One of the most importance financial steps that a high-earner (or future high-earner) can take is insuring against catastrophe. Good saving habits and a strong income can go a long way, but they aren’t worth much if you get taken out of the workforce by a freak accident or a prolonged illness.
I had read enough about the importance of locking in a good rate for long-term disability insurance that I took care of it during my PGY-4 year. My policy includes:
- own-occupation provision (I will receive compensation if I am unable to work in my medical speciality, even if I am able to work in another profession)
- cost-of-living rider (payments increase by 3% per year to keep up with inflation)
- residual disability rider (I get partial payments on a sliding scale if I lose 15% or more of my monthly earnings due to disability, even while still working in the same medical speciality)
- future increase option rider (my current plan will pay just $5,000 per month if I become totally disabled; once I become an attending this can be increased annually by $2,500 up to a maximum benefit of $15,000 per month)
For this I pay $178 a month, which I understand to be fairly competitive for its terms, my age, and my medical history (a couple chronic medical problems that, while minor, are lifelong). I had to undergo an extensive medical history-taking session and provide past medical records, but I did not have to have a physical, have vitals taken, or have labs drawn. The process was easy and painless.
Contrast that with life insurance. I’m in the final stages of acquiring a term life insurance plan, a process which has taken 11 weeks and counting. I had the same phone interview and request for medical records as I did with disability insurance, but they also sent a nurse come out to my apartment to take my vitals and collect blood and urine specimens (at least I hope she worked for the insurance company…).
I finally received an offer for $108 per month for a $1,000,000 30-year term policy. This compared to the $60-65 per month that would be more typical if they hadn’t found high cholesterol on my labs. My understanding is, if I had applied for this policy when I was under 30 and still in residency, they would never have been drawn. By not applying in – say – my PGY-2 year, I have saved ~$780 in premiums (albeit while carrying the risk of not having a good life insurance plan), but it will cost me an extra $15,480 over 30 years. That’s a net cost of $14,700 just because I was too busy (lazy) to get this taken care of a few years earlier.
There’s a lot of inertia working against getting this stuff sorted in residency: busy schedule, the intrinsic abstractness of insurance in general, and the fact that many residency programs provide their own group life and disability insurance (even if they are often woefully inadequate). But I can now attest that it’s worth your time and effort to get the process over with.