Disability insurance protects against financial demise
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Key takeaways:
- Buy disability insurance early after graduating from medical school.
- Always maintain an emergency fund in cash that would cover at least 3 months of living expenses.
Like many sports, such as soccer and basketball, financial independence requires simultaneous offense and defense. One of the most important defensive plays a physician must make is buying disability insurance.
Medical students invest a significant amount of time, energy and money to become attending physicians. One physical or mental disability can ruin a young physician’s life in many ways, including financially. Disability insurance protects against financial demise in a profession that requires such significant investment.
When to buy
Buy disability insurance early after graduating from medical school, ideally when one is younger and, hopefully, healthy.
Keep in mind there is often a waiting period for 3 months between becoming disabled and when one can collect disability benefits. Thus, always maintain an emergency fund in cash that would cover at least 3 months of living expenses.
Disability benefits stop at the age of 65 years. Some of the benefit payments must be used to save for life after 65 years.
Important riders to consider
There are several important riders one should consider purchasing with disability insurance:
Own-occupation: This is critical for physicians, allowing one to collect disability if one cannot work as a physician. For example, if you cannot operate anymore due to a back injury, you can still collect disability payments and work in the pharmaceutical industry.
Guaranteed insurability or a future purchase increase: This allows one to purchase a disability policy when young and gradually increase the policy coverage as a salary increases — without repeating medical clearance as one gets older. This is critical when initially obtaining disability insurance as a relatively lower-paid resident or fellow.
Residual disability: This allows one to receive partial disability if one is partially disabled. For example, if you are only able to work 50% of your normal workload, you could still work the 50% and collect half your disability benefit.
Cost of living: If one gets disabled at a young age, disability benefits will increase commensurate to inflation and the cost of living.
Noncancelable, guaranteed renewal: The insurance company cannot cancel one’s policy if paying the premiums. If the company goes bankrupt, then it must sell the policy to another insurance company.
For more information:
Chirag P. Shah, MD, MPH, is a soccer and Nordic ski coach, who also practices medicine and teaches in Boston. He can be reached at cshah@post.harvard.edu.
Jayanth Sridhar, MD, is an award-winning podcaster, physician and educator who is chief of ophthalmology at Olive View Medical Center in Los Angeles. He can be reached at jsridhar119@gmail.com.
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