Bonnie Koo
Welcome to another installment of Interviews with Real Female Physicians. The goal of this series is to share their story so that you, the reader, may learn and be inspired from their experiences – good and bad. We all come from different backgrounds and have different situations. Some of you are married, some are not, some with kids, some with blended families. Let’s show other women that any of these can work financially! So let's introduce our next woman physician rockstar – Vivian.
Tell us about yourself:
I’m a practicing pathologist in Florida. I’m married to another physician and we have one child. In my opinion, the PRACTICE of pathology is an unexposed specialty to medical trainees. While it may not be one of the highest paying specialties, it is also not one of the lowest and we have a very low burn-out rate. Trust me…I’m not starving….. Especially for a female, pathology is a fabulous specialty because of the flexibility. I have no waiting room full of patients. While I have a stack of work on my desk, I can get up and get a coffee, run to my kid’s school for a recital, work really early or late leaving some “flexible” time during the day. I have no call or no weekend duties now, but even when I did it was home call and rarely needed to come in. I wish more medical schools would expose, particularly require, students to spend time with practicing pathologists on an actual rotation. Go visit your friendly pathologist and see what a great gig we have! I have been in practice for 16 years, all in academic settings.Did you graduate with student loans? How much & what are the interest rates?
I had 80% of college paid for by the military (out-of-state public school) and 100% of medical school (in-state public school) paid for on scholarship as well. I had a small loan (around $5000 if I recall) that I had from college which I paid in full using my first few paychecks as an intern. Though I didn’t have loans, my military commitment for 13 years “trapped” me (and my husband) in non-competitive pay. What is non-competitive pay? Well…..ten years ago in 2007 our combined dual full time MD income was at an all-time high of $257,000 AGI (which isn’t shabby I realize, ….but one of us is an interventional cardiologist). If we had student loans and made even close to median income for at least interventional cardiology at the time, I’m pretty sure we could have budgeted it in to pay them off. The non-competitive pay is the trade-off for no loans. We learned to live very frugal off our government salaries and lived off of one salary for over 15 years.Financial aspects of kids
When did you have them?
We have one child who was born when I just started my PGY-2 year.Are you planning to fund their college expenses?
529 plans were relatively new at the time, so we opened one in addition to the otherwise used vehicle for college which existed prior to 529s, the UTMA. We didn’t do anything crazy with funding them. I put $250/month into the 529 and $200/month into the UTMA for almost 18 years now. We also were helping to fund my niece and nephew as we opened up a 529 for each of them ($100 month/each) My son has scholarship money as well. I’m a believer in the 529 plan because of the tax shelter on growth it provided all those years. We have a lot of flexibility with the UTMA as well.What are your child care expenses?
We used the military daycare full time from age 6 weeks to 6 years old. My son was born after the private school cutoff (which was to be 5 years old by 30 June), so he then started full-time kindergarten at age 6. The daycare was convenient (across the street), open over 12 hours a day and reliable (it closed maybe once for a power outage and once for an earthquake which also killed the power). It was also cheap being subsidized by government/taxpayer dollars for military. We were too busy to deal with nanny issues. Once our son was in school, we used carpooling, neighbors and afterschool activities to assist with transportation. By the time we moved to Florida he was old enough to ride his bike to school and stay home alone. While I realize childcare costs are steep, our expenses never went away and really got worse. Our son is involved in an individual sport at the national and international level and the cost of coaching, travel and other expenses has far exceeded most childcare costs for anyone. It’s been running nearly 30K or more annually to support his activity since age 9….and then private school on top of that (see below).Are your kids in private or public school? What is the cost including after care if needed.
One of the best private schools in the state was four miles from our house. So we took advantage of the convenience of location, at the expense of the tuition. We have been paying over $20,000 annually for private school other than grade 7 (we homeschooled that year…I figured if you are going to F*** up a year in your kid’s education, it might as well be 7th grade…..). Is the private education worth the cost? No. I have liked the small class size and the families we have met and became friends with. Part of the tuition is really “buying you and your kids’ social life” in my opinion. The families at these schools are self-selected. Both my husband and I always agreed on never “skimping” on anything our kid may need. The largest portion of ALL our expenses was always to support our son. The private school has worked for us. Only one more year to go!Financial aspects of marriage
Are you married?
