This is a guest post by Jamie K. Fleischner, CLU, ChFC, LUTCF.
Jamie is President of Set for Life Insurance. She started in the business in 1993 and has received numerous awards and recognition as being among the top disability brokerages in the country. As an independent broker, she seeks the most suitable products at the best rates for her clients. Set for Life has the largest portfolio of discounts nationwide, including unisex discounted rates for women. For more information, visit www.setforlifeinsurance.com. Set for Life is a sponsor of Wealthy Mom MD.
Women now exceed the number of men in medical school and residency. Furthermore, many women physicians are the breadwinners in their families. This makes it even more important for them to ensure their income is properly protected.
As a woman physician, what do you need to know when it comes to protecting yourself and your income? If you are dependent on your income to pay your bills and support yourself and/or others, it is imperative that you protect yourself with a proper individual disability insurance policy.
Here’s a short primer on what to look for in an individual disability insurance policy:
1) Definition of disability
It is critical that your policy will cover you if due to sickness or injury, you can’t work in your medical specialty even if you can work in another specialty or occupation. Be sure your policy will not reduce benefits if you either are capable of or choose to work elsewhere.
Without a good definition, the company can determine whether you can work or may not have to pay benefits if you are capable of being gainfully employed. This is especially true for group policies through your work or association policies. Look for definitions called “own occupation” or “regular occupation.”
Also, make sure your policy pays you own occupation for the full benefit period. Some policies only pay own occupation for two years and then change the definition to total disability not working.
2) Noncancelable, guaranteed renewable
This means that once you have your policy, the company can never modify the contract or raise the premiums. Most association policies don’t have this language and people are shocked when they reach their 40s or 50s and their premiums skyrocket.
These are extra benefits on your policy. Important riders include residual which covers partial disability, increase options which allow you to increase benefits in the future and inflation riders which keeps your benefits up with inflation when you are on claim.
Even if you have a group disability policy in force, it is still important to consider supplementing with an individual policy:
1) If you leave your employer, your group policy is (likely) not portable. You may need to go out and purchase your own benefits. If you have an adverse health condition, this may be difficult.
2) Most group policies only cover you if you are totally disabled and are not working. It won’t pay for partial disabilities.
3) If your employer is paying the premiums, the benefits are taxable.
4) Most group policies have a cap on the benefits. If you have a larger income, this can make a large gap between the benefits paid and the amount of benefit you need.
For example, a typical group policy will pay 60% of your income to a maximum benefit of $10,000/month. This $10,000/month benefit is taxable. Therefore, your after tax benefit would be about $7,000/month.
What’s the difference in disability insurance for men and women? Individual policies cost close to twice as much for women than men. According to the companies, women are not only more likely to file a claim, but their claims last almost twice as long as those of men. As a result, disability insurance can be very expensive to purchase for a woman.
Here are some important considerations for women when it comes to purchasing disability insurance:
1) Unisex rates
Some insurance companies offer unisex discounted rates. This means that both women and men pay the same rate. This can help reduce the rate significantly for women, in some cases up to 70%.
Here is how to obtain a unisex rate:
a. Work with a broker who already has unisex rates available for you.
b. Find other people in your practice or at your place of employment who also want coverage. With three or more people applying for coverage, the company can issue the policy at unisex rates. Some people even purchase a policy on a staff person for a small amount and this results in significant savings.
c. If you are a resident, some companies already have unisex discounts available. Some companies don’t offer unisex rates for residents but offer it for attending physicians. If you are close to finishing your residency, you may be better off waiting to purchase your policy.
There are several other types of discounts available including AMA discounts, employer sponsored discounts and other association discounts.
If you are trying to trim costs, consider what is most important. For example, is it worth it to you to pay the extra premium for the inflation rider? Do you need to cover your full income if your spouse or partner also brings in an income?
4) Work with an experienced independent broker
If you work with an agent of a company, they have a financial incentive to only show you their company’s product which may or may not be the best fit for you or in your best interest. If you work with an experienced independent broker, they can shop around for you and find the most suitable product at the best rates. Look for a broker with credentials such as CLU (Chartered Life Underwriter) which is a master’s level degree in insurance.
5) Determine how much benefit you need
Calculate your fixed costs and determine how much after tax benefit you need.
1) If you already have an individual policy but are paying female rates, see if you may have access to a unisex policy. This will require new underwriting (medical questions). If you have significant health conditions, this may not be a good idea. If you are healthy and can save more than 10%, it may be worth considering a replacement policy.
2) It is important to review your overall financial situation. Once you are in a position of financial independence, you may no longer need the coverage or can remove riders or reduce the benefits.
For more information about disability insurance for women, visit http://www.setforlifeinsurance.com/disability-insurance/disability-insurance-women