Insurance coverage might not be considered the hottest topic in conversation, but for physicians, it’s a necessary one. The exciting topics of insurance – auto, home, disability – won’t be going away anytime soon, whether we spend much time thinking about them or not.
Have you ever stopped to think about how much insurance coverage you need to make your life run as smooth as possible? It’s mind-boggling when you consider how many forms of coverage you need once you become a physician.
Whether its adequate homeowners or renters insurance, long-term disability, or automobile, it takes a lot to keep you covered. And when it comes to coverage for a physician’s needs, the cheapest insurance may not be the best insurance.
Today we are going to discuss each category of insurance which is of interest to physicians. We’ll discuss specifics about each insurance and resources for you to ensure you have proper coverage. These are the policies which will not only protect you in case of an emergency, but are also part of sound financial management.
Let’s take a look at the essential elements to every physician’s insurance checklist.
One of the most important items to mark off your insurance checklist is your homeowners insurance.
If you’re already a homeowner, then chances are you have purchased homeowners insurance or are shopping around for coverage and premiums. But it’s worth discussing this coverage a little more in depth.
Why You Need Homeowners Insurance
There are several reasons you should purchase a homeowners insurance policy. The first – and arguably the most persuasive – is because it’s likely a requirement from your mortgage lender. The lenders want assurance their investment is protected in case of fire, vandalism, or some other hazard. Having a policy in place will satisfy this requirement from your mortgage lender.
But what are the other reasons besides your mortgage lender makes you? A comprehensive insurance policy protects you in multiple scenarios. A policy will protect your unattached structure in case of wind, fire, vandalism, thunderstorms, tornadoes, and even hurricanes! All of these scenarios could be major catastrophes but having a good policy in place will help you recoup the cost of the damage.
It’s not only your structure which is covered. Your personal belongings on the inside of your property are covered with a homeowners policy. Think of all the valuable belongings inside your four walls: appliances, jewelry, clothing, furniture, just to name a few.
Your coverage isn’t limited to your structure or what’s inside your four walls either. Depending on the hazard, it’s possible you’re covered when you’re away from home. For instance, if your golf clubs are stolen from your car, even though you weren’t home at the time. Your homeowners policy might cover this despite the fact you weren’t inside your home.
Depending on your policy, you could also have personal liability. This is the coverage in case of a lawsuit against you for an injury on your property, or even away from your home. It can help with legal and medical fees associated with an accident.
A homeowners policy not only provides you peace of mind, but can also provide additional coverage to your home, its contents, and anyone who is visiting your property (whether invited or uninvited).
What to Purchase With Your Homeowners Insurance
There are a few items you should review with your homeowners insurance policy.
The first is the deductible. How much will you be responsible for with each claim? Most policies have a minimum of a $500 deductible, but you can increase the amount if you want to lower your premium.
You will need to work with your agent to calculate your rebuilding costs for the structure. This factor makes up a large portion of your premium.
You’ll also need to confirm coverage for your personal liability. As physicians, I highly recommend you carry more coverage in this area versus someone in another profession, and we’ll discuss this further a little later on. This is the part of the policy which covers costs associated with lawsuits.
There are a couple of other items you should confirm coverage, depending on your state. The first is flood insurance. The second is earthquake insurance. These aren’t always included in your policy, so ask your agent about it, especially if you’re in a state prone to either of these natural disasters.
Working with a knowledgeable, trustworthy agent for homeowners insurance is critical. You’ll want to use someone who can help you build the most comprehensive policy and still stay within your monthly budget.
Rebuilding Costs and Homeowners Insurance
One item you want to make sure you have reviewed in your homeowners policy is the rebuilding costs. Remember, you’re insuring the structure of your home, not the land you built your house on. This means you should not factor in the value of the land in the rebuilding cost.
If you were to include the land in the rebuilding costs, then your cost would be inflated and it would cause your premium to be higher. If you are trying to make sure you have adequate coverage and want to stay within your budget, then start with a review of your rebuilding cost in your policy.
Discounts With Homeowners Insurance
It may be a requirement for you to carry a homeowners insurance policy, but one thing it doesn’t have to be is a budget-buster. There are ways to save on your policy while still purchasing the right coverage.
The first way is to shop around! I’m amazed at how many of my clients don’t take time to shop around for different rates. I get it, it’s not very exciting to call agent after agent trying to get a quote or trying to get this done when you’re in the process of purchasing a home. But by putting in a little effort, you can save money on your premiums.