We have been married 20 years this year. We eloped in Las Vegas while there for a previously planned weekend. The wedding cost $133. Frugality at its finest. I have read the cost of the wedding is inversely proportional to the odds of the marriage lasting.Did you get a pre-nuptial or post-nuptial agreement?
No pre-nuptial. We believed in pooling resources to achieve economy of scale and ease of finances. We are both extremely busy. We don’t have time to “sort bills” or move money back and forth. We are also both physicians working full time (well my husband works 50% now). We don’t “need” each other for financial support.Do you and your husband agree on finances?
Though my husband and I are very different in many aspects, we definitely share the same financial goals and values. Both of us agree we have equal rights to our money as we both work very hard. We don’t ask each other to buy things. We both assume were are equally financially responsible. I don’t ask him permission to buy a $750 dress. He doesn’t ask permission to buy $9000 dollars of some stock he wants. I do all the finances. If we were in financial difficulties I think we would have more discussions. (Side note I also did our taxes from 1997-2012. After our move I got lazy and just pay a CPA now. He’s not doing anything for me other than saving some time. There is no special tax code for physicians. I can read the IRS forms and use a calculator just like he can. But I also like that I can call him and complain about our taxes. This is one area where it is difficult to discuss with your family and friends. They can’t fathom paying over 300K in taxes annually).Are you the breadwinner?
My husband has always made roughly twice my income, though I would never want his job and I’m sure he would never want to take care of all the things I do at home to ensure our household runs like a well-oiled machine.Have you experienced a financial catastrophe?
Definitely lost investments. The most significant one recently was one of our foreign stocks was delisted and apparently we were unaware (long story). The stock became worthless. Our real estate rental investment was a loss when all was said and done. In the end, there is no reward without risk and in the 20 years we were married, the gains have outweighed any hits.
General Finances
What’s your FI (financial independence) number?
Never really thought about a number, but rather having enough unearned income (without actually divesting anything) to live comfortably. I definitely don’t want to work much longer. I don’t enjoy medicine as much as I used to. The “fun times” of pre-EMR and less red-tape are gone. All the other hassles which take up more of my time than actual patient care are really not enjoyable. I long for the day where I could just read a bunch of slides and talk to a clinician for 30 minutes why their patient may have giant platelets. Unfortunately the latter is not even reimbursable (though it’s a consult technically!) If it doesn’t generate RVUs our institution doesn’t want us partaking…..sad really that it has come to this. Enough soapbox, but the ability to walk away from a job at ANY time is priceless. I’m not working to pay the bills anymore.Who handles the finances in your relationship? Are you DIY or do you have a financial advisor?
We are basically DIY. For about 15 years we had an account for $8.99/month there was unlimited trading. We set up the account so that every Monday we dumped about a thousand dollars and bought shares of stock for 3-4 companies. We would just change the companies every now and then. We had to transfer our account when this institution closed and now we can’t set up automatic stock purchasing anymore; so I have to admit we are not as regimented. Some people ask “How can you all retire so early?” Well this is it….REGIMENTED DIY INVESTING. There is no fee drag with stocks or an advisor and now we have free trading. Because the majority of our wealth is not tied up until we are 59 ½, we can do whatever we want with the money and live off dividend income (in addition to pensions). From a tax standpoint we are paying taxes on four streams of income (my salary, husband salary, husband pension and dividend income), so we really “need” to retire to reduce our taxable income. I am not a huge fan of advisors (no one really cares about your money except yourself) and definitely not assets under management.What is your net worth?
We have no debt. We paid for our home in cash this last time around. Our net worth without our home is 5.6 million dollars. Because we own our home outright with all the equity, we are just under 6 million dollars since we actually own it rather than the bank.Do you have insurance?
