Medical residency can be a very trying time in your career. There’s lack of sleep, lack of money – and the accumulation of student loans. It may feel overwhelming to even think about your financial future when you are trying to get through your day-to-day responsibilities. Yet your world may be turned upside down if you became too sick or injured to work. Statistically speaking, you have approximately a one in three chance of losing your income to a sickness or injury between the ages of 30 and 65.
Individual disability insurance can help offset this risk. But when is it ideal to start this process? The answer is the sooner the better.
Individual disability insurance requires medical underwriting asking you about your medical history. Therefore the ideal time to purchase a policy is when you are healthy and can qualify.
- Purchase a minimum size policy with the maximum amount of increase options available. This will reduce your current cost but will lay the foundation to purchase more in the future without further underwriting. The maximum size policy on an individual policy is $15,000/month.
- If you are considering a fellowship or a subspecialty, purchase your policy earlier rather than later. General specialties such as internal medicine and pediatrics will cost less than surgical subspecialties. However, the policy premiums are based on your specialty at the time of your application. This can provide you with significant savings.
- Don’t be enamored by policies that don’t require underwriting. These policies may have limitations and/or exclusions since they can’t underwrite. Furthermore, they may limit the amount you can increase your policy in the future which will require future underwriting at a later time.
What to look for in a disability policy:
When purchasing a disability insurance policy during residency or fellowship, it is important to look for the following:
- Specialty Specific definition of disability. It is important that your policy cover you in your medical specialty without restrictions if you can work in another medical specialty or occupation. This type of definition comes in sever different names: Own occupation, transitional occupation, regular occupation. Each company has slightly different names. It is important to read this part carefully. With a specialty specific definition, it will cover you in whatever specialty you are practicing in just prior to your claim. For instance, if you purchase a policy while training in internal medicine and go on to gastroenterology and later become disabled, it would cover you if you couldn’t practice as a gastroenterologist.
- Non cancelable, guaranteed renewable. With this provision, as long as you pay the premiums, the company can never cancel your policy or raise your premiums.
- Ability to increase the policy in the future.. It is important that your policy has the ability to increase in the future as your income increases without having to go through future medical underwriting. If your health or situation changes, you are safe and able to increase your policy.
- Residual Rider. This allows you to receive a partial benefit if you have a 15-20% (depending on the company) loss of earnings or more.
- Cost of Living COLA Rider. This keeps your benefits up with inflation if you are on claim for more than one year.
- Company Has High 3rd Party Ratings. It is important to check the company’s 3rd party ratings to ensure quality. https://setforlifeinsurance.com/disability-insurance/companies. Ideally, look for a policy with AM Best Ratings of A+ or better.
Discount rates for medical residents
Set for Life Insurance has discounts set up at numerous resident programs and hospitals throughout the country. These discounts can save you from 10-40% on your premium, depending on your situation.
Please contact us to find out if a discounted program is already available to you. If not, we can help you put together a discount for your program.
About group disability benefits
Often, your residency program will already have a group policy in force. These typically offer a $2500/month benefit. Because group policies can’t discriminate regarding who they offer coverage to, they often lack the important provisions of a personal policy.
- Your group policy may require you to be totally disabled and not able to work in any capacity before you can receive any benefit.
- The benefit may be taxable income to you if the employer is paying the premiums.
Affording your premiums
If you are concerned about paying for your disability insurance during residency, there are several things we can do to reduce your premium as much as possible.
- Some companies allow a “graded” or increasing premium. This is initially less expensive and your premium will increase each year. If you wish to lock it in at a later time, you may do so on any policy anniversary.
- You may choose to simply supplement what your group policy already offers and load up your policy with increase options. This will allow you to keep your premium low during residency and still reserve the right to increase it in the future without any medical underwriting. The minimum size policy is $1000/month benefit. If you decide to purchase a $1000/month benefit policy, be sure there are enough increase options available to you to purchase more in the future without undergoing medical underwriting.
Options for residents finishing training:
If you are in your last year of training, you have a few different options:
1. You can take the special resident offer amount of $4000 a month regardless of current income or group benefits.
2. If you are graduating and already have an employment agreement signed for your first year income outside of residency, we can use that agreement as income verification to issue you a higher amount of coverage now.
3. First year physicians can automatically purchase $5000-$7000/month benefit (depending on specialty and company) regardless of your new income and without evidence of a contract.
First-Year physician: $5000-$7000/month coverage
Fellows and residents in their third year or greater: Up to $4,000/month over and above any group coverage
Residents: eligible for up to $4,000/month benefit (regardless of any group benefits)
Considering disability insurance? Consider the facts.
Your most valuable asset is your ability to earn an income. For medical residents like yourself, future income is the payoff for your years of training, hard work and accumulated debt.
Physicians’ jobs are very physically demanding. Consequently, they are at a much higher risk than other professionals to become disabled in some capacity.
Your student loans do not go away if you become disabled.
There is no better time for a physician to consider purchasing a personal disability policy than during residency. Since policies are based on your situation at the time of application, you have the opportunity to put yourself in the best light and lock in a policy based on your current age, health, and many other benefits.
You will never be younger than you are now so rates will be less expensive.
Qualifying for disability insurance can be difficult, so it is important to apply before you have any medical problems or conditions. Once you have the policy, insurance companies can’t take it away from you as long as you pay your premiums.
Insurance companies realize that medical residents have great earning potential. Therefore they allow you to purchase over and above what another professional would normally qualify for.
If you are considering going on to do a fellowship or a riskier specialty, if may make sense to purchase your policy early since you may be in a better occupational class, giving you better rates. Once you have your policy at those rates, you will still be covered in your new specialty, but possibly at a reduced rate.
By making a responsible decision early on to purchase a policy, you build the platform to have your policy follow you for your career.