Speaking of premiums, by paying your premium annually, versus monthly, you can get a discount. Make sure you ask the agent what incentives there are for paying premiums up front. Some states require you to put your premium in escrow so this may not be an option, but if your state doesn’t require it, then ask about the discount.
You can lower your premium by taking on a higher deductible. If you have your emergency fund built up, then this is a smart option to consider. Many policies have a $500 deductible but you can lower your premium by raising your deductible to at least $1000.
Lastly, don’t forget about combining with other insurance policies. If you can purchase from the same company that provides your automobile coverage then you should qualify for a discount. Don’t leave anything on the table!
Don’t Skimp with Homeowners Insurance
The important point to remember with homeowners insurance is it’s not a place you want to skimp too much. There will be times it’s important to pay a little more because your coverage will end up being more comprehensive. Like other areas in your life, a little bit of research and comparison shopping can end up getting you the best policy possible for your budget.
There’s a lot that goes into homeowners insurance, but what if you aren’t a homeowner yet?
Many of you reading this are in an apartment and have a landlord you pay rent to each month. If that’s the case, then you will need to make sure you have proper renters insurance. Fortunately, renters insurance is inexpensive but it can cover you in case something unexpected happens to your belongings.
The Basics of Renters Insurance
Imagine if your apartment had a fire and destroyed all your belongings. Or what if the pipes burst in the apartment above you and your furniture took the brunt of the burst pipe? You wouldn’t want to pay out of pocket to replace these items, would you?
If the answer is no, then you need renters insurance. Renters insurance is designed to protect and replace your belongings in case of vandalism, fire, or other damage in your apartment.
You might think your landlord should cover the cost of any damage which occurred inside your apartment. Here’s the kicker – your landlord’s insurance only covers the dwelling, not your personal belongings.
One more thing, if you have a roommate and they have renters insurance, then you still need to purchase your own policy. The policy only covers your belongings, so make sure everyone under your roof has their own policy.
How Much to Spend on Renters Insurance
As I mentioned before, renters insurance is very inexpensive. It’s one of the few things in the insurance world where you get a lot of value for very little money.
You’ll want to have ample liability coverage (I recommend $100,000) and you might need to add flood insurance if you live in a flood zone. Take an inventory of your belongings so you can confirm you would have enough insurance coverage to replace everything – even if you lose it all.
There’s no excuse not to have renters insurance and you can have an agent work on quotes for you as well.
You’ve got your dwellings covered, now you need to cover your other big purchase – your car. You can’t have a physician’s insurance checklist without talking about auto insurance.
You might think that auto insurance is one of those fix-it-and-forget-it things. But having the right coverage is especially important for physicians.
The Basics of Automobile Insurance
Other than knowing you’re required by state law to carry automobile insurance, have you given much thought to the subject? If I had to guess the answer’s probably no.
When you’re talking about auto insurance, there are 3 types of coverage which will fall under these policies: liability, comprehensive, and collision.
Not all states require liability coverage, but it’s a good idea to carry it. Think of liability coverage as covering any third-party costs with an accident. You’ll want to have at least $500,000 in coverage. Liability coverage includes two different categories: property damage and bodily injury. Liability coverage in your policy will cover costs associated with fixing the other driver’s car and also paying any medical bills associated with the accident.
Comprehensive coverage is coverage for repairs related to any damage to your vehicle which doesn’t involve an accident. This is the coverage you need when you have damage from a hail storm or if a tree limb falls on the back of your car.
Collision coverage is the coverage you use when you are involved in an accident – either by yourself with your car only or if you’re in an accident with another vehicle.
How to Save on Automobile Insurance
Since every driver is required to carry insurance, you’ll be able to find multiple quotes to fit your budget. But how can you save on auto insurance without jeopardizing coverage you need? Here’s where I want to caution physicians. It’s important for physicians to carry more coverage for auto insurance than the average person. Here’s why.
If you’re ever involved in an accident and the other driver finds out you are a physician, suddenly there is more of an incentive for the driver to potentially file a lawsuit against you. Most people know physicians make more money than the average person, and there are people who will take advantage of this fact. It’s sad but true.
Similar to your homeowners or renters insurance, you need to work with an agent to get the best policy. Ask about discounts if you carry more than one policy with the company. You could also get a discount for paying your premium annually versus quarterly. It’s worth asking your agent to get the right policy in place and take advantage of every discount.
