I’ll be doing a series of posts over the next few weeks on disability insurance. The subject is sufficiently broad, and sufficiently important, that one post isn’t going to cut it. I have partnered with Pattern in providing this crash course video below. The rest of this post will be the first in the series, and a bit of an introduction into the subject of disability insurance.
Disability Insurance is More Complicated Than Life Insurance
If you read the recent post on life insurance, you know that buying life insurance isn’t particularly complicated, and won’t require more than an hour or two of your time. Unfortunately, disability insurance is FAR more complicated, and while it may not require a ton of time to understand and purchase a policy, it will require more self-education and a lot more decisions to be made.
Similarities to Life Insurance
Both life insurance and disability insurance are INSURANCE products. That means they must be bought from an agent. You are better off buying both types of policies from an independent agent that can sell you policies from multiple companies rather than a “captive” agent. The same policy will cost the same no matter which agent you buy it from. Agents, of course, may be compensated more for selling you one policy than another, but they are unlikely to disclose that to you, and the differences aren’t great for similarly priced policies. You hope that you’ll never collect on either one of them.
Both life and disability insurance are also designed only to address the financial aspects of a tragedy. Just like life insurance doesn’t bring a loved one back, disability insurance doesn’t fix your disability. Both simply protect income. If you die and cannot produce the income your family needs, life insurance will provide it. If you become disabled and cannot produce the income you and your family needs, disability insurance will provide it. Both policies, of course, can be dropped as soon as the physician becomes financially independent from his investments. There shouldn’t be an emotional factor to buying these policies– it’s simply business.
Differences Between Life and Disability Insurance
There are 5 significant differences between Life and Disability Insurance.
# 1 Disability is subjective
You know very well as a doctor that disability is subjective. With life insurance, someone is either dead or alive. Not infrequently, I find myself saying those simple words, “Time of death….9:21.” There really isn’t a “time of disability.” Unfortunately, this aspect makes insuring against it far more complicated. You cannot buy disability insurance like a commodity. For the most part, all 30 year level-premium term life insurance policies are the same. You just buy the cheapest one. No two disability insurance policies are the same. The definition of disability becomes all important.
# 2 Disability is complicated
You must read the entire policy and discover when it will pay out and when it won’t. For example, many policies don’t pay out until you’ve been disabled for 60, 90, or even 180 days. Guess which one costs more? Some policies will only pay for two years if you are disabled with a psychiatric illness, while others will pay out until you’re 65. Guess which one costs more? Some will increase the payout with inflation each year. Guess who pays for that? There are dozens of differences between policies and options within each policy.
# 3 Disability is taxed differently
Life insurance payouts are always tax-free to the beneficiary. Not true with disability insurance. It turns out the benefits are tax-free if you paid the premiums with post-tax dollars, but fully taxable if you paid with pre-tax dollars, such as through an employer’s group plan. Disability insurance is also more expensive than life insurance. This is mostly because it has a higher likelihood of being used. But consider a physician who makes $200,000 a year. A typical rule of thumb is to get 10 times your salary in term life insurance. A 30 year level-premium term life insurance policy might cost $1600 a year, or about 0.8% of your income. A disability insurance policy that will pay $10,000 a month (only 60% of salary) in the event of disability is likely to cost $3000-6000/year, or about 2% of his income (but 3-5% of the income actually covered by the policy).
# 4 Disability insurance is sold in proportion to your income
Disability insurance generally gets more expensive as you get older because the likelihood of using it gets higher. Residency can be a great time to buy it because you get lower rates (not only for age, but also sometimes because a resident is put into a different classification of physician than an attending). But as a resident, you cannot buy enough of it (or afford enough of it) to cover the rest of your career. A brand new attending can buy more of it, and isn’t much older, so this isn’t a bad time to buy either. A resident and new attending also have a great need for life insurance, since they have few assets and lots of liabilities.
Physician income levels can increase dramatically the first few years out of residency, due to making partner or building a successful practice, so it isn’t uncommon for a doctor to need to replace a policy, or purchase an additional one at that time also. As the years go by, the disability insurance policies offered by the companies add new features, which may be particularly desirable to you. Although they’ll cost you more due to the additional features and your increased age, it might be worth it to you to get those features, so updating policies even mid to late career can make sense too.
