When it comes to disability insurance, there are income and participation limits to determine how much benefit you can purchase. This means at your income level, you are eligible to purchase a certain amount of insurance based on your income and if you have a group disability insurance policy in force.
As a medical resident, you may purchase between $1000 to $5000/month regardless of income and group benefits in force. If you are within 180 days of graduation, you may purchase between $6500 and $7500/month benefit (depending on company and your medical specialty).
Physicians and dentists in their first year of practice may purchase up to $7500/month benefit without proof of income.
If you are a physician with an income greater than $400,000, you may purchase more than $15,000/month benefit, but need to purchase from more than one company. The maximum amount of benefit you may purchase from any one company is $15,000/month. If you purchase from more than one company, you may purchase up to a maximum of $25,000/month. These limits are set by the reinsurers.
But how do you decide how much disability insurance to purchase?
It is important to take a look at your financial situation to determine how much benefit you need to have and what other income sources you have if you were to sick or injured to work. If you have a spouse who is also working, you need to take a look at how much you each contribute to the household expenses.
Individual benefits are nontaxable if you pay with after tax dollars. Therefore, you need to determine how much take home pay you need to cover.
If you are a medical resident with a few years to go before finishing your training, you may consider purchasing a smaller size policy such as $1000 or $2000/month. This will keep your expenses low while still providing some benefit but more importantly will cover your future insurability.
With a large group insurance policy, the benefits may be taxable if your employer is paying the premiums. Therefore, you may need to supplement more than you originally thought.
For more information about physician and medical resident disability insurance and determining the right amount of benefit to purchase, contact Set for Life Insurance today!