Umbrella insurance is also referred to as a personal liability insurance. This is additional coverage to your homeowners or renters insurance. This is supplemental insurance which I strongly believe every physician should have.
Think of umbrella insurance as a back-up insurance plan which kicks in after your other insurance coverage has paid out. It covers accidents occurring on your premises – either involving you or someone else. Umbrella insurance covers property or equipment which can cause damage or harm others, such as a pool, trampoline, or a household pet.
An umbrella policy would be in addition to the extra personal liability coverage in your homeowners and automobile policies. Those two plans would kick in first, then your umbrella policy would be used.
If you want to make sure you don’t lose everything you’ve worked hard for due to a lawsuit, then you need to purchase an umbrella policy.
You might not be convinced you need to add this additional coverage through an umbrella policy. But I tell my clients when you’re a physician, you have to make sure you cover all your bases. For the most part, people are honest. But there’s always a chance that someone will hear you or someone in your household is a physician, and suddenly they cry foul at the first chance.
It’s unfortunate we have to worry about these things, but we do so make sure you have enough coverage if the worst happens.
What’s Included in Umbrella Insurance
Umbrella insurance picks up where your auto insurance leaves off. For instance, if you are in a car accident and it’s deemed your fault and then the other driver sues you for emotional damage. Your automobile insurance will only pay for the damage to the vehicles and the medical fees but not the “emotional damage” the driver could sue you for.
If you are building your net worth, then you need to have umbrella insurance. Look for policies which provide at least an additional $1,000,000 in case of a lawsuit or crazy expensive claim. Fortunately, the policies are very inexpensive (between $150-$300 a year) and you will be glad you have it in place.
You can purchase an umbrella policy through the company where you purchase your homeowners or automobile policies. It’s easy to add on to your existing policies. With the affordability of an umbrella policy, and the tendency of some people to take advantage of physicians, there’s no reason for you not to put an umbrella policy in place.
Long-Term Disability Insurance
We’ve talked about insuring your home, automobile, and how to protect yourself from personal lawsuits. Now it’s time to discuss insuring your current and future income with long-term disability insurance.
A physician’s financial portfolio will never be complete unless it includes a comprehensive long-term disability policy. Your job is not only physically demanding, but think about how your work would be impacted if you were to be injured.
Why You Need LTDI
Long-term disability insurance is one of those must-haves for physicians. As much as we’d like to think we will remain healthy as long as we’re practicing medicine, there are times when it’s not the case. This is where disability insurance can help bridge the gap between income and ability to work.
Statistics tell us a story. One in four Americans will experience a situation before age 65 in which they need to make a disability claim – and doctors are not exempt from this average. This is coupled with the fact, physicians are double the rate of the average person. Between accidents, illnesses and physician burnout, there are multiple scenarios where a disability claim could occur.
Many of you reading this may assume you have enough coverage through your group disability insurance through your hospital. The group coverage can provide some benefit, but it is severely limited when it comes to replacing your physician’s income.
With today’s long-term disability policies, you can tailor them to your specialty and income requirements.
One of the greatest benefits to purchasing your own LTDI policy is how portable it is for you. If your career takes you to multiple states, then you’re still covered. If you choose to exclusively work locums or 1099 work, your policy will be there for you. The portability of your policy means you don’t have to worry about anyone else making a decision on your policy – except for you.
What to Look for in an LTDI Policy
The number one thing to start with when choosing a policy is to work with a knowledge disability insurance salesperson. You want to work with someone who specializes in working with physicians. You also want to look for someone who can quote as many carriers as possible. At this time, there are 6 carriers for LTDI policies, so choose someone who can give you access to as many as possible.
You’ll also need to choose riders for your policy. Riders are simply conditions in your policy. They can be tailored to provide greater coverage to you and they can be based on where you are in your medical career. Again, a knowledgeable salesperson will steer you in the direction you need so your policy is as comprehensive as possible and still within your budget.
The very first order of business when selecting items for your disability policy is to make sure it is non-cancelable and guaranteed renewable. This is the insurance world’s way of saying the insurance company can never take your policy away from you. Assuming you pay your premiums on time, then your policy will remain in effect.
The second most important aspect to your LTDI policy is to make sure it’s written with the Own Occupation language. Most personal long-term policies are written in this language, but confirm with your agent this is what you’re selecting.