# 5 Disability insurance is more likely to be used than life insurance
Studies have shown that 10-20% of people will have a period of disability of some kind between the ages of 25 and 65. Those odds are simply too high not to insure against that type of financial catastrophe. If you do not currently have disability insurance, it is time to get serious about it and cover that risk.
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When it comes to car insurance, I have lots of liability, but no comprehensive or collision. Similarly, I have a 365 day waiting period, until my disability insurance kicks in.
I’ve never read any literature, as to what the ideal waiting period is. I came to the conclusion myself, that the ideal waiting period is the longest that you can afford. An insurance company has costs and must make a profit. If you selfinsure, you keep the money that goes to costs and profit for yourself. My insurance agent was critical of my decision to switch from a 90 day to a 365 day waiting period. But I’ve reached a stage in my life where a 365 day waiting period is not a financial problem. I would be interested in hearing the opinions of others on this topic.
I agree with your general philosophy to self-insure whenever possible. One thing to consider, particularly with disability insurance, is that there usually isn’t much of a price advantage to get a 180 day waiting period vs a 90 day. For example, if the premium were 50 cents more a month to have a 90 day waiting period instead of a 365 day waiting period would it be worth it to you? Of course it would. But for $100 more a month, it might not be. So it is worthwhile comparing these things. Sometimes a much better policy is not much more expensive so you should look for these inefficiencies in the system.
To the White Coat Investor,
I am a graduating medical student about to enter residency and I really appreciated these posts on disability insurance. I am trying to find out as much information as possible so that I can insure myself. I have gotten a lot of quotes from different companies and I am struggling to determine how much disability insurance I should buy (obviously they all went to sell me as much as possible).
After doing my homework, I like the language of Guardian ProVider the best but they are trying to sell me a policy that seems too rich with a 90 day EM, 4K monthly benefit, 12K FIO, residual disability, COLA, and 4K catastrophic. I appreciated the post on COLAs and catastrophic. But how much FIO should someone have? My understanding is that disability insurance is only to cover: first, what you absolutely need to live and, of this basic amount, your group insurance will not cover so that you can make yourself whole. Having the option of a self-insured plan going to a 16K monthly benefit seems excessive to me. As assuming I have a group-plan that covers 2/3 of my income pre-tax, I would have to make 700K annually to need a self-paid, post-tax plan that would offer me 192K annually. And then, as a poor medical student, I find it hard to believe anybody could “need” this amount of money. What are your thoughts? Could you provide some numbers as a guideline?
Thank you for your help.
I
Mike-
I think I might have just responded to you via email. But this comments asks slightly different questions, so I’ll address them here as well.
First, the value of a group policy may not be that high, even if it “covers” 2/3 of your income. It’s possible to be disabled enough to not be able to work, but not disabled enough for your group policy to cover. The definition of disability in many group policies can be pretty strict. The last thing you want is to have a policy for years and then have it not pay you, but that is often what happens with a group policy. Also, you may switch jobs and no longer have that group policy (I’ve never actually had a job with a group policy, unless you count the military’s pathetic excuse for one.) I suggest a solid individual policy and anything you get from a group policy is icing.
Second, individual policies are generally after-tax. You obviously don’t have to (and generally can’t) replace your entire salary.
Third, I discuss future purchase options in part 4 of this series. As a resident, you should probably get as big of a future purchase option (FPO or FIO with some companies) as you can. Later, if you buy even more coverage, you may not need that FPO rider, but a resident should generally get it.
Last- The “how much coverage to buy” question is pretty individual. You have to think through the plan in the event of your disability. If you’re married to an orthopedist, you might not need any disability coverage at all. If you’re married to a teacher (like I am), then you probably need more. I don’t necessarily think you should only buy enough to barely cover basic needs. Remember you also have to save for retirement out of the proceeds of that policy, and besides, who wants a bare bones existence? If you never get disabled, you’ll wish you’d bought less. If you do, you’ll wish you’d bought more.
Personally, I have $7500 worth of coverage. I make about an average physician salary now, so that feels a little under-insured to me. I anticipate buying some more this year after making partner, probably $5K more. I don’t think $16K is too much necessarily, but it’s probably too much for me.
