Insurance for Skilled professions, Life and Disability ( paging IE)

Background: We are DINK in late 20’s. Both resident doctors. Both have mountain of debt (education loans) as compared to general population. Our greatest asset is future income. So after investing half of our life and this much money, what if either one of us has any disability? What good options we have.

Yesterday we had a presentation at our work place by a CFA about insurance and it was a Joke. I knew from Insurance expert’s posts more than he knew and funny thing is he knew more than a hall full of residents, so figure. I emailed to few places, but everyone wants to sit and talk for which I don’t have much time.

So I am on FWF..
I am looking into getting 1) life insurance 2) Private disability insurance. 3) A Umbrella Policy (Thank you SIS for that Thread)

Currently have this:
1) Long-Term Disability Plan Name: Resident Long Term Disability (employer spon) will pay 2000$/pm which i think is Joke.
2) Life and AD/D Plan Name: Basic Life 25,000 --no charge (All benefits-eligible employees receive basic life insurance coverage in the amount of $25,000 at no cost. Basic Life Insurance has an Accidental Death & Dismemberment (AD&D) provision.)
I am changing to New: AD&D - Family: $440,000--- going to pay 15.40$ /PM

My questions:
1) Life: what’s best in our situation? Full, term or variable?
2) Where to look for good private disability insurance.

And why are we not have good threads on Insurance (Life and Disability), we have on auto, home, umbrella and etc. TIA

We dont have good info bc the only way to get info and compare di plans is by working with an agent

Guardian is highly regarded for di but there may be othef carriers tailored to new doctors

Get a term long enough to cover any mortgage or children through adulthood... So if yont plan to have kids for 3 years get at least 25 year term

arch8ngel said: I would be surprised if whatever private practice you join doesn't have a LTDI plan that they offer.

thanks SIS

These practices do not have good plans. And one more problem is if you become a parter you loose the LTDI, thats anotheer reason I am shopping for Private LTDI

arch8ngel said: Whoa, that's surprising.

Your broker will probably know to bring this up, but when you shop around be sure to stipulate "same job coverage" (I can't recall the proper name for it, at the moment). That's the biggest inclusion needed for professionals to keep them from declaring you fit to work at McDonald's when you used to work as a physician.
Its called "own occupation" and unfortunately each carrier has a different definition.

You really need a good agent to work with you on this.

azygous said: Background: We are DINK in late 20’s. Both resident doctors. Both have mountain of debt (education loans) as compared to general population. Our greatest asset is future income. So after investing half of our life and this much money, what if either one of us has any disability? What good options we have.

Yesterday we had a presentation at our work place by a CFA about insurance and it was a Joke. I knew from Insurance expert’s posts more than he knew and funny thing is he knew more than a hall full of residents, so figure. I emailed to few places, but everyone wants to sit and talk for which I don’t have much time.

So I am on FWF..
I am looking into getting 1) life insurance 2) Private disability insurance. 3) A Umbrella Policy (Thank you SIS for that Thread)

Currently have this:
1) Long-Term Disability Plan Name: Resident Long Term Disability (employer spon) will pay 2000$/pm which i think is Joke.
2) Life and AD/D Plan Name: Basic Life 25,000 --no charge (All benefits-eligible employees receive basic life insurance coverage in the amount of $25,000 at no cost. Basic Life Insurance has an Accidental Death & Dismemberment (AD&D) provision.)
I am changing to New: AD&D - Family: $440,000--- going to pay 15.40$ /PM

My questions:
1) Life: what’s best in our situation? Full, term or variable?
2) Where to look for good private disability insurance.

And why are we not have good threads on Insurance (Life and Disability), we have on auto, home, umbrella and etc. TIA

With life insurance, you should only be looking at term insurance. I'm not in a position to make specific recommendations without knowing more information, but an annually renewable convertible term policy might make more sense for you than a level term policy.
Advantages:
Less expensive for a bunch of years
Can convert to a whole life contract with no medical questions
If healthy in a few years can switch over to a level term product if you don't want to convert

Disadvantages:
If health changes and you want a level term policy, it will cost you more.

For disability insurance, you do need to talk to a good agent/broker. You don't need somebody local. The person must not represent a specific company. If the person is knowlegeable, the time committment on your part should be very minimal. Getting the proper information to find the best company for you will only take a 5-10 minute phone conversation. Once the agent has the quotes, it will take another 5 minute conversation to make sure that you understand the policy and then the application will take a 10 minute phone conversation.

azygous said: InsuranceExpert said: arch8ngel said: I would be surprised if whatever private practice you join doesn't have a LTDI plan that they offer.
You are correct. This actually increases the importance of buying as much coverage as possible now. The problem with group disability plans is that the contractual language makes it much more difficult to have a legitimate claim. At the same time, simply having a group contract makes it much more difficult to get an individual policy. This is because companies limit how much coverage they will let someone buy. Individual coverage should be purchased before group coverage.

