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February through June are typically the most common months of the year for medical residents to initiate conversations with their colleagues about whether or not now is the right time to purchase a disability insurance policy. There are a variety of important factors for each person to consider individually that makes this either an immediate or deferred option for the near future however, here are some of the most collectively important reasons to consider why protecting your income (and future income) is so important right now.
1) Pre-Approved Limits for Coverage.
– One of the primary factors necessary to purchase an individual disability insurance policy is financial verification. Many of the top insurance companies offering coverage to residents will bypass this requirement and offer pre-approved coverage issue limits without any need for financial approval. These limits are, in many cases, quite generous with some companies offering up to $5,000.00 a month for final year residents. Specialists in their final year may be able to receive up to $7,500.00 a month even without a pending employment agreement. More importantly, all these plans provide future increase option riders to allow residents to add more coverage, up to $16,000.00 a month in some cases, once their income increases without any further medical underwriting. These plans may not be available with such generous provisions in future years so purchasing a plan no ensures you will always have a contract.
2) Student Loan Obligations.
– According to the American Medical Association, the average U.S. medical graduate has over $139,000.00 in student loan debt. Place this on the shoulders of someone who earns an average stipend of $43,266.00 during residency and fellowship and the chances of any loan repayment become very low. Many current loan provisions DO NOT allow for forgiveness on loan interest accrual for an economic hardship or long term disability. Consequently, a young resident who suffers a serious illness or injury could place themselves in a lot of trouble financially. By obtaining a long term disability insurance policy now, it provides an immediate solution to this problem.
3) Medical Approval for Coverage
– Most residents don’t consider their current health as a potential roadblock for qualifying for disability insurance since they are generally healthy. According to the social security administration, one-third of Americans entering the work force will become disabled before they retire. By purchasing a disability insurance contract now, you not only protect your current income but the availability of purchasing more in the future, regardless of how your health changes. The most unfortunate situation for any person to be in is to have an adverse change in health and not be able to obtain disability insurance when they need it most.
4) Contract Policy Language
– Regardless of what you read online or hear from a financial advisor, the only important terms for a disability insurance claim to be paid is what’s laid out within the actual disability insurance contract between you and the insurance company. Currently, there are many favorable contracts available to residents that specifically protect their own occupation and even medical specialty. Recent history however in this volatile insurance market has shown trends where many insurance carriers stop their available plans and medical professionals are limited to limited few options to choose from. Taking a contract today will allow piece of mind that those provisions you have will not change even if the business changes.
– Disability insurance premiums are based largely on a person’s age at the time they activate coverage. The plans with Non-Cancelable and Guaranteed Renewable provisions will lock in those rates for the remainder of the contract, usually to age 65. The younger you are, the cheaper the cost of insurance will be. Some carriers offer premium choices to allow for very low premiums initially that gradually increase over time for a resident to obtain this coverage and then lock in the premium once they become a practicing physician and their income is much higher. Don’t wait until you are in your 40’s or 50’s to get this since premiums will be significantly higher than in your 20’s or 30’s. Take the time to look at what the rates would be for you by searching for free disability income quotes online.
Thomas Lloyd is a Disability Insurance Consultant for the Financial Balance Group based in Washington DC. 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