Hi WCI,
I realize that this page is for disability insurance but I was wondering if you had any knowledge on malpractice for part-time work. I currently have a claims-based malpractice insurance with a company named Oceanus, a risk retention group. I am looking to switch to a different carrier but I was surprised by the cost of tail coverage if I moved to occurrence based. Do you know if going from a claims policy to another claims policy with a retroactive date is “equivalent” to an occurrence based policy (as I was told by my agent).
Also, what do you think about a risk retention group versus a straight insurance company like MLMIC? If this is outside the scope of this website, I completely understand. Thanks.
I see no difference between buying occurrence vs claims-made with a retroactive date. I agree that tails can be pretty expensive. I think I was quoted $55K for mine (with the annual claims-made premium of around $18K). They’ll pay it if I retire, but if I change to a job without that company either I or my new employer will need to pay the tail. I see no reason not to use a risk retention group (essentially a captive insurance company) instead of a more traditional insurance company. Benefits include fewer regulatory hassles and more control by the owners (i.e. the insured) over litigation issues.
Hi WCI
I’m looking for your opinion on disability policy.
I recently left an employer several months ago. I had a group LTD policy provided from my ex-employer at that time and a principal disability policy that I purchased (own occ, COLA, catastrophic disability benefit) with a monthly maximum benefit of $6225. At the time, my agent told me that I could not get a policy with a higher benefit due to the fact that benefits from my group policy and my personal policy would exceed 100% of my income.
I am with a new employer now and currently have a group LTD policy that pays a total monthly benefit of $10,250 (after taxes) and I still have my personal principal disability policy. With those two together (total $16225) I feel that I would be able to handle my finances during a period of disability. The principal individual policy costs about $2800/ year.
However, I recently received an offer from Metlife (who does retirement planning for my employer). They are offering an own occ, portable, supplemental individual disability income of $5000/ month with a catastrophic disability benefit of 8000/month. It would cost $78.11 per paycheck or about $2000/ year.
Is it worthwhile to take this Metlife policy and cancel the Principal policy? The Metlife policy does not have medical underwriting.
I am 37, married with a toddler. We recently bought a home and the amount listed above should be able to pay for housing costs + living expenses + some saving for retirement.
Thank you.
I am not an independent disability insurance agent, which is what you need. There are differences between those policies, whether you recognize them or not. As a general rule, the older you get the more expensive disability insurance gets. Because of that, it generally does not make sense to replace an older policy with a newer one, because the newer one is usually more expensive for what you get.
You say you’ve got a policy that pays $6225*12 for $2800 a year, or about 3.7% with Principal. The Metlife policy will pay $5000*12 for $2000 per year, or about 3.3%. So the price for the newer policy is a little bit cheaper. Now, the question is why. If it is truly a better policy for you (and the slightly smaller size of it doesn’t matter), then sure, buy it. If it is only a slightly worse policy, then you may still want to buy it. But if it is markedly inferior, with worse residual benefits, lower COLA, a less comprehensive definition of disability etc, then you probably don’t want it since it isn’t that much cheaper than what you have.
I’d get the two policies side by side and go over them with an experienced independent disability agent or two until you’re sure you understand the differences between the two, then make a decision. Keep in mind an agent’s incentive is to sell you a new policy due to the commission structure of disability insurance.
Ok thank you.
I found out that the MetLife policy does not have a COLA so I decided to stick with my current plan which does have a COLA.
WCI,
Do you have a post regarding things you wish you had done prior to leaving the military? Along those lines, should I get disability insurance while on active duty?
I don’t think I left much on the table while I was in the military. Good luck getting disability insurance while on active duty. It’s a pretty tough gig. I have a post planned on the subject, but haven’t gotten to it yet.
Thanks, I look forward to that post. It seems that trying to get any kind of insurance while on active duty and stationed overseas is very challenging. After reading your post on whole life insurance, I tried to switch to term, but no dice. Something about having a contract with specific countries, was the reason for denial. It seems that you can get term while in afghan but not in Japan – I guess earthquakes are inherently more dangerous than IEDs. By the way, this particular bank – which only used to be available to military personnel – is not what is cracked up to be. Since becoming more financially savvy, I have noticed that their previous financial recs were not in my best interest.