We have umbrella insurance. By the time we left the military (which offers its own version of life insurance), we were able to self-insure along with collecting the pension as “back-up income”. I do have a free life insurance policy through work at this point and free short and long term disability, but we don’t carry anything else. Due to our finances now, we have very little (minimums required by the state for car) or no insurance on material things (jewelry and home contents). If my car gets totaled I just go out and get another one, pay cash.What does FI/retirement mean to you? What does it look like?
It is the ability to not depend on your employer for income. You can do what you want, when you want. You can walk away from a crappy job because you don’t have debt and have other sources of income. You can still work, but it is optional.Any parting words of wisdom?
1) No one cares about your finances except you and your family. Trust NO ONE. You are better off managing your own finances rather than someone else. It’s not hard. If you have someone help you, you still need to have enough knowledge not to be swindled. 2) If you have two incomes, live off ONE. You will never miss the other income if you are not using it for material things. Use it to pay off debt and invest the remainder. If you have only one income try to calculate what percentage you absolutely need to live off and do the same. Remember if you are on one salary of $125,000 as an example, you still are way ahead of the average American and they can still put food on the table. There is no NEED to buy a Birkin bag……..though I really want one! 3) Regimented long term investing. The more money you can take out of your paycheck and “never see” will get you to your goals. 4) Be patient. It took 20 years to get where we are today. Time and compounding is VERY powerful. 5) Get out of debt ASAP. I chiseled away at our first mortgage (15 year mortgage 400K at 7.25%…yeah we are that old and we refinanced from a 30 year at 8%!….) I put extra towards principal EVERY month. By the time we sold our home we just pocketed the entire sale. Living through the era when interest rates were unbearable really pounds the “get out of debt ASAP” hard. And now that we have no debt it is amazing what cash flow is really like…….ALL interest is money out of your wallet no matter what the interest rate is.And … that's a wrap! If you're interested in doing this please send me an email – I'd love to hear from you!
Vivian is one wise female doc! I totally agree with her 5 pieces of advice. Way too many people are debt tolerant. ]]>
Welcome to another installment of Interviews with Real Female Physicians. The goal of this series is to share their story so that you, the reader, may learn and be inspired from their experiences – good and bad. We all come from different backgrounds and have different situations. Some of you are married, some are not, some with kids, some with blended families. Let’s show other women that any of these can work financially! So let's introduce our next woman physician rockstar – Stella.
Tell us about yourself:
I am a gastroenterologist working for Kaiser Permanente in the Bay Area but originally from Dallas, TX. My husband is a facial plastic surgeon in private practice. We’ve been out of training for ~7 years and both turning 40 this year. We live in San Francisco and have a 4 year old daughter and a son on the way this November. We are both avid travelers and foodies. I often hear the advice to move out of a HCOL area but to us, we love the city and all it has to offer and feel it’s worth it.
Did you graduate with student loans?
I had ~$120k in student loans following med school. I went to The University of Texas at Austin for undergrad and a public in-state med school. I’m the youngest of 6 kids and my family was not wealthy so I received grants and loans to get through my education, including Pell grants. I paid off the highest interest private loan (~$20k) when I worked as a hospitalist in between residency and fellowship but otherwise deferred my loans during training. I consolidated the loans with ACS. Luckily the interest on the remainder of my loans were relatively low at ~3%, and I paid them off in one fell swoop 5 years out of training. I would have done it sooner, but my then FA discouraged me from doing so stating it was “good debt” that helps my credit score and I’d be better off investing in the market w/ better returns. Glad I didn’t listen to that advice as it feels good to be almost debt free.
Financial aspects of kids
When did you have them?
We had our daughter 3 years after becoming an attending.
Are you planning to fund their college expenses?