Ex. Azygous joins a practice. They have a group policy. It pays 60%. He makes $200,000. The premium payment is treated as income to Azygous. This means that his benefit will be tax free. The policy is not very good (most group plans aren't). He wants to supplement his group plan. He can't because individual carriers will cap his coverage at $10,000/month and he already has $10,000 of coverage.

If he has $5,000/month of coverage and then joins the practice, he will be able to keep the $5,000 and then get the $10,000 on top of that.

--This is what I was referring to. Most group plans are not good. My plan is Get personal LTDI within 2-3 months of leaving fellowship or joining the pratice.
-- With your permission IE I m going to copy paste few of these para's and email to fellow residents..( You will be suprised how ingnorant the population is). We had a recent case in which a fresh graduate had a rare sarcoma with mets in cord resulting in paraplegia and it all got me thinking about LTDI. The only thing I dont know is how much would be the premium and how diffcult it would be for claiming in case of a disability.

No. No. No. (I'm yelling at you in a kind way.) You don't wait to buy it. You buy whatever you can today (as soon as possible).
This is for a few reasons:
1)You need the coverage if you become disabled today.
2)There is no guarantee that changes in your health won't prevent you from getting it in the future.
3)Once you join a practice, their group plan, even if you aren't yet eligible for it, can you prevent you from getting individual coverage or will limit how much you can buy.

We all have to keep in mind that having a desire to purchase insurance isn't good enough. With disability income coverage one must qualify medically, financially, and occupationally.

The premium is function of occupation, sex, age, amount, and contractual terms. Collecting on a claim is not difficult with a good individual policy with strong contractual language. It is very difficult with most group contracts.

As you said to get the LTDI plan ASAP, but how can we have plan that will pay on future income. Currently have this:
1) Long-Term Disability Plan Name: Resident Long Term Disability (employer spon) will pay 2000$/pm.

Can we get LTDI on top of this ?? Becauz in residency we dont make much and 2.5K is what we take home. So we get an personal LTDI now, how will it work on top of what we have current from the employer.

I PM'ed a question to IE but I think others may benefit from the answer so I am reposting it here too...

I just ran a UL quote for me (34 year old male, excellent health ) at $1M and its $2750/yr. FORESTERS BIG (Guaranteed UL)
(Preferred Plus Non-Tobacco)

I dont know as much as I should about UL, but from what I read the rate stays $2750 till age 120. I will certainly die before then. So this is paying for a certainty of payout, like WL.

Why wouldnt this UL policy, with much lower premiums, be favorable to WL, which costs like $10k/yr?

At what point could I let the dividends from a WL policy pay the premiums , and stop paying into it? About year 20?

The difference as I see it, is that I need to put $200k into the WL policy (over the next 20 yrs) before I can stop paying premium...and thats using "todays dollars"

But with the UL I just pay $2750 per year, and even if I did that for 50 years before I croaked (and in later years, such a payment would be considered low at that time) it would only be $137k premiums. Why wouldnt the UL be far superior, easier to afford, etc?

SIS, great question. It has to wait for a response because I need to go make money.

FWIW, I participated in a previous thread regarding DI, and never posted the final result/decision. We opted to not get DI for the wife, as she has DI provided by her employer during her residency. I will reassess signing up for DI when she finishes and is working in private practice. However, it was certainly more than expected. For a $3500/month benefit, the level/flat premium was approx. $200/month. No small change. This was via Guardian w/ a true "own-occ" policy. She's in her late 20's btw and healthy. This is just an FYI for those that are considering getting DI and are curious roughly what the monthly premium is..

I have no idea if the quote below is true, but it made me wonder if an inflation hedge is lurking in these products.IE said: (To pay all of the premiums, in today's interest rate environment, it will take close to 20 years. In a high interest rate environment, it could take less than 10 years.)

I went to an independent agent for private DI and it was very expensive. I dont remember the company but the premiums were about 8% of the benefit. Example, For $1500/month the premium was $125/month. Mid 30s male. The ins co required a physical exam. Any remote pre existing condition was excluded. Example, if you had knee surgery to repair high school football injury, all future knee conditions were excluded. I asked why it was expensive and he said there is a high rate of fraud with these policies. He could only find 1 company in my state to insure me.

I stuck with my group DI from employer. It's with Cigna, a 60% own occupation that I pay premiums. Exclusive so any and all other income sources reduce the benefit.

SUCKISSTAPLES said: InsuranceExpert said:
Comparing GUL vs. WL as a straight comparison is very difficult to do. GUL has the advantage of cheaper premiums, but it also has the disadvantage that if the insured ever drops the policy, in hindsite, all that they had was expensive term. If something happens in the future and they can't pay their premiums for a couple of months, the policy will lapse. They are making a lifetime committment with absolutely no out.


When I compare the policies, I do it at the same premium. In other words, if someone is spending $2750 for $1,000,000 of coverage, we'll compare it to $1,000,000 of a combination of term insurance and WL. When we do it that way, it is easy to see the advantage of the term/WL combo. In both cases, the DB will be the same. However, the WL/Term policy will have a cash surrender value and the GUL won't. Ultimately, the term insurance will all be converted to WL and once that happens, the death benefit of the policy will start growing or the out of pocket premium can be decreased. So, the major advantage of a WL/term combo is the cash surrender value which makes the policy equal or superior no matter what happens.