Anyways, thanks for all the helpful blogs you have posted. I wish I had been reading them from the get go.
I’m not sure why you don’t want to mention USAA. I like their banking and auto/homeowner’s insurance, but their investing options leave a lot to be desired.
I bought life insurance while on active duty, but expect it to have an “act of war” exclusion so it won’t pay if you’re blown up by an IED.
Hello – I’ll be finishing my ob-gyn residency next month and will begin a full time attending role in the fall. I have a group disability policy through my employer which would provide 80% of my income in the event of a disability. A couple other relevant points specific to my situation; 1.) we carry no student debt, 2.) my husband, a non-physician, is the primary breadwinner in the family.
would you recommend a separate, additional disability policy in my case, or is it overkill given our family situation, the existing group plan, and the relatively high 3000-4000 annual premiums associated w/ the incremental disability policy?
appreciate the input!
What is your financial plan if you get disabled? If your plan is that you live off your husband’s income, then you don’t need disability insurance at all. Lots of two-physician couples don’t buy disability insurance at all. I suppose there is the risk that they both become disabled….
I own two disability insurance policies. All together they won’t replace 80% of my income, and my wife doesn’t have an income at all. A disability insurance guy will often recommend you buy as as much as they’ll sell you, but most attendings don’t need that much.
Should I become disabled the plan would be to live off my husband’s income, which exceeds my physician income, and the 80% disability benefit from my employer’s group policy. My gut is telling me to forego the secondary, separate disability policy as our ability to live our lives isn’t dependent upon my income, however most everyone i know purchases these separate plans so i’m somewhat worried that there may be something i’m not fully understanding about the employer group policies.
The employer policies aren’t as likely to pay as an individual policy and you can’t take them with you when you change employers, but they’re also much cheaper. It’s all a balancing act. Why not take the employer policy and go see an independent disability agent and compare it to a good, solid individual policy and then make a decision about whether it is good enough for you or if you’re willing to pay more for a slightly better policy? If you’re not sure, you can always split the difference. You don’t need to buy an individual policy just because everyone else does. You’re in a different financial situation than everyone else.
“The employer policies aren’t as likely to pay as an individual policy…”
Do you have support to this claim? Or is it tongue-in-cheek? I found the employer policy to be fantastic.
I have purchased Standard as a trainee and plan to increase to the max. I switched from another company due to a medical rider. My new rep and my current training site is telling me Standard is not stable and I should switch. However, switching would drastically increase my premium (I am a female also) and I will have a rider. Does anyone know if Standard is really “unstable.” I was also told because there was no underwriting they would have to do the under writing if I filed for disability. Is that really a problem?
Standard’s financial ratings are not quite as high as some of the other top disability insurance carriers out there, but I think claiming that they’re unstable is a bit of a stretch. It sounds like you may have purchased one of Standard’s GSI policies which do not require any medical underwriting and are priced based on unisex rates. I think that policy is a great option for a female who otherwise would have been issued a policy with an exclusion rider.
The agent you’re working with might be using a bit of a scare tactic. You should probably reach out to a different advisor/agent, have them review your existing coverage details and get a second opinion. You can certainly feel free to reach out to me, or any of the other agents/advisors on this site. We’d all be happy to help.
I hope they’re not unstable. That’s where my policy is. No, they don’t underwrite after you file for disability. They underwrite before issuing the policy, if they’re going to underwrite at all.
As I am finishing up residency (38 year-old M), I was quoted for an individual DI by an agency which has a contract with my university to give special discounts to the graduating residents. The DI is a combination of Guardian and Standard and they seem to have all the riders discussed here (FIO, specialty specific, Non-Cancelable and Guaranteed Renewable, etc. but no catastrophic coverage as apparently it is not offered in CA). I am starting with $6500 monthly benefit for $4700 annual premium. This premium is 6% of the annual income covered by the policy. The agent is adamant that the 2-5% annual premium is based on one’s annual total income and not the income covered by the DI policy. I am a bit confused and I am wondering if you can clarify whether the fair 2-5% annual premium is based on one’s total annual income or the income covered by the DI policy. Thank you
I’m pretty confident WCI intended this to be 2-5% of your total income, as that would be typical. California is the most expensive state for buying disability insurance though, so I wouldn’t be surprised that the percentage is greater than 2-5%. Standard is a great option in California because they’re the only insurer currently offering a True Own-Occupation definition of total disability, without also limiting the benefit period for claims relating to mental/psychiatric conditions (this is only for CA specifically). Guardian’s ProVider Plus policy is also a very comprehensive option which is partially more comprehensive than Standard outside of the mental/psychiatric limitation.