My husband and I had completely different experiences in this regard growing up. As I mentioned earlier, my parents didn’t have much so I got through school with loans and work study programs in college. Even though this made me independent and resilient, I did feel limited in the options of where to attend school. I didn’t bother applying out of state or to expensive private universities. I think in retrospect I did fine for myself, but it must be refreshing to not have finances hinder the “the sky’s the limit” mentality. My husband’s family in contrast paid for 4 years at Stanford undergrad and out of state medical school including living expenses. Not only that but they also set up a modest trust fund for him that matured in his late 20’s to get a jump start on life. Despite this, he is incredibly grounded and rational with money. In fact, between the 2 of us, I tend to be the spendthrift. I often have to convince him to loosen up the pursestrings. We plan on fully funding for 4 year private school and grad school if need be. Partly this is cultural and partly this stems from both of our experiences. I think the most important factor is that we try to instill in our children a sense of hard work and empathy for others. We are front loading $140k for each kid early on in the Utah 529 and leaving it alone to let compound interest work its magic. We’ll bankroll the rest if that isn’t enough to cover the costs by the time they’re in school. If we’ve overfunded then I’ll transfer the beneficiary to nieces/nephews or perhaps grandkids. After 5 years out from front loading the 529, I’m considering funding an irrevocable trust for our kids that matures around age 30 similar to what my husband had as a starter fund. I know this is controversial and may engender “economic outpatient care” per the millionaire next door, but it was such a huge benefit for us starting out. We can fund the annual gift limit of $28k per couple without running into estate tax issues.
What are your child care expenses?
Our nanny’s take home pay was $40k a year for the first 3 years, then our daughter went to preschool. We still have a part time nanny/housekeeper who picks her up after preschool, and does all the grocery shopping/cooking/cleaning around the house. Her take home pay is ~$30k. With both of our schedules it wasn’t feasible to do daycare since we are often running late and needed the flexibility of a nanny.
Are your kids in private or public school?
My daughter is currently in a private pre K-8th grade school. It is ~$36k per year including aftercare and summer school which is pretty standard in SF. I would be lying if I said I didn’t have an existential crisis about this ALL the time. I grew up without means, a child of immigrant parents, went to public schools my whole life, and I think that really taught me resilience and how to relate to others. I’m concerned about my kids being around wealth and excess their whole lives, and I worry about how they will learn empathy for others. I’m fascinated by education policy and have read up on it quite a bit. I know all the studies and evidence that cites how diversity (socioeconomic and ethnic) is better for everyone, but when it came down to it I just couldn’t “experiment” with my child. Part of me feels like what is the point of working so hard to get where we are if we aren’t able to provide a better life than we had for our kids? I’m still working on getting clarity on this matter…we’ll see.
Financial aspects of marriage
We are legally married. I had no assets but my husband had a modest trust fund that really helped us get a jump start on life. Unfortunately it matured right after the crash in 2009, but it was still enough to pay for our wedding, start his practice without having to moonlight or take out loans, put a down payment on our home in a very HCOL area, and pay off my student loans. I recognize that I’ve lucked out in marrying someone without debt, and credit this “starter fund” with allowing us to get a headstart on our finances. We did not get a pre-nup. We are both very much of the mindset that what’s mine is yours and vice versa and trust each other inherently. This may sound naive or foolish but it’s worked for us thus far. Some couples have budgets for each other or have to ask permission to spend over a certain amount, but this is unheard of in our relationship. My husband and I agree on finances and speak openly about it–he trusts me to take care of the financial aspects for our family. I have more of an interest in personal finance and find it empowering to be knowledgeable about this stuff. Neither of us stay at home. I work 4 days a week instead of 5 which allows me some breathing room to run errands or self-care. I think the perception however is that I have much more free time so I’ve taken over the financial responsibilities for our household, which I’ve enjoyed anyways. We both are highly compensated, but he does earn more than me by a sizeable margin. However, I have the generous pension and provide our family’s health insurance through my employer. Together we earn >$1M a year. I think we both have mutual respect for each other that we both contribute equally to this relationship and not just in monetary terms. 
General Finances
What’s your FI (financial independence) number?
