Posted by Amy Carbone on Nov 19, 2024 3:04:07 PM
With one in four Americans becoming disabled before retirement age, income protection is important for anyone, but for those who undertake years-long educational tracks and face potentially heavy student debt, income protection is particularly important. Doctors sometimes take for granted the need for disability income insurance. Many factors contribute to this oversight, ranging from limited income during residency, lack of knowledge, and the mistaken assumption that existing coverage through your residency or employer will suffice.
As a medical resident, you have a unique opportunity to overcome your financial vulnerabilities by building a solid financial foundation for your life, starting with a strong risk management component that includes income protection.
If you’ve been thinking about disability income insurance - that’s great! Before you go too far down this path, let’s look at 7 common mistakes we don’t want you to make when electing DI coverage.
7 Mistakes Medical Residents Should Avoid When Evaluating Disability Income Insurance
Mistake #1: Procrastinating on Purchasing Insurance Is Costly
Waiting to secure DI until after residency can lead to higher premiums or loss of eligibility due to health changes.
Purchasing disability income insurance when you’re young and healthy allows you to lock in lower rates and secure coverage before any health issues arise, especially since many insurance companies offer resident discounts.
However, simply having a policy isn’t always enough. You need coverage that works for your unique situation.
Mistake #2: Opting Only for Employer-Provided Coverage Will Limit You in The Future
Convenience isn’t always the best choice. While opting for an employer-provided policy may seem the easiest, it often falls short of providing adequate coverage. These policies often lack portability, so if you change employers during or following residency, you could lose your coverage.
While you may choose to elect an employer-provided policy, it may benefit you to supplement that coverage with an individual policy that provides ongoing protection that follows you throughout your career.
Mistake #3: Not Considering Specialty-Specific Coverage
Medical professionals face unique risks based on their specialties, yet many doctors opt for standard policies that don’t address those risks.
When you secure a DI policy with an “own occupation” definition of disability, it covers disabilities that prevent you from working in the occupation in which you trained and are currently working. Some DI policies will include this feature as part of the contract, while you may need to add it as an optional rider to other policies. A disability income insurance policy with an “own occupation” feature may pay benefits and protect your financial situation if you cannot work temporarily or long-term due to an illness or injury.
A “true own occupation policy” may be more suitable for physicians, particularly those with highly specialized positions requiring extensive training. This “true own-occupation” policy may allow you to collect benefits if you’re unable to perform the substantial and material duties of your specialty, even if you’re able to work in another occupation.
Mistake #4: Underestimating How Much Coverage You Need
As part of the DI application process, you’ll need to select a coverage amount that you would receive if you were unable to work. The amount of disability income insurance for which you can apply is typically based on your income. When purchasing coverage as a resident, insurance companies typically have special limits for which you may apply without having to prove income, recognizing that your income will increase significantly when you complete your residency.
Remember that you will also likely want a higher coverage amount later as your career progresses and your income increases.
You can easily solve this challenge with a future insurability option rider. While you’ll need to medically qualify for the rider initially, you won’t need to do so when you increase coverage in the future.
Mistake #5: Ignoring Policy Riders
The future insurability option isn’t the only rider available. An insurance rider is additional coverage that can be added to a policy, offering crucial benefits and ensuring that your coverage evolves over time.
Some common riders are:
Own Occupation: May pay full benefits for disabilities that prevent you from working in the occupation in which you have been trained and are currently working in.
Future Insurability Option: Allows you to increase coverage later without additional medical underwriting.
Cost of Living Rider: Post disability increases to your monthly benefit annually to keep pace with inflation.
Student Loan Protection: Cover your student loan payments while you are disabled.
Mistake #6: Overlooking Policy Exclusions and Limitations
It’s a myth that disability income insurance policies are the same; in fact, there are so many different policy configurations. That’s why it is important to understand what is covered and what isn’t in your particular policy.
Premium structure, monthly benefit amount, and rider configuration all have an impact on DI. Take the time to thoroughly review policy terms, examine all exclusions and limitations, and don’t hesitate to request clarification about anything you don’t understand.
Mistake #7: Relying on Advice from Inexperienced Advisors and Your Peers
When looking for resident disability income insurance, you may need help navigating the coverage, riders, exclusions, limitations, and more. DI is a complex topic, and your decisions today can have long-term consequences.
Just as you wouldn’t turn to your non-medical peers for advice about procedures or your medical peers for suggestions for investment strategies, your peers may not be the best source of information. Additionally, not all insurance advisors are equipped to meet the specific needs of medical professionals, and relying on their advice may lead to unexpected shortcomings in coverage.
You’ll be best served seeking advice from those who have experience working with medical professionals and are familiar with their unique needs. At Treloar & Heisel, we have a long history of working with medical and dental professionals, and our goal is to educate, prepare, and protect our clients.
Take Charge of Your Future Today
Considering all the factors and navigating the intricacies of resident disability income insurance can be daunting, but avoiding these common mistakes can significantly enhance your financial security. By taking proactive steps in evaluating your disability income insurance needs, you can safeguard your future against unforeseen circumstances.
Take control of your financial future and the peace of mind that comes with knowing you are well-protected. Learn more about Disability Income Insurance for Medical Residents and how to connect with the experienced advisors at Treloar & Heisel.
About Treloar & Heisel
Treloar & Heisel, an EPIC Company, is a premier financial services provider to dental and medical professionals across the country. We assist thousands of clients from residency to practice and through retirement with a comprehensive suite of financial services, custom-tailored advice, and a strong national network focused on delivering the highest level of service.
Insurance products offered through Treloar & Heisel, LLC.
