Let’s start by saying that I’m certainly not the only person on the internet that thinks it’s critical for all doctors to buy true own-occupation disability insurance that protects you in the event that you become disabled and can’t earn your full income. Your earning potential is too high and school is too expensive to not protect. There’s a good chance you’ve already (or will soon) hear about DI all the time because your eyeballs and attention are valuable and disability insurance agents sponsor a lot of podcasts and a bunch of blogs.
And that’s actually basically okay because that helps pay the bills for a lot of meaningful content out there; these folks are paid by the insurance companies (not you); and you need to use one to buy a policy anyway.
I bought my disability insurance policy toward the end of residency, but when I look back at my post-call exhausted driving, occupational hazards (e.g. sharps), and health scares, I feel fortunate to still be healthy and to have gone through the process unscathed. Though we haven’t needed to use it yet, it’s not hard to imagine a scenario where things didn’t pan out so well or where I or my wife developed a condition that prevented us from buying insurance in the future.
I have no doubt that the best answer to the question of “when to buy disability insurance?” is as soon as feasible. And I wondered more about the logistics of buying a physician policy as a medical student, something that no one really talks about.
So I asked Matt Wiggins from Pattern to talk with me and fill in the gaps. He made a video for you, dear reader (good for anyone but especially medical students and residents), and I’ve written a post breaking down how that works in medical school and detailing my thoughts. This isn’t a sponsored post (we don’t do those around here), but I do have a relationship with Pattern if you end up checking them out to get policy quotes. (It never costs anything to see your options; agents get paid a commission if you buy a policy.)
What is disability insurance?
A disability insurance policy will provide you with monthly paychecks if you become unable to carry out the duties of your job due to disability. The more you earn, the bigger a policy benefit you can purchase (and the more it costs in premiums). Disability insurance ensures that you are protected financially when things go wrong and you can’t work the way you used to.
A good policy for a doctor is called an own-occupation policy because it pays the full benefit if you can’t do the same doctoring job you were doing as a physician when you become disabled, even if you can be gainfully employed otherwise. If a surgeon hurts her hands and can’t operate, then she’s fully disabled even if she goes on to make even more money as a consultant or another kind of doctor. The problem with most policies bundled with your employment is 1) they don’t follow you when you leave your job and 2) they typically don’t have as strong a definition as own-occupation or what defines a disability. The practical matter is that a group policy just may not cover you in real life. The sorts of policies residents have while in training are notorious for letting you down when you need them most.
When you buy a policy, you will also choose from a variety of “riders,” which are essentially optional add-ons you can purchase a la carte. Each one makes your policy more expensive but also makes it more flexible. A common example would be a “future benefit increase” rider, which allows you to upgrade to a bigger policy in the future when your income rises without needing to go through medical underwriting. Even if you develop a medical condition that is sure to result in a disability in the future, the company still has to let you exercise the rider.
When is the right time to purchase disability insurance?
So you definitely need it. The question is just the timing. Ultimately, since you can’t predict the future, the real answer is as soon as you are eligible to buy the right kind of policy and can afford it. The first part has a real answer, the affordability part is a little fuzzier.
There are two long-term financial benefits to grabbing a policy early:
— Cheaper rates based on Age and Health (you’re never younger or probably healthier than you are right now)
— Discounts from University or Training-program affiliation (range anywhere from 10-40% off the premium and will typically last the life of your policy even after you leave)
For many, a good solution is to get a very small policy towards the end of medical school. You can lock in $1,000/month in coverage for $20-$40/month, which would at least provide $1,000/month tax-free until you are retirement age should a disability happen to you in medical school. But the main benefit is that this small purchase would lock you into the ability to increase your coverage to much higher levels without the insurance company ever checking on your health again, which can be the difference between being future-proof or not. It’s all about who you are when you buy, not who you become.
How Things Differ for a Medical Student
A resident or attending buying disability insurance is able to buy an own-occupation specialty-specific policy. This is the kind that protects exactly what you do. A pre-match medical student will instead get a generic (internal medicine) policy. If you buy a policy after matching, the rate will be adjusted for the risk category (and procedures etc) of the field they’ve chosen. So an anesthesiologist, a higher-risk specialty, will have a higher rate than a family doc.
But there is some nuance. I asked Matt how that works if you specialize later on, and this is what he said:
When a doctor files an own-occupation claim, the insurance company looks to find out exactly what duties or procedures the doctor is doing at the time of disability, and that is the occupation that is protected. In other words, if a doctor buys a policy in med school and then goes on to an internal medicine residency, followed by a cardiology residency, followed by an interventional cardiology fellowship, they will be protected for the procedures they are doing as an interventional cardiologist even though they bought their policy well before they were an interventional cardiologist and their rates are cheaper than if they had purchased the policy later as an attending IC doc.
Interesting (and not what I would have expected at all).
So, if you’ve chosen a higher risk field like a surgical specialty or anesthesiology, then you’ll also save money in the long term by getting the rates of a less risky “generic doctor” profession upfront.
Most companies will only offer policies to fourth-year students, who can purchase a benefit of up to $2500/month (which would cost in the neighborhood of $60-$100/month in premiums for men and $75-$125/month for women). Once you match, you’d be eligible to increase to the resident benefit (which is 5,000/month across the board). But you don’t have to buy a policy at the maximum you’re eligible for; you can buy one that you’re confident you can afford.
The idea that I could have skipped a couple of burritos and a latte and locked in disability insurance as a medical student is crazy to me. I waited until late in residency when we had more cash flow, but that was I think the wrong approach. I should have purchased a small policy as soon as possible. Even if I couldn’t afford the higher premiums to increase the benefit until later in training, at least I could have guaranteed that flexibility to do so upfront by being more proactive.