~$9 million. We will probably need ~$350k/year to cover expenses in retirement, and I multiplied this by 25. I do get a generous pension if I stick w/ my employer at least part time until I’m 60 which I’m not including in this calculation, but it would provide ~$250k/year at retirement until death–it’s hard to pass up that deal. We may get to our FI number in 10 years, but instead of retiring, will probably cut down to 3 days a week at some point until I officially retire at 60. In the meantime, I really need to cultivate some hobbies/interests so that I can look forward to retiring to something.
Who handles the finances in your relationship? Are you DIY or do you have a financial advisor?
I’m in a transitional period after recently getting rid of our financial advisor and in between a DIY stage and robo-advising. Currently our taxables accounts are in 2 places: I’m investing on my own at Vanguard using a lazy 4 fund portfolio AND using a robo-advisor at Betterment which charges .25% of AUM. It’s my own little experiment and so far the Betterment account has outperformed my DIY account at Vanguard by a few percentage points even including their fee. Plus they tax loss harvest which I don’t have much interest in doing. I’ve easily spoken to an advisor when I’ve needed to and they gave great, unbiased advice. I haven’t quite decided which way I’ll go just yet when I do consolidate my accounts.
What is your net worth?
$3.8 million including equity in our home. Without equity it’s ~$2.5M.
How are you saving for FI/retirement?
I contribute the max $18k to my 401k at work plus I get a >$20k match. In addition, I put in ~$15k in post tax money so I can do the mega backdoor Roth IRA conversion. We each do $5,500 in backdoor Roth IRAs every year. He maxes out his 401k + 3% match. I wish he had more tax advantaged space but is limited by his S-Corp safe harbor 401k plan. I have a defined benefit pension plan that will essentially provide half of my max income yearly at retirement until death if I stay with my employer until 60. I’m not including this in my FI number but it would provide the majority of my expenses in retirement. Beyond that we put the rest of our savings in taxable accounts. Our asset allocation is 90/10 stocks/bonds and rebalance by reinvesting dividends or contributing from our savings to the asset class that’s lagging behind about every quarter (as opposed to selling any funds). I place tax-inefficient funds in my Roth IRAs (REITs, emerging market, small cap value funds), and also use low ER target date funds (with the date beyond my expected retirement date to be more aggressive) in my 401k to avoid wash sale issues with my taxable accounts. We save 25-30% of our gross income a year. We basically live off my income and his income goes straight to our savings account so we don’t miss it, which I then transfer to our taxable accounts or other investments once it reaches a certain threshold.
Biggest financial regrets:
- Using a commissioned broker unknowingly as our first “financial planner” who charged a 6% front loading fee! I realized this when I looked at the paperwork from when he opened our 529 account. Opening a 529 account is super easy to do yourself and here he was skimming 6% off the top. It still makes my blood boil thinking about it, but you live and you learn. This was one of the main motivators I had to educating myself so I consider it a silver lining.
- Using the financial advisor at my banking institution to open up individual bond funds for me and charging me 0.8% AUM when he wasn’t managing anything–bonds manage themselves.
One thing you wish you knew:
It takes time and a lot of reading to feel really comfortable managing your own finances. I think it took me up to 2 years of extensive reading, and I’m still learning something new things all the time. So in the meantime, it’s okay to use a financial planner if you need one–just pick a fiduciary, fee-only, NOT fee-based FA. Also, target date funds with low expense ratios are okay to use while you’re learning the ropes.
Do you give to charity? If so, where and why?
I’ve always felt strongly about contributing to charities or organizations that empower other women or invest in women owned businesses. We give ~$20k a year (with goals to contribute more in the future) to a variety of charities including Women for Women International, Planned Parenthood, ACLU, and Amnesty International. A major goal for me this year is to set up a donor advised fund (DAF) for tax efficient charitable giving. Another one of my goals this year is to set up a small need based scholarship fund at my high school alma mater in honor of my father who passed away a few years ago that will be awarded to promising females who want to major in STEM fields. And while this isn’t charity, we are investors and hold equity in my sister’s startup tea company which has a social impact component helping female Kenyan tea workers establish financial independence and care for their families.
Any parting words of wisdom?
