Your Guide To Life Insurance

Your Guide To Life Insurance​

Life insurance is one of the best ways to protect your family and their financial wellbeing, regardless of the type of work you do.

But as a physician, it’s even more crucial to have a life insurance policy, even if you’re in good health. After all, as a high-income earner, you may have more assets that make good life insurance coverage a must-have at any age or stage in your career.

If you have loved ones that depend on you, life insurance is a necessity. If you pass away before the end of your career, the right life insurance policy provides financial support to your loved ones.

Life insurance rates are determined by each individual life insurance company. They determine your insurance needs and benefit amount on the results of a medical exam, your medical history, and finances. The process and rates vary from company to company, so be sure to consider multiple options before purchasing a plan. We’ll share how to do so ahead.

How Much Life Insurance Do You Need?

There are “rules of thumb” out there for determining how much life insurance you need.

But for real peace of mind, you need to evaluate your personal needs and situation.

Plus, it’s not easy to consider the worst possible scenarios in life. That’s why we recommend you speak to advisors who work for qualified insurance carriers. It’s their job to take an unbiased look at your life and your income to help you determine the type and the amount of insurance you need.

And remember, your needs may change over time, so you may want to revisit your insurance strategy as your situation changes. Having financial advisors who know all about life as a physician makes planning for a difficult time much easier.

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Do All Doctors Have to Sign Contracts?

Not necessarily. But as the trends in physician employment shift, more and more doctors are required to do so.

According to a 2018 study by the Physicians Advocacy Institute, the percentage of hospital-employed physicians increased by more than 70% between July 2012 and January 2018. In addition, the percentage of hospital-owned practices increased by over 128%. The trends show that more doctors are working as employees rather than working in private practice.

In 2019, an AMA press release supported that data. AMA reported that 47.4% of all physicians practice medicine as employees. Only 45.9% are physician owners with their own medical practice. All of those employed physicians can expect, at some point, to have to sign a physician employment contract.

Your contract will likely include liability tail coverage since it covers your organization as well as yourself. It may even include malpractice insurance, depending on your employer and the state you work in.

But you should shop around for life insurance options for yourself, even if your employer offers group insurance plans.

Why?

Because as well-intentioned as these plans are, they are designed to provide the bare minimum. These are not plans tailored to you and your lifestyle.

This is why having your own life insurance plan is vital. We’ll go into more depth ahead as to why. Also, we’ll explain how you can customize a plan that is perfect for you and your life.

Similar: How Much Disability Insurance Do Physicians Need?

Which Type of Life Insurance Do You Need?

In addition to the amount of insurance you need, the type of life insurance you purchase is equally important. Term life insurance and Permanent (whole life) policies are the two basic types of insurance policies.

Deciding which type and the amount of coverage is best for you will depend on several factors.

Permanent Life Insurance

Permanent life insurance offers lifetime protection as long as the policyholder pays the premiums. Typically, permanent, whole life policies offer cash value accumulation that you can use if needs arise during your lifetime. Though there are higher premiums, you can lock down rates for permanent plans so payments never fluctuate.

The combination of death benefit and cash value may provide useful flexibility within a financial plan.

Term Life Insurance

Term Insurance provides a guaranteed death benefit for a specified time period, usually for a 10- to a 20-year term. Since it’s temporary, a term life policy does not offer any cash value.

Plus, a term policy can expire before the insured’s death, meaning there is no death benefit payout. Its insurance premiums are typically initially less than the premium for an equivalent permanent policy.

Which is the Best Option for Physician Life Insurance?

In most cases, a permanent life insurance plan is a better option.

Remember, permanent life insurance is for life. Term policies are short-term and only provide coverage for about 5, 10, or 20 years.

If you’re a physician at the start of your career, it may be more tempting to opt for a cheaper level term life policy. But you may end up undercutting yourself in the long run, especially since the unexpected can strike at any time.

This is especially true if you have family members you want to take care of. If you as the policyholder pass away after your term life insurance ends, your loved ones will be stuck paying final expenses.

Alternatively, a permanent policy can pay your beneficiaries a lump sum. Plus, they provide a cash-value account, which is a portion of the premiums that grow over time. You can put this money towards family expenses, old student loans, and other life necessities.

Term policies are less expensive since they’re only for a set period. However, you can opt for a renewable term or convert your term policy into a permanent life policy down the road.

Keep in mind, if you develop health issues that make you seem a policy risk during the underwriting stage, your renewal or switch to a permanent policy may be denied.

In some cases, it can be difficult to evaluate the relative benefits of a term policy against those of a permanent policy.

Compare insurance policies and the best rates online, speak to an insurance agent and reach out to us at Physicians Thrive. Our advisors can help you understand how each of the types can help you achieve your protection goals as well as how to find the lowest rates.

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When Should I Buy Insurance?

It’s never too early to buy a life insurance policy as a physician. As long as you can afford the premiums, you should have a policy.

As a high-income earner, you have more assets to protect than the average person.

In general, you should really put time into exploring your insurance needs as you start your family.

Also, you’re more likely to be able to afford a good policy with all the premiums you want after you finish your residency. After your residency, you’re more like to have the income that helps you afford premiums.

And while it’s never too early to start shopping around for the best rates (as long as you can afford the premiums, that is!) you definitely do not want to procrastinate. It’s easy to avoid planning for something as major as life insurance.

But the longer you wait, the more likely you are to find yourself in a situation that makes getting great rates more difficult. The current state of your physical health is as crucial as your financial state, after all.

Insurance agents will assess your health during the underwriting process as they determine the level of risk involved in insuring you. Therefore, shopping for an insurance plan when you’re young and healthy is advisable.

You’re more likely to get an affordable plan with all the riders you want.

What Are Life Insurance Riders?

Speaking of riders, it’s time to discuss the importance of riders and how they can help you customize your life insurance.

Riders are provisions that you can tag onto your basic policy to make your insurance suit you and your life better. And while some are free, others will add to the cost of your monthly premiums.

Some of the most relevant life insurance riders for physicians include:

• Waiver of premium rider: This allows you to keep your insurance even if you become too disabled to work and afford your premiums.
• Accelerated death benefit rider: This provision lets you access a portion of your benefits if you get diagnosed with a terminal illness.
• Critical illness rider: Similar to the accelerated death benefit rider, this provision pays out benefits in the event you get diagnosed with a critical illness.
• Child protection rider: provides financial support if your child passes unexpectedly or converts into an insurance policy for your child when they age out of your policy.

It’s easy to understand how these types of riders can be true make or break aspects of your insurance policy. Again, talking to an insurance agent from a reputable agency or our very own financial experts can help guide you to the right decision for you and your family.

Related: 9 Common Life Insurance Riders that Physicians Should Know

Who Should Be Insured?

Every healthcare worker needs to have a life insurance policy. This is something even medical students need to start planning for.

However, there are other situations that may warrant insuring a life other than the household income earners:

• Consider the cost to replace the tasks of a non-working spouse.
• Protect yourself from significant estate tax burdens should your parents die prematurely.
• Consider the impact to your business should something happen to key employees.
• You may need to prepare to buy your partners’ share of your business if anything were to happen to them.

Our team can help you craft a strategy to protect yourself financially with life insurance when life happens in that moment.

As a physician, you’re usually the one taking care of everyone around you. Your patients at work and your family at home rely on you in different, but very real, ways.

It can be challenging to set aside time and plan for your financial future. But that’s exactly what you need to do. Right now.

Having a life insurance policy in place means you can continue to live your best life and know you and your dependents are well provided for.

Get Your Free Life Insurance Quote! It’s easy!

For more information, contact Physicians Thrive now.