Any Fellow or Resident about to complete their final year and venture out as a practicing physician knows just how busy the next few months can be. Securing a proper offer from your new employer and perhaps moving to another city are just some of the most common hurdles to overcome. Consequently, it is imperative to be extremely organized and focused on what tasks need to be considered first. Here are the top 5 most important business-related areas to focus on as a graduating resident or fellow about to become a new physician.
1.) MALPRACTICE INSURANCE
Malpractice insurance is required for all physicians and most other medical providers. Hospitals typically purchase a large group policy that protects all their direct medical employees but some now require physicians to purchase their own coverage. Any physician that decides to open their own practice or join an existing practice most likely will need to purchase their own coverage. Physicians employed by the Federal Government do not need to purchase this coverage as any suit brought against them is against the U.S. Government.
2.) DISABILITY INSURANCE
Physician disability insurance is a voluntary but critical component for protecting against the risk of being disabled. A 30 year old physician making $100,000.00 annually who suffers a permanent disability could lose nearly $6,000,000.00 in future earnings. Many hospitals and large practice groups provide this form of coverage to their employees but typically have benefit limit caps that will not fully insure the total loss of a physicians earned salary. It is prudent to either supplement or fully insure your income with an individual disability insurance policy that is portable and provides some language to recognize your medical specialty.
3.) RETIREMENT SAVINGS
As terrifying as it sounds, the idea of starting early for retirement savings is becoming more and more important in this working environment. There is a high level of volitilty in the stock market and many company 401(k) plans are no longer providing the same matching contributions to their employee plans. Consequently, it is important to at least start saving a small amount at the earliest age possible.
For example, a 25 year old who starts contributing $100.00 a month into a retirement account for retirement at age 60 will amass close to $379,000.00. However, a 35 year old starting the same level of contributions will have just $132,000.00. The earlier you start, the more growth will occur with compounding interest. It is also important to diversify your savings into various asset classes, stocks, fixed income, qualified and non qualified plans so their is a lower risk associated with loss.
4.) LOAN PROTECTION
Most graduating residents or fellows will carry a large debt from tuition costs associated from medical school as well as specialty training. A study done by the Association of American Medical Colleges in 2008 indicated that the average medical student carries with them over $155,000.00 in student loan debt from tuition costs associated from medical school and related programs.
The ability to earn an income to pay down that debt is the most important fact to consider. What happens to a person that cannot earn that income because either a sickness or injury prevents them from practicing medicine? Will the bank decide to provide a bailout? Highly unlikely. This very simple concept sadly is overlooked by many young medical professionals unless they see it directly affect a friend or themselves.
A possible solution to this dilemma is simple – purchase a disability insurance policy that specifically covers a fixed loan obligation. These policies are generally inexpensive and available only through individual plans – not through group or association plans. Take a afternoon and obtain some disability insurance quotes online to compare what is available.
5.) FINANCIAL SERVICES PROFESSIONAL REVIEW OF YOUR EMPLOYMENT AGREEMENT
Take the time to obtain a copy of your potential new employer’s offer and sit down with either a financial professional or attorney to review the contracts terms and conditions. An experienced professional who deals with contracts can clearly outline and explain what the compensation, terms and conditions are, which, in turn, will provide you a list of questions to return to your new employer and ask. This step is something many new physicians may feel is too aggressive with their first position as a practicing physician but actually is a very common action taken by highly compensated individuals considering a new position.
Addressing just some of these items above will help protect your current and future financial plans. Always try to find a financial professional you feel comfortable with to assist you on these matters. Schedules are tight and by eliciting help, it will most likely allow for more productive time spent building your own career.
Thomas Lloyd is a Disability Insurance Consultant for the Financial Balance Group based in Washington DC and is a Registered Representative of Park Avenue Securities LLC (PAS).He provides physicians and dentists nationwide with disability income protection plans and strategies to ensure retirement savings in the event of a long term disability or illness. If you have any questions or concerns regarding life or disability insurance, please email Thomas – firstname.lastname@example.org or contact him toll-free at 1-866-680-8779
Anthony Delvecchio is a Financial Representative for The Guardian Life Insurance Company of America. He can be reached by calling 866.680.8779. Neither Guardian, nor its subsidiaries, agents or employees provide tax or legal advice. You should consult your tax or legal advisor regarding your individual situation.
Understanding Medical Malpractice Insurance – A Primer – Michelle Mello, Harvard School of Public Health. The Robert Wood Johnson Foundation. January 2006
 Potential Cumulative Loss includes a 3% Compounding salary adjustment for inflation.