- Money affords you the opportunity to invest in meaningful projects. Now that we have some expendable income, I’ve felt this burning desire to give back and do something bigger than just practicing medicine. I’m still working on exactly how best to do that, but I’m thankful for the opportunity to explore these options.
- Outsource what you can afford if it gives you more time to spend with family or doing things that bring you joy (or maintain your sanity), and don’t feel guilty about it.
- Focus on gratitude–I struggle with this every day. I know that I have many advantages and am so fortunate in so many ways, but it’s easy to lose sight of this.
- Don’t marry a crazy person–I know that you can’t always control who you fall in love with but if there’s early warning signs that you aren’t going to be financially compatible or they seemed destined to live paycheck to paycheck, run the other way.
- Mo’ money mo’ problems–making more money brings a whole host of other issues to consider like asset protection, estate tax planning, trust funds, buying more insurance, etc. Work as much as you need and consider cutting back when you have enough.
And … that's a wrap! If you're interested in doing an interview please send me an email – I'd love to hear from you!
I hope you enjoyed reading about Stella and her family.]]>
The White Coat Investor recently wrote an article about the financial milestones one should celebrate. Reaching net worth zero is milestone #1 on his list of 14 worth celebrating. So yep, you read that right and I'm proud of it! I no longer have a negative net worth. It took me about 2 years out of residency to reach this: I finished residency in June 2015 with a net worth of negative $207K which included about $210K in student loans. I finished 2016 with a NW of – $92K. Now I am at $0! I still have student loans but my retirement accounts + cash savings now equal my student loans. I made a conscious decision to not delay retirement savings due to my extra late start to attending hood at age 38. I could not afford not to start building up my nest egg to pay off my student loan debt quickly. Here are some of the other milestones I have reached: # 5 – Retirement Portfolio of $100K I reached this earlier this year. It does feel good to see 6 figures in them. Especially when your student loan debt is still 6 figures. # 7 – Buy Your First New Car With Cash Sort of. When I moved back to NYC from California, my parents let me take over a lease which had 1.5 years left. That lease ended last December. M happened to have a car that he no longer needed for his work commute. He still owed about $10,000 on it. I paid it off and now I drive it to work. Win/win. To complicate things even further, M & I have just recently considered our finances combined. We work with a financial planner and we plan (and she guides us) as if we are married. So, from now on, I will discuss our combined finances. In that case, we have achieved: # 6 – $500K Net Worth Our combined NW just passed $500K earlier this year. This is largely due to equity in his condo. M likes to joke he is the one keeping our NW positive. True for now ;). Although we aren't married, we have signed paperwork (wills, etc) that essentially bind us together. We also operate as a family now with Eggy due soon. What milestones have you reached this year? Make sure you celebrate them!]]>
This is a post about independent insurance broker Lawrence Keller, CFP®, CLU, ChFC, RHU, LUTCF. He is a sponsor of Wealthy Mom MD. 
Besides disability insurance, do you sell other insurances?
Yes, besides disability insurance, I also sell term life insurance.
Are there any particular insurances that you think us physicians should be aware of?
When purchasing term life insurance, as you discussed previously, carriers look many factors. These may include height, weight, blood pressure, pulse, personal medical history, and family history. Ideally, you want to apply to for your life insurance with a company in which you have the best chance of receiving the most favorable underwriting classification and, thus, the lowest premium rate.
For example, if one has an immediate family history of Coronary Artery Disease (in a parent prior to age 65), they should consider which company they apply to. For instance, a company may not care if the family member was diagnosed with CAD; instead, they focus on if the individual passed away as a result. If they are alive and the proposed insured meets all of the other criteria, they would typically still qualify for the best underwriting classification. The same is true for cancer. Some carriers will take this family history into consideration and others will not.
While I do not sell Property & Casualty Insurance, physicians, in most cases, should have more coverage here. Specifically, they should carry an Umbrella or “Excess Liability” policy – especially if they drive a car. This extends the liability limits of your automobile and/or homeowner's insurance policies. You would likely want to purchase all of these from the same insurance company. In doing so, you can have them integrated and coordinated with each other, as well as, qualify for discounts.