While both are great options, they are likely the two most costly options in CA. Did the agents you’re speaking with show you MetLife, Ameritas, or Principal? You might decide to go with the combination you were recommended anyway, but you should at least know about those other policies so you can make your own informed decision. There are certainly enough of your peers who select not to go with Guardian or Standard, to make this worth your while. Feel free to to reach out if you need a second opinion or if the current agent won’t objectively review the other options with you.
Thank you for your comment.
I am still a bit confused about the 2-5% of one’s total income vs. income covered by the DI policy (monthly benefit $ X 12). Because if we are looking at 2-5% of one’s total income, then how can we assess the cost of the DI policy? A person can get a DI policy for $5000 of monthly benefit while they make $500,000 annually (even thought under-insured), and obviously their premium would be less than 2% of their total income, but it may not be necessarily a good deal. For my example above ($6500 monthly benefit for $4700 annual premium) if we calculate the percentage based on the total income of $130,000 (for 60% of total income), then $4700 would be 3.6% which seems like a good deal, but if we calculate it based on total income covered by the DI policy in case of disability, $78000 (12 X $6500), then we would get 6% which is a bit higher than what is recommended.
My agent told me that my options through them would be Guardian, Standard, and Principle because these companies are giving a “special discount” of 20% to residents graduating from our program. My understanding is that these companies have found our academic center as a lower risk for disability and have been giving a special discount for doctors graduating from here.
The 2-5% is obviously meant to be a ballpark and not a rule that you need to follow. It is typically said that you can expect premiums to be 2-5% of your total earned income (not insured income) if you secure the full benefit available to you. Like you said though, someone making $500k might only have $5,000 of monthly benefit and a resident making $50k might have that same $5,000 monthly benefit. Furthermore, the policies can be designed completely different with various riders, different benefit periods and possibly elimination periods. Simply put, the numbers can obviously be out of whack depending on the circumstances. The best thing to do is review quotes from several options, not just three, and evaluate them carefully. Helpful tips are great, but it really just comes down to your specific situation.
If you don’t mind posting your specialty in a comment, I can take a closer look (using the same discounts you were shown by the current agent) and provide some feedback.
The 2-5% figure when I use it refers to the amount of income covered. So if you want a monthly benefit of $10K, expect to pay $200-500 a month for it. Hope that helps.
No. 2-5% of the covered income is exactly what I meant. Even if you had 60% of your income covered, 5% of your total income would be a really high premium for it.
I think that’s a really expensive policy. Make sure you’re shopping from an independent agent and looking at all possible policies and discounts. If that’s the best you can get, well, that’s what you’re stuck with. As usual, I’m left wondering why there are doctors in California at all.
Sorry for the confusion CK2015. Now looking a little closer, 2-5% of insured income looks more accurate in most cases. California is an exception to that though, and can be much closer to 2-5% of earned income. For one of the most favorably priced specialties (IM, FM, Neuro, Onc, Hem, Cardio), a 38-year old male in CA can expect to pay between $295-$410 monthly for a policy covering $6500 in monthly benefit (4.5%-6.3%), if including an age 65 benefit period, 90-day elimination period, residual, COLA and Future Purchase Option rider. One of the less favorably priced specialties (ER, Anes, Orthopedics) would be even higher. Disability insurance is really expensive in CA and it doesn’t seem to be getting any less costly. Perhaps you want to consider modifying some policy features in order to keep the premiums more reasonable. Some examples would be extending the elimination period, removing COLA and buying a guaranteed renewable policy without the non-cancelable feature (Standard and Ameritas allow for this). Some of these modifications can reduce the cost by substantial amounts, so you shouldn’t discount those options.
