an insurance agent muddling through his own personal and professional challenges, when he met Stephanie and guided her through her ordeal. His search for meaning in his work was answered by Stephanie, and her approach to the setback she faced: 

“As I worked with Stephanie to secure her claim, I couldn’t help but notice she was doing a lot of helping herself. Unlike anyone I’d ever worked with before, Steph became obsessed with understanding the ins-and-outs of her policy — and the policies of her friends and colleagues, who naturally went to her with questions. Without skipping a beat, she’d begun advocating on behalf of other doctors, encouraging them to learn about their coverage, to protect themselves. I knew she’d be a natural insurance advisor. And she was. She is.”

PearsonRavitz has an inspired story. When protecting your livelihood with DI, trust is paramount. You want people like Stephanie and Scott in your corner. And I don’t know about you, but I’d trust an OB/GYN with my life. As a disabled physician, Stephanie has transformed her own pain into a personal mission. She and the team at PearsonRavitz can help protect your income with the right disability insurance policy.

As Dr. Pearson says, 

“We know insurance isn’t as exciting as practicing medicine. But if you’re a physician, it’s an absolute necessity. Let us help you find a plan that’s made for you.”

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