How do you differ from other brokers?
I'm an academic at heart and understand the nuances of each policy available in the marketplace. I also have access to discounts, in many cases, including unisex rates for females. However, unlike other brokers, I don't advertise this or use it as a way to bring me new clients. If I find myself in a situation where I know that the potential client needs a product or discount that is “exclusive” and I cannot provide it, I will refer them to the “endorsed” agent. I do this knowing that I will not be compensated.
You never have a second chance at a first impression. I have found that the “goodwill” that this provides has done more for me than any commissions that I could have earned selling a product that was not in the best interest of the potential client.
Do you have any advice on how to choose an independent insurance broker and what makes someone a good broker?
I think a “good broker” possesses certain qualities. A good broker:
- has a deep understanding of the marketplace,
- represents several companies,
- provides illustrations of coverage from each of them,
- and takes the time to thoroughly review the differences.
An independent insurance broker who does these things helps clients make a decision that best meets their individual needs, goals and budget.
Beware of agents that are “captive” and can only offer policies to you from one company or have a strong financial incentive in to do so. The client should never feel that they were “sold” something or pressured to make a buying decision. The client should feel that their broker was a resource throughout the process. They should feel that they had their best interest in mind and made the process as enjoyable and informative as it could be.
I would also look an independent insurance broker with credentials and/or certifications in the insurance and/or financial planning industry. This shows dedication to the industry and the desire to learn. More so, these brokers usually have a good understanding of the financial planning process, not just disability and life insurance policies.
Finally, you will not be paying more for purchasing your policy from an experienced insurance agent than you would from an inexperienced insurance agent.
What are the top 3 things you see that physicians don’t understand about disability insurance?
Understanding Premium Pricing
If policies are structured the same way and all agents are showing policies with the same discounts, the premium rate will be the same. This industry is heavily regulated and the premium rates and contractual language must be approved by each state. Therefore, if the plan parameters are the same, the only way that one agent can provide a lower price to the consumer is by having access to or knowing of a discount plan that another agent does not.
Association Plans v. Individual Policies
Association plans (not individual policies that include an association discount) are inferior compared to individual policies. Typically, the policy can be cancelled by the association or insurance company. Also, premium rates can increase every five years (generally when your age ends in a “0” or a “5”). Plus, the definition of total disability is not “Own-Occupation” and you don't receive a policy. You simply receive a certificate that evidences that you are part of a larger group.
Understanding LTD Plans
When it comes to group LTD plans and individual policies, there is no such thing as a “primary” or “secondary” company. If you meet the definition of total disability under both policies, you can potentially collect full benefits under both policies.
Additionally, with the exception of those eligible to purchase coverage under “New In Practice” limits, generally, if you are going to be eligible for group LTD coverage with a new employer, it must be taken into consideration when determining the amount of individual coverage available and deferring enrollment into a mandatory group LTD plan to potentially allow you to purchase a larger amount of individual coverage does not work. If you submit a copy of your employment contract in order to purchase coverage based upon your “new” salary and it mentions that you will be provided with Long-Term Disability insurance, the underwriter will ask about this and, again, it will be taken into consideration when determining the amount of individual coverage available for purchase.
Finally, it does not matter if the group plan's definition of total disability is “Own-Occupation” or not. Instead, the insurance company must assume that if you are disabled, you can potentially collect under the group LTD plan. After all, the insurance companies to not want to give you an incentive not to work. That would allow you to make more money not practicing than if you continued to practice medicine.
Is there anything else you would like to tell us as an independent insurance broker?
The time to ask your questions is when you are researching the policies available. You don't want to find out that you purchased the wrong policy and then start doing your homework.
All too often, I see physicians in this situation that could have easily been avoided if they took the time to really understand what they were purchasing. Unfortunately, they don't have the ability to make changes based upon medical or financial issues that arise subsequent to the purchase of the policy or policies they no longer feel to be adequate.
I hope you enjoyed learning a bit more about Lawrence and independent insurance brokers!