Yes, if you want something closer to that 2% figure, you need to buy this thing as a 26 year old resident and skip a few riders. If you want all the bells and whistles and you’re buying it at 40 (or worse, 50) you’re going to pay a lot more. And that’s ignoring the California effect.
HI White Coat Investor,
Would love to get your opinion regarding a disability policy I am looking at.
I am a 36-yo M living in California, graduating IM and starting a hospitalist gig in July.
Got a quote for ProVider Plus Limited Guardian policy, $6,500/mo, 3% COLA, Benefit Purchase Rider, 90 Elimination Period, Benefit Period to 67 for $322.74/mo. The agent told me this is a special deal for graduating residents and no exam, blood, or urine required.
Since I have about $220,000 in student loans, they quoted me a Student Loan Protection Rider (up to $2,000/mo) for total $350.24/mo. Is it worth considering?
Thanks in advance!
I don’t think I’d buy that rider.
Here’s how to buy disability insurance:
https://www.whitecoatinvestor.com/how-to-buy-disability-insurance/
Steve,
The numbers you were provided seem to be a bit higher than I would expect. Although insurance companies set the pricing for these products (thankfully), it’s still the agent’s responsibility to quote you the best occupation classification and provide you with all applicable discounts. It may be worth getting a second opinion because I’m not certain you were provided the best pricing for your situation.
I tend to agree with WCI. If you can qualify for $2,000 of additional base monthly benefit which is payable directly to you if you become disabled, I would do that. It provides you with more flexibility and would apply to total and partial disabilities whereas the Student Loan rider is only payable for total disability. The Student Loan rider is a reimbursement feature, meaning it reimburses you once you’ve provided proof of paying your student debt obligation.
The only reason you might want to consider that rider is if you are not eligible to secure more than $6,500 of monthly benefit, and want a larger overall benefit amount under your individual disability policy. You should discuss the benefits to each option with your agent and make the best decision based on your needs and goals. There may be better options for you than the Student Loan rider.
Michael Relvas is highly recommended !!
I thought I was stuck with my institution’s preferred insurance representative, but he was able to take over the case and get me better rates once I determined that my rep was not up to date on the policies.
Awesome, reliable advice.
You can find him online:
https://www.mr-disability-insurance.com/Disability-Insurance-Consultants.php
I am 37 years old currently with no medical problems
I currently have a metlife disability policy for $5,000 monthly benefit (omni advantage) with elimination period of 180 days. I am paying about $2,080 per year
It has the following riders
lifetime benefit for total disability (no charge)
monthly benefit for residual disability with 24 m recovery benefit ($312)
presumptive disability (no charge)
your occupation benefit ($319)
Guaranteed insurability ($96.3)
max total increase $5000
unit of increase $1000
i recently got an offer from another agent for ameritas policy for the same $5,000 benefit for a premium of $1521 per year.
it has all the base policy features along with the enhanced residual disability rider and recovery benefit rider
The agent said that the premium is lower because ameritas gives a discount to my employer.
Considering the savings of $559 in premium per year, do you think i should switch?
The metlife policy offers lifetime benefit for total disability if it starts before the age of 45. The benefit amount progressively decreases 5% each year after age 45. e.g if disability starts at age 46, the benefit will be 95% of the $5,000, if disability starts at age 47, the benefit will be 90% of the $5.000 and so on. The ameritas policy does not have the lifetime benefit.
Also the metlife policy offers full coverage for claims related to mental/nervous and/or substance abuse disorders. The ameritas policy limits these benefits to 2 years for mental/nervous and/or substance abuse disorders
if i switch i will lose the lifetime benefit. I am not too concerned about the mental/nervous disorders as i have no history of addiction or mental health issues.
I am having a hard time deciding whether i should switch to save the $559 in premium per year although i lose some benefits also
I would appreciate any advice
I’m not sure there is a right answer. I guess what I’d be most worried about is whether $5K is enough. Maybe you should buy both! $5K a month is inadequate for many doctors.
