If you are addicted to the National Geographic Channel, like I am, then you've probably seen videos of Adelie penguins. The males build nests out of stones in frozen Antartica...
This is the tenth in a series of posts made in preparation for a presentation I will be making for physicians in fellowship training at an upcoming ACCP meeting. In this post, I’ll be covering the types of insurance that you need to get yourself safely to retirement.
You can buy insurance to cover almost anything you can imagine, and there are salesmen out there that will try to. Most physicians will need several types of insurance: home, car, health, malpractice, disability, life, and umbrella. I am going to focus on just the last 3 types of insurance.
Disability insurance. You’ve likely invested more than $200,000 and between 11 and 15 years in your education to become a physician so you had better protect that investment. The amount and type of disability insurance you need will depend on your individual circumstances. For example, early in your career, you have a lot more to lose if you suddenly find yourself unable to work whereas if you are close to retirement and already have a sizable retirement fund, then you may not need to depend on disability payments to get by. Also, you will need to consider your specialty. A friend of mine who is a general surgeon had to stop operating in his early 50’s due to arthritis in his thumb and that pretty much ended his practice career. On the other hand, another of my colleagues who is an endocrinologist became paralyzed from the waist down and dependent on a wheelchair after a diving accident as a young adult; she practices full-time and is one of the most highly regarded physicians in her field nationally. Many group practices and hospital employers will provide a standard disability insurance policy and you will need to look at your own circumstances to determine if that is enough or if you need to purchase additional disability insurance on your own. Disability insurance policies can have a lot of differences. For example, some will cover student loan payments and some won’t; some are subject to income tax and others are tax-exempt.
Life insurance. This is a tricky one. If you are single with no dependents, you may not need any life insurance since if you die, no one will be left unsupported. But most of us have at least one person other than ourselves who depend on our income. The amount of life insurance that you need will vary depending on how many people depend on your income and for how long they will be depending on it:
- If your spouse does not work, you need more life insurance
- If you have children, you need more life insurance
- If you are early in your career and have not built up a sizable retirement fund, you need more life insurance
- If you have a lot of debt (mortgage, loans, etc.) that you don’t want to leave to your heirs, you need more life insurance
- On the other hand, if your spouse works, your kids are out of college and you are near retirement, you may need little or no life insurance
There are essentially two types of life insurance, term and whole life. For physicians, term life insurance is the better deal and I would stay away from whole life policies since whole life policies are considerably more expensive and provide coverage that you will not need for your entire life.
Umbrella insurance. This is a policy that provides coverage over and above your regular insurance policies. When asked why he robbed banks, Willie Sutton famously replied, “Because that’s where the money is”. The same could be said for why personal injury attorneys sue physicians: because that’s where the money is. As a physician, you have a big red bull’s eye painted on your back and if you are involved in an automobile accident or someone slips on your sidewalk and gets injured, there is a pretty good chance that they and their attorney are going to go after you for more than your regular automobile or home owner’s insurance policy. I think that all physicians after residency and fellowship should have an umbrella insurance. $1 million in coverage is usually sufficient.
So, in summary, don’t just buy a lot of disability insurance, buy the right amount that you are going to need based on your specialty and how far along you are in your career. Don’t just buy a lot of life insurance, buy what you need when you are younger and when your family is dependent on your income. But do buy umbrella insurance.
In the next post in this series, I’ll go over the advantages and disadvantages of state teacher’s retirement systems for those physicians who are eligible for them.
September 3, 2016