May is Disability Insurance Awareness Month
Helping clients build a solid financial foundation begins with protecting their income from a disabling illness or injury, let's make sure you know what to look for.
May is Disability Insurance Awareness Month so here is an updated post on what you need to know when reviewing your policy
There are 5,965 insurance companies in the United States and only SIX of them have true own-occupation policies that could appropriately protect a physician from losing their income in the event they were hurt or sick and unable to work. These six companies are:
Ameritas
Guardian
Mass Mutual
Ohio National
Principal
The Standard
Our first recommendation would be to seek out an independent agent who represents all six of these companies and can present you with a comparison to make sure you are getting the best deal. If their business card has the same logo as the policy they are presenting you, they have a conflict of interest.
Once you have found someone to help you review and understand your options, it is time to crunch some numbers to understand how much you actually need. For young and healthy physicians, there is a quick rule of thumb that spending 2-3% of your gross salary on disability insurance will be enough to cover 2/3rd’s of your gross income.
These numbers might be easy to remember but the real goal is to have your expenses and retirement savings covered. After all, you are buying disability insurance to protect your income. Your income is the foundation of your financial plan and the key to covering your expenses and funding your retirement.
Physicians generally have two salary ranges: residents and post-training. These are the two big milestones that should automatically flag a review of your policy. Quick annual policy reviews may be beneficial in making sure that you are getting the best deal available. These insurance companies want your business and have association and employer-related discounts that can work to your benefit.
For example, one of our clients is in a group of 15 doctors who all understand the need to protect their income. It is our role to make sure they are properly insured and getting the best deal possible. For their office, we had the insurance company put in a multi-life discount that saved each of them over 10% on their policy premiums. This was very easy to do and only requires 3-5 participants depending on the insurance company. This also gave them access to unisex rates which made the savings for the female doctors even greater than the 10%. These discounts can be exclusive to the agent that sets them up but can also be made available through associations.
The only other trick to getting the best deal is to buy what you need as early as possible. Locking in at the youngest age possible for a policy with proper inflation protection can save you hundreds of thousands of dollars over your working years. These policies can stack on top of each other, so take advantage of being young and healthy when you can.