Own Occupation means you will be paid out based on your ability to perform the job you had prior to your disability. Compare this language to the way group policies are written, which is Any Occupation language. Any Occupation means the insurance company decides which occupation you can perform after your disability claim is filed.
Purchasing an Own Occupation policy for yourself means you will have the most comprehensive coverage in case of an accident or illness. It means you will continue to get paid, even if you’re able to perform some type of work.
When to Purchase an LTDI Policy
Since I work with quite a few residents, I’m often asked when is the best time to purchase an LTDI policy. The answer is, almost anytime is a great time to purchase a policy. If you are an attending physician and haven’t purchased a policy yet, it’s OK because it’s something you can start looking into right away.
If you’re a resident, I strongly recommend you purchase your policy while you are in your residency or during your fellowship. Here’s why I make such a strong recommendation. When you try to purchase a policy, you will have to go through the medical underwriting process. During your residency, this will presumably be the time in your career when you are the youngest and healthiest.
Purchasing during your residency will lock in the lowest rates possible. If you’re concerned you won’t be able to afford a decent policy, don’t worry. There are riders you can purchase so your coverage can “grow” with you, as your career in medicine grows.
One more thing, the discounted rate for a resident is good for about 90 days once you’ve completed your training. So if you can’t get your policy together until then, you should still be able to take advantage of the lower rates.
How to Save Money with Your LTDI Policy
There are a few ways you can save money on the cost of your long-term disability policy. The first way to save is to purchase while you’re a resident (or shortly thereafter).
The second discount is what’s referred to as a Multi-Life discount. If you can find one other person in the same practice as you, then you can both apply for a disability policy and receive a discount. The beauty of this discount is it can be anyone in the practice – another doctor, nurse, or administrative personnel.
If you purchase a policy and then move states, make sure you have your rates re-evaluated. There are states where the insurance premiums are much lower versus other states, so it’s worth looking into to see if your premium could be lowered. States like California and New York are notoriously high with the premiums so it pays to consider location.
If you’re a female physician, have your agent use a unisex rate so you’re getting the lowest quote possible. A policy for a female physician can be 3-5 times the cost of a male physician’s policy (the insurance companies will say this is due to increased risk with childbirth). However, if your agent is savvy enough to run your quote as a unisex rate, then you can benefit from a lower premium.
Lastly, try checking any association you belong to as a physician or your affiliation through a hospital. There may be discounts available through one of these avenues.
Purchasing long-term disability insurance as a physician should be seen as a must-have on your physician’s insurance checklist. Having this coverage in place will ensure you and your family can still have a decent income even if you are injured or have an illness.
Term Life Insurance
Disability insurance is great for the unexpected accidents which can happen. But what if the unthinkable occurs? This is where term life insurance comes in.
Term life insurance is a life insurance policy which provides a benefit to your beneficiaries, paid out during a specific time frame (a term). You can purchase life insurance either as a term life or whole life policy, but I recommend term life only.
Term life insurance is an incredible value. For a very small amount each month, you can make sure your family is provided for, should the worst happen to you.
You’ve probably started getting inundated with offers from various salespeople. Doctors are a prime target for all kinds of investments and policies. This includes life insurance, or more specifically, whole life insurance.
There’s rarely an instance where I would recommend a client purchase a whole life policy. They have high monthly payments which do very little for you and are used to pay the high commissions of the salespeople. Instead, I recommend everyone invest in a term life insurance policy.
Basics of Term Life Insurance
With term life insurance, your beneficiaries would receive a payout should you pass away during the designated time period. Most policies are purchased in a 15, 20, or 30-year term, although you can purchase them in any 5-year increment.
A general guideline is to purchase coverage equal to 25 times your income. Another amount to consider is roughly 10 years worth of expenses. It may sound like a crazy high number, but most likely you’re the breadwinner for your family so you need a policy which supports your family’s needs.
Your family will have quite a bit of expenses over the years, should something happen to you. Expenses such as funeral costs, mortgages, bills, medical expenses, and college tuition. When you consider the amount your spouse or children would be responsible for over the years, then it’s easy to see how you need to get to a $2 or $3 million policy.
The Cost of Term Life Insurance
Term life insurance happens to be very affordable – which is another reason it’s such a great product. You can find policies for as little as $25 a month, depending on your age and health.
As with other insurance policies, your premium will go up or down depending on the amount of coverage you choose to purchase. If you purchase a policy when you’re in your 20s, then your rates are going to be less versus purchasing in your 40s.
