Physician Contracts, Disability Insurance and Investments
Contracts: Horrible Unexpected Results Of Casual Contracts
It’s tempting to trust your new employer and assume he or she has your best interests at heart. Employers are, after all, showing faith in you when they offer you a contract. However, it’s not uncommon for unexamined contracts to contain unintended pitfalls that make things go horribly wrong, sometimes long after you’ve been hired. That’s what happened to a physician in the Chicago area, as described in this article. How do you overcome contract dangers like this?
You must first clarify your relationship with your employer — are you an employee or a consultant? This alone will dominate the other contract provisions. Of course, you’ll be nailing down compensation, bonuses, time off, etc., but you also want to know how much freedom you will have: freedom to moonlight, to set your own schedule, to resign, to benefit from any inventions or innovations you design. You might fail to cover all the important issues during your interview — which is why you absolutely should require a lawyer specializing in doctors’ contracts to review the document before you sign.
The time to arrange for consultation is before the interview, to protect yourself from making premature verbal agreements. Your lawyer will likely tell you in no uncertain terms: If it’s not in writing, it’s not in the deal. Your lawyer also can draw your attention to fuzzy language, non-compete clauses, malpractice provisions, termination provisions and any terms that affect your income.
It helpful to find a partner who knows the legal ins and outs of physician contracts. Physicians Thrive has helped thousands of physicians protect their futures, including helping to avoid poorly designed contracts. We hope you will contact us as you begin your job search — we might be able to help save you from a disappointing or even devastating employment experience.
Life And Disability: How Much Insurance is Too Much for a Physician?
Highly-paid doctors and their families often have lots to lose when a serious disability or death takes away the salary that supports their lifestyle. Is it possible to plan for the future and defuse this worry? Most definitely! Can you overinsure? Unfortunately, yes. Here are some rules of thumb to help you research the options and choose the best one for you.
Most financial professionals believe disability insurance is critical for high earners such as physicians. One of the first objections against disability insurance is the cost of premiums, but you might not believe costs are prohibitive when you think about how much you and your family could lose if you lose your ability to work.
A recent New York Times articledraws attention to the Employee Benefit Research Institute, a Washington public policy research group that pegs the cost of employer-sponsored disability insurance at around $16.30 per $1,000 for up to $15,000 a month, usually with a 30-day waiting period. According to this source, an individual plan will run about $18.60 per $1,000 with a three-month waiting period. (The difference isn’t that great when it comes to monthly premiums—but there are huge benefits to having a private policy. More about that in a future blog.) Even if you don’t use your disability insurance, many believe the peace of mind it produces is invaluable.
One of the reasons people overinsure is that they try to replace every penny of lost income, even though expenses (excluding medical and rehabilitation care) might actually decrease. Some doctors purchase plans with higher payouts (and higher premiums) because they want to plan for inflation. In effect, they are overpaying for the early years. It might be better to determine what would be an appropriate amount in today’s dollars, and then purchase a policy with inflation protection. This kind of policy is portable and goes where you go. It can be confusing to sort out the pros and cons of different disability policies. Knowledgeable advisors who specialize in disability insurance for physicians, such as those at Physicians Thrive LLC, can help you avoid buying too much coverage.
(NOTE: The article mentioned above is a helpful resource for understanding the pros and cons of disability insurance. Keep in mind, for high wage earners such as physicians, disability insurance could be more necessary than for those in other professions. You can find more of our insights about how much disability insurance physicians need here.)
Investments: How Much Risk Can You Stand?
When you’re young, your financial advisor’s analysis could be right—at this stage in life, you can stand to take on some risk. However, that doesn’t mean you should take on more investment risk that you can stand. High-risk investing isn’t for everyone. Your investments should cause you LESS worry, not more worry. How do you determine the level of risk that’s right for you?
A responsible financial professional should closely question you on your personal risk tolerance. He or she can develop a profile that indicates how financially aggressive or conservative you are by nature. And if your medical education didn’t include a class in modern portfolio theory, an advisor will show you how diversification lowers your risk, how to diversify properly, and how to avoid over-diversification. They’ll also show you how time defangs risk. The long-run statistics don’t lie: Since 1928, stocks have outperformed what are seen as safer Treasury Bonds by about 2 to 1 on an annual average return basis.
Your investment profile will evolve as you age. At your career start, it’s advisable to balance current needs with long-range goals. This probably means you must take some risks. Let a professional advisor walk you through the alternatives and show you how the appropriate level of risk can lead you to a bright future.