A lifetime benefit is reasonably rare. Most of these policies stop paying out at 65-67. The benefit of some kind of a lifetime benefit is that you don’t have to save for retirement (with benefits) like someone who doesn’t have that so you can buy less total insurance. I’d be a little hesitant to give that up. But I’d go over those two policies with a fine comb and really understand exactly what I was giving up and exactly what I was getting. Maybe even talk to a second agent for another opinion. Many times these questions don’t have a “right” answer. It’s just what you want.
I get additional 15k disability benefit through my employer therefore i kept my policy at only 5 k and did not add to it. I understand that the employer benefit is not the same (pre vs post tax, own occupation etc).
I see. I think that changes things significantly. I think I’d keep the lifetime benefit but look at it all together, preferably with a second agent.
AK –
Here are a few thoughts/questions to consider.
Keep in mind that the agent/advisor recommending the new Ameritas policy stands to make a decent amount of money if you go along with his recommendation. Helping you modify your existing MetLife policy however, would not make him/her any money. This isn’t to say that the Ameritas policy is a poor recommendation, but depending on the caliber of agent/advisor you’re working with, the potential earnings could be playing a bigger factor in his/her recommendation than you think.
Did the agent you’re working with show you proposals from Guardian, Standard, Principal and MassMutual, or just Ameritas? Ameritas offers a great policy and is very competitive for a number of specialties, but you should review all of your options thoroughly before making the decision to replace an existing policy.
Although the OmniAdvantage policy is not as comprehensive as the Income Guard policy MetLife most recently sold, it’s still good. So to help determine whether replacement is worthwhile, you should evaluate how the premium would change if you simply modified the MetLife policy. For example, how much would the premium be reduced if you downgraded your graded lifetime benefit to an Age 65 benefit? Would the savings be comparable to that of replacing it with Ameritas? If so, than you might want to consider that option instead.
It’s great that Ameritas has a discount available for your employer, but don’t ignore the fact that the Ameritas policy doesn’t have graded lifetime benefits (which isn’t an inexpensive benefit) and includes a mental health benefit limitation (which is worth about 10% of the premium). Ameritas isn’t just less costly because of the discount – it’s less costly because it’s also less comprehensive.
My recommendation is for you to evaluate making changes to your MetLife policy and compare that to proposals from all of the leading insurers. It sounds like you already have a working relationship with an advisor so I doubt you need it, but feel free to email/call me if you’d like a second opinion. I can’t really give you an opinion at this point because I don’t know enough about your situation or the options available to you.
Hope this helps.
Thanks so much for this extremely helpful post. Is there some sort of financial benefit to buying disability insurance while still in fellowship, as opposed to buying it after one is an attending? I have read conflicting information about this and was hoping you could clear up the confusion. I will be completing my oculoplastics fellowship next month, and I’m trying to decide whether I can wait to buy disability insurance until after I start my private practice job in a few months or whether I will end up paying more in the long run if I wait. (Of course, I understand that, because I am healthy now, waiting involves some risk since my health could change.) I have a lot of demands on my time right now and would have more time to deal with this after I finish fellowship. Is there any financial harm in doing so? Thank you!
Aside from the issue of being older and possibly developing an issue, you may also be in a different (cheaper) occupational class as a trainee. In addition, once you have coverage through an employer, it may limit how large of an individual policy you should buy.
HI WCI,
I’m a 31yo male PA w/ a LTD w/ Ryan Insurance Strategy through my professional association making in the low 100k/yr. Below is snapshot of my plan, I wanted to get your feedback, whether it’s a good policy or not. Thanks.
Your Plan: LTD only
Monthly Disability Benefit: 60% of Pre-disability Income up to the plan maximum.
Monthly Long-term disability Benefit: $3,418.35
Your monthly LTD premium: $14.24
It’s simply not that easy to identify a “good” plan. If it is from one of the big 5/6 companies, it is likely good. Going off price alone (all you gave me) it is very, very cheap. (0.4%) Which makes me suspect it isn’t a good plan. Most good plans cost 2-6% of the amount insured. But it may be a great supplement to a good plan, hard to say.
As a FMG resident medicine physician and someone who was prescribed anti-depressant for 6 months by program’s sanctioned psychiatrist, how does all of this factor into shopping for a disability insurance?
The FMG won’t affect anything, but the depression may. The independent agent you buy the policy from should shop it around informally to see which of the big 6 will care the least about it!
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