Your medical history will also be factored into the premium. You want to answer all medical questions as honestly as possible. Not only can your answers affect your premium, but if you omit something it can cause an issue after your death. It’s better to be upfront about all medical conditions so there aren’t any questions should something happen to you.
You can purchase a term life policy through any insurance broker. You should get quotes from multiple places, but keep in mind the terms are going to be about the same from policy to policy. Still, it’s a good idea to have several quotes so you know you’re getting the most competitive cost. You can also compare the quotes to your current insurance company’s offerings for term life.
It’s possible your employer also offers a term life policy as a benefit. The payouts on the group policies are quite a bit smaller than if you were to purchase your own plan. Although a nice benefit to have, you’ll want to have your own term life policy in addition to whatever your employer is offering.
Even if you’re the breadwinner, you should take out a policy for your spouse. Think about the help you would need if something were to happen to your spouse. In addition to funeral costs, think about the ways they contribute to your household. With term life being so affordable, there’s no reason not to purchase a policy for your spouse.
How to Ladder Term Life Policies
In the term life insurance world, there’s an approach you can consider called “laddering.” This is where you would purchase two policies, instead of only one term life policy.
Most physicians who choose to go the route of laddering will purchase their first policy and it will have a higher payout, say $2 million and will have a 20-year term. Then you would purchase a second policy where the payout would likely be less, perhaps $1 million and would have a 15-year term. The idea being once your first policy has dropped off, you would have built up your assets by the end of the term, but you still have the second policy in place – without having to go through underwriting again.
The concept of term insurance laddering is for young attendings, residents, or medical students who have a high amount of debt, high earnings potential, but very little assets. Laddering is used to protect your earnings power. It’s a great concept for young physicians to consider when they’re purchasing their term life insurance policy.
Whether you purchase two policies or one, having term life insurance is a critical component of a physician’s insurance checklist. It’s not an investment, but it’s a way to know your beneficiaries will be taken care of in case of the worst.
Identity Theft Insurance
As you can see, there are major elements to your insurance checklist. But there are a couple of minor ones too, which I’m occasionally asked about. One of those is identity theft insurance.
Here’s the good news – you probably already have some identity theft coverage through credit monitoring services, credit card companies, and your bank.
The best piece of advice I can offer is to monitor your credit reports. And since you are entitled to three free credit reports each year through the credit bureaus, this shouldn’t be an issue. You can also track your score through your credit card companies or online banking. If you notice any big changes, then you can react quickly.
If for some reason you have concern your identity has been compromised, then you can freeze your credit files directly with each bureau (Experian, Equifax, and TransUnion). This is actually something you have to do yourself and isn’t offered by the identity theft insurance companies.
Overall, you probably don’t need the identity theft insurance, but it’s worth mentioning here since we do see more and more advertisements around it. Fortunately for us, this is something we can handle.
If you’re convinced you don’t have the time to monitor your own credit score or deal with a potential identity theft on your own, then you could consider a monthly monitoring plan from a reputable company. Something simple is all you need for identity theft protection service. Consider this one insurance you can mark off your insurance checklist and be done.
Long-Term Care Insurance
It seems as if the subject of long-term care insurance does get brought up more often these days. And it makes sense, considering our parents are aging, and the population is living longer.
Long-term care insurance is coverage for the services needed to care for a loved one, which aren’t covered by Medicare or other insurance policies. Think of this coverage as providing coverage for long-term care facilities, nursing homes, assisted living facilities or adult day care.
Most people who purchase the policy for themselves are older, generally in their 50s or 60s.
While there are several long-term care insurance providers, I wouldn’t say I recommend purchasing this type of insurance just yet. This is one of those things where you have time and can purchase it later in life. If you’re a resident, fellow, or building your medical career, it’s more important to get your other insurance items in place first.
With this in mind, it’s a good idea to bring up the subject with your parents to see if this is something they’ve considered purchasing for themselves. But overall, I would say to focus on your other insurance needs first (homeowners, auto, an umbrella policy, disability, and term life) before you add this to your checklist.
The Physician’s Insurance Checklist
As you can tell by now, a physician’s insurance checklist looks different from other professions. You have worked long and hard to get where you are in your career, so you have to make sure your assets are protected.
Having the right insurance in place won’t keep you from having to deal with occasional headaches and hiccups. But the right insurance policies will give you the peace of mind you need so you can focus on what you love to do.