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Don’t let the unforeseen derail your career.
Congratulations! You made it through college, medical school, residency and are finally getting paid for your efforts. And, it’s not only your sweat equity but, often, the price you paid for a great education. The upside is ‘I now have many years to look forward to of being well-compensated.’ But what if something were to happen that derailed everything? Perhaps, an illness or an accident. Imagine having spent all that time, expense and effort and then not being able to do what you most wanted to do in life?
Disability insurance—your income protection—is one of the most important purchases a physician will ever make. As a financial planner, I know it is possible to make great plans which will account for everything (e.g., home purchase, college for your kids, retirement, etc.). But if you don’t have income none of it remains possible. So, what should we look for in a policy?To begin with, a physician should be covered specifically in their specialty. For example, an orthopedic surgeon who can no longer perform the material and substantial duties of the specialty would get paid. And, that would happen, even if they were able to perform the duties of a hospitalist, retrain for radiology or for anything else whether it be medical or non-medically related. Other important considerations would include having a policy that’s both non-cancelable and guaranteed renewable. When you have that type of policy, your coverage is guaranteed, and your rates are fixed for the life of the policy. And, very importantly, once you have your policy, you’ll never need to take another medical policy to maintain your coverage or rates. The one caveat is if you’ve lapsed your coverage and have gone beyond your “grace” period, the carrier may require you to fill out a health questionnaire and, quite possibly, have you take a medical exam. That’s why it’s very important to make sure premiums are paid on time and that you’re keeping all of your information (home address, banking, etc.) up to date with the carrier. This will increase the likelihood that your policy will be maintained. It is also critical that you work with a company that not only offers this type of coverage but will service it as well.
Other important considerations would include company issue limits, residual or partial, as well as a COLA (Cost of Living Adjustment) rider among other options. Issue limits are the maximum benefit amount a company will offer. Residual would give you an ability to still make a claim should you experience a loss of time, duties and/or income and still be working but, perhaps, not at full capacity—and as result are suffering a loss of income. This varies by company. COLA would increase your benefit annually should you ever be on claim. One other major consideration is the guaranteed insurability rider on your policy. This gives you the ability to increase your coverage to keep pace with your income without having to go through a medical process. This is subject policy issue limits. Terms of these riders vary significantly by carrier with some giving you the option every year and others only allowing for an increase every three years.
Lastly,an experienced financial advisor can be a major should the physician have a pre-existing medical condition— physical or mental. The advisor can make the difference in the type of offer you receive from the carrier. One carrier may make a substandard offer while another would make a full offer. And, should you ever think you have a claim, you may want to start with your advisor, who can provide some valuable direction. While they can’t ensure an outcome, they can help you have a much better experience.
Edward Alferoff, CFP®, Partner | Vital Planning Group | 718.813.9840 | email@example.com