At older ages, this isn't true.
Instead of only comparing GUL to a WL/TL combo, why not also include a comparo if you reduced the GUL and used a GUL/TL combo? That seems like it would be even cheaper.

yes, you dont have any cash value if you stop paying a GUL policy or GUL/TL combo, but with the thousands saved in premiums each year, you can build your own "cash value account" from the savings

IE...any comment on the FORESTERS "big GUL" policy I mentioned? they seem far cheaper than other carriers...

Once you do this, you are back to BTID. It is then all based upon the assumptions, but if you do it in that manner, the death benefit will drop when the term disappears.

I don't anything about the specific policy that you are describing. I'll try to look into it. The cost does sound cheap. That's not always a good sign, but it could be. Some carriers have premiums that are simply impossible to get.

Is this The Catholic Order of Foresters out of Illinois? If so, I would be concerned. If I wrote a policy from a company with their financial strength, my E&O insurance wouldn't cover me if there were any issues. They are below A- with AM Best and not rated by anybody else.

InsuranceExpert said:
I don't anything about the specific policy that you are describing. I'll try to look into it. The cost does sound cheap. That's not always a good sign, but it could be. Some carriers have premiums that are simply impossible to get.

Is this The Catholic Order of Foresters out of Illinois? If so, I would be concerned. If I wrote a policy from a company with their financial strength, my E&O insurance wouldn't cover me if there were any issues. They are below A- with AM Best and not rated by anybody else.

Address 1 The Independent Order of Foresters
Address 2 789 Don Mills Road
City Toronto
State CN
ZIP M3C 1T9
Phone Number -
Fax Number -
Web Site www.foresters.com
Company Ratings
Rating Agency Rating Category Rating
AM Best Financial Strength A
Standard & Poor's Financial Strength NR
Moody's Financial Strength A3
Fitch Financial Strength NR

BTW It always seems the best insurance rates for California residents come from these Canadian insurers (Wawanesa, Foresters etc)

InsuranceExpert said: Something is wrong if he could only find one insurer. In terms of price, for a white collar person without group coverage, the cost is typically 1-2% of income for a male and 2-3% for a female.

Interesting.. As shown by my example, the DI was a little over 5%. When you say 2-3%, I take it that's for an ideal candidate and perhaps not through Guardian? I'm just curious how/why my wife's policy was nearly double that.. Perhaps the cost "drops" (percentage wise) when going from say $3500/month coverage to $7k/month?

SIS, I don't know which Foresters your talking about, but I believe most if not all of them are organized as Fraternal Benefit Societies, meaning that they are not covered under the state gurantee fund.

As far as GUL vs. WL, I believe IE has some good advice. GUL can be better at old ages. At younger ages, strictly speaking on gurantees, GUL is better. Dividends on whole life are not guranteed; meaning that you could end up paying the 10k for whole life each year rather than the 4k each year for GUL. Everything I have read indicates that this is not likely to happen with a strong mutual life insurance company. If the company in question ever wants to sell another whole life policy again, then it has to pay dividends. Considering the fact that this is now one of the most difficult times for the life insurance industry, from what I have seen, the mutuals have reduced their dividends only slightly.

Maybe IE can provide more detail, but blending term and GUL vs. blending term and WL ends up being a discussion of GUL vs. WL unless the increasing one-year term is priced differently for GUL than WL.

One other thing to watch out for -- from what I have seen 30 year term is not a good deal. There are fewer companies that offer 30 year term and the prices do not seem competitive. A UL policy will be competitive on price, with the added bonus of having some cash value.

Also, IE never seems to mention that many term policies have a conversion feature that allows the policyholder to convert to "permanent" coverage without underwriting. This fact is important when comparing term to WL (or even when considering a 20 year vs. a 30 year term product). In other words, if someone is capable of buying term and investing the difference, then a conversion option will allow a person to retain coverage for a longer period. Thus, if someone cannot self-insure after the end of the level term, he or she can use the invested difference to purchase a permanent product (such as a GUL -- if it is still around in 15 to 20 years).

Finally, with regard to GUL or whole life, these can end up as terrible products in hindsight if the owner has a period of financial difficulty. Surrendering the policy after just a few years is a worst case scenario. Even in later years, with GUL, its even more of a problem because there is not much cash value and hence no ability to take a loan to pay the premium. With whole life, its at least possible to take a policy loan or a partial surrender to pay the required premium for a few years. Under either situation, BTID looks like a much better strategy in hindsight.

You should know that UL can be written as a blend. like 50% perm 50% term rider. This signifigantly reduces the COI costs long term. most insurance agents write UL or WL for the benefit of their pocketbook rather than the client. I have even seen a 25/75 blend on a million face. UL should never be written if the client funds it at minimum. Even if they they fund it at target, it should be blended.
This whole idea of what should we buy, perm or term is like saying do we need a screwdriver or a hammer.
It all depends on the situation of the client. Thats why they need to sit with an advisor.