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
Message edited by: azygous on 2009-11-05 10:01:48 CST
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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
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.
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.
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.
People are going to read this and have a typical FatWallet reaction that $10,000 should be enough. Everyone's situation is different, but what's much more important is to realize that having a disability policy and being able to collect on a policy are two very different things. There are many circumstances with typical language that will allow him to collect the $5,000 individual benefit and not be able to collect the $10,000 benefit.
azygous said:Background: We are DINK in late 20’s. Both resident doctors. Both have mountain of debt (education loans) as compared to general population. Our greatest asset is future income. So after investing half of our life and this much money, what if either one of us has any disability? What good options we have.
Yesterday we had a presentation at our work place by a CFA about insurance and it was a Joke. I knew from Insurance expert’s posts more than he knew and funny thing is he knew more than a hall full of residents, so figure. I emailed to few places, but everyone wants to sit and talk for which I don’t have much time.
So I am on FWF.. I am looking into getting 1) life insurance 2) Private disability insurance. 3) A Umbrella Policy (Thank you SIS for that Thread)
Currently have this: 1) Long-Term Disability Plan Name: Resident Long Term Disability (employer spon) will pay 2000$/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.
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.
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?
Message edited by: SUCKISSTAPLES on 2009-11-06 09:07:07 CST
Often, young professionals can get plans that will pay more than their income. For instance, Azygous should be able to get a policy that will pay him more than 100% and have the ability to buy more coverage in the future without medical questions.
The insurance companies do this because they know that the future income will be much higher than the present income so there is no incentive for the insured to become disabled.
SUCKISSTAPLES said: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?
Guaranteed Universal Life (GUL) is a universal life policy in which the insurance company promises that as long as you make a minimum payment, they will keep the policy in force even if the cash surrender value is $0 and the cost of insurance is greater than the premium. The way to mentally think of a GUL policy is to simply think about it as "life time term". The cash surrender value will be $0 or close to it and the death benefit will remain level.
I love this product at older ages and think for older ages it is superior to WL. The same is not true at younger ages. Let's start with an agreement that if someone dies soon, the type of insurance is irrelevant. All that matters is the death benefit.
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.
WL is much more expensive, but the dividends will cause the death benefit to grow. The $1,000,000 policy could grow to $3,000,000. The dividends give lots of flexibility so in the future, they could pay all or part of the premium (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.)
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.
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..
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