Pros and Cons of Term Life Insurance for Physicians

Term life insurance is a popular choice for medical residents, fellows, and early-career physicians, but is it the right choice for you?

Let’s explore the advantages and disadvantages of term life insurance for physicians.

What Is Term Life Insurance?

Term life insurance provides financial security for your family or dependents, and benefits from such a policy could help cover lost income, mortgage payments, educational expenses for your kids, and other living expenses.

With a term life policy, coverage is for a fixed period of time, typically 10, 15, 20, or 30 years. The key features are:

• Fixed premiums for the duration of the term period selected.
• Payment of the death benefit if the policyholder passes away during the coverage period.
• Term Life can be converted without medical evidence of insurability to permanent life insurance, depending on the provider.

Difference Between Term and Permanent Life Insurance

Unlike term life insurance which provides coverage for a fixed period of time,  permanent life insurance is intended to provide coverage for your entire lifetime. Depending on the type of permanent life insurance policy selected, premiums may be payable for your entire lifetime, or may be payable for only a certain number of years.

Permanent Life insurance also includes features you won’t find with a term life policy. For example, unlike term life insurance which provides death protection only, permanent life insurance may include a cash value component that can be borrowed against or withdrawn.

If you’re in training or the early stages of your career, term life is usually the best option. As you progress in your career and your financial situation evolves, you should consider converting some of your term life insurance to whole life.

Here are the pros and cons of term life insurance:

General Advantages of Term Life Insurance

1. More Affordable Coverage

One of the primary advantages of term life insurance is its affordability. Compared to permanent life insurance, term life policies come with much lower premiums, making them an excellent option for medical residents, fellows, and early-career physicians who may have limited financial flexibility. This affordability allows you to secure higher levels of coverage without straining your budget.

2. Flexibility in Coverage Period

Term life insurance offers significant flexibility when it comes to the length of your coverage. You can select terms typically ranging from 10 to 30 years, allowing you to align the policy’s duration with your unique career and financial goals.

3. Simplicity and Clarity

Term life insurance is straightforward and easy to understand. Unlike permanent life, there are no complicated elements related to the policy's cash value; it focuses purely on providing a death benefit. This simplicity makes it an attractive choice for early-career physicians who want reliable coverage without complexities.

General Disadvantages of Term Life Insurance

1. Limited Coverage Duration

One of the main disadvantages of term life is that, by design, term life insurance coverage provides coverage for only a specified period of time, after which premiums will increase significantly or the policy will terminate, depending on the insurance company. If you still need life insurance at this point, age and changes of health may be a factor in obtaining new coverage.

2. No Cash Value

Unlike permanent life insurance, term policies only offer a death benefit without a cash value accumulation component. This lack of financial asset building can be seen as a drawback for those seeking long term insurance coverage combined with the ability to accumulate additional savings.

3. May Not Meet Long-Term Needs

When selecting a term policy, you base your decision on your current situation, which may change significantly over time.

Your family situation may change, or your income may increase in ways you can’t foresee, meaning that your financial obligations may expand as well. Even with a base of a 30-year term, you might need additional coverage down the road.

However, if you’ve developed health issues during your coverage period, new coverage — whether term or permanent — could come with higher life insurance premiums or stricter underwriting requirements. You might even find that it would have been beneficial to have a long-term care rider on your policy.

The changes you’ll see as you age make it harder to adjust your coverage to suit evolving needs.

Building a Life Insurance Strategy for Your Career as a Physician

For many younger physicians, term life insurance is a solid starting point. However, as you accumulate assets and your family’s needs grow, transitioning to a more comprehensive life insurance plan may become part of your long-term financial planning.

When securing life insurance, physicians must consider more than just the type of policy. Ultimately, the right life insurance strategy for you will depend on your individual circumstances, career stage, and future goals. Consulting with a financial advisor or insurance expert can help ensure that your coverage aligns with your broader financial picture, giving you the peace of mind to focus on what matters most.

To explore what may be the right strategy for your unique situation, contact us today.

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.