By Dr. Jim Dahle, WCI FounderWe've spent a lot of time in the last couple of years ensuring that our recommended insurance agents are always doing the right thing for white coat investors. Doing so required learning a lot about the industry that we didn't used to know. Perhaps the most interesting thing we've learned is just how few disability insurance policies are actually being sold to doctors.
The insurance carriers aren't exactly volunteering the exact numbers, but we have enough information to estimate it within a few thousand. The fact is not nearly enough of you are buying disability insurance policies.
Running Some Numbers
Each year, there are about 21,000 new MD graduates, 8,000 new DO graduates, and 7,000 new dental school graduates for a total of 36,000 new doctors. Not all of them need an individual disability policy. Some didn't match. A few of them are already financially independent trust fund babies. Many are married to doctors or other high income professionals, and they have reasonably decided to use each other as their disability insurance policy. Some of them have rationally decided that a group policy offered by their employer or professional group is “good enough” and that they aren't willing to spend any more to get a high quality, portable, level premium, individual policy with a stronger definition of disability and better riders. Some percentage of them are in the military, and they've had few issues getting good individual coverage. A small percentage of people have medical issues or interesting hobbies and don't qualify for any Guaranteed Standard Issue (GSI) policies.
Nobody has data on all of this stuff, but let's use some generous assumptions for each item.
- Total new docs: 36,000
- Didn't ever match: 700
- Trust fund babies: 300
- Married to another high earner AND comfortable with neither being insured: 15,000
- Happy with their group policy: 2,000
- Military docs: 700
- Medical issues and no GSI available: 1,000
- Total docs who should be buying an individual policy each year: 16,300
How many policies are being sold each year? Less than 1/3 of that 16,300 figure. Maybe less than 1/4 of it. What the heck? Most of our colleagues are running around out there with their greatest asset (the ability to earn a high salary) completely underinsured.
Why Doctors Who Need Disability Insurance Aren't Buying It
Why are they doing that? I'm not sure. I think a big piece is simply ignorance.
I'm doing the best I can. Disability insurance is Chapter 1 (i.e. Step 1) in my Financial Boot Camp book, and it has prominent chapters in the original WCI book and the Guide for Students that we try to give to every first-year medical and dental student every year. It's prominently featured on the blog and podcast regularly. I don't know what else to do.
Please, tell your colleagues that they need to buy a disability insurance policy and maintain it until they become financially independent.
I think a bigger issue is the hassle factor. Buying disability insurance usually takes a few weeks and at least a phone call or two and an appointment with a medic for a quick physical and blood draw. I'm sure that's stopping a lot of busy docs. Inertia is hard to overcome.
Sticker shock is probably part of it, as well. Disability insurance is expensive. A policy that provides a $10,000 per month benefit (just $120,000 a year, less than half the income of a primary doc) costs $200-$600 a month. It's because these policies actually get used. That feels like a lot of money to a resident, fellow, or even new attending.
Mistrust of the financial services industry is also an issue. Who wants to go see somebody and fight off an hour-long whole life sales presentation just to get what you need? And who knows if they're really doing the right thing for you? Again, we've tried to do what we can here. For many years, we've maintained (and policed) a list of vetted, active agents specializing in doctor disability insurance. We expect them to do the right thing for every white coat investor, hopefully minimizing this trust issue. They certainly aren't pushing whole life policies on young WCIers buying DI.
So, let's figure this out a bit. While our sample is going to be biased (you all are a very different population from doctors at large), let's ask a couple of questions.
Loading ... Loading ...What do you think? What can we do at WCI to double or even triple the number of docs buying policies each year?
Jim, I can’t thank you enough for giving this advice years ago. After reading your recommendations, we bought DI years ago – I work in a procedural specialty and I developed a long-term wrist issue only a few months after we bought the policy. Had I not bought it promptly I’m sure I’d be uninsurable now with a history of wrist surgery. Get it as soon as you can!
Question – my wife bought a policy too when we were both out of training. Now she works PRN and we are trying to decide if she needs to keep her policy. If I die, we have lots of term life (3.5 million) which will be more than enough for her to not need to work. If we are both disabled, I think we could live on my policy plus our current savings (that’s kind of hard to extrapolate depending on what that disability looks like and if there are long term care costs etc). I am thinking about this right or missing something? Obviously I can run the situation with our agent but he I’m sure will tell us to keep it :-).
Thanks again for the early and timely advice!
Our pleasure. For sure the most important thing when it comes to disability insurance is having SOMETHING in place.
As far as your wife, yes, you’re thinking about it correctly. If you don’t need the benefit if you’re both disabled, I guess you can drop it. Lots of people might wait a year or two until they’re absolutely sure though. I mean, what if the market drops 50% this year for instance?
You make good points, but I’m a little stubborn and confident (possibly overconfident) in my resilience and ability to figure out a way to provide for my family, even with a long term disability.
Not saying I’d find a way to make a physician salary, but I’d figure out how to cover our basic needs.
It also helps that I have an emergency fund, a term life insurance policy, a good start on retirement investments, and no debt.
The wealthier you are, the more likely you are able to make it work. But there are some disabilities that really keep you from doing much at all. I guess if you got one of those, maybe you could at least get Social Security disability.
There’s no way to guarantee this. Disability comes in all forms, and some of these health issues are insurmountable (at least in terms of your ability to earn a living) regardless of your resilience. Not worth the gamble, in my opinion.
As doctors we’ve all seen people who have a horrible disease or traumatic process that not only strips them of an ability to earn an income but now requires multiple doctor visits. Can your spouse or partner take the time off to get you to a doctor visit? Can your partner take time off to sit beside you while you’re hospitalized? Can your partner take the time off to navigate the insurance companies and bills that come in?
Jim, when you fell off that mountain how much was your wife able to work at her job and how long until she could go back to work her normal hours?
I worked with a doctor who developed a dementia of some sort and was forced to retire. He was relatively young, 50’s. I know another doctor who developed MS and it became severe fast. She was in her 40’s. She had disability insurance and retired. I miss her. I’ve known many doctors who ended up with breast cancer to brain cancer. Disability and illness take a toll on the whole family.
I even know of a doctor who developed a neurological process but continued to work. He had horrible surgical outcomes and was sued to high heaven. The hospital was sued. The state health department and JCAHO were all over that hospital, not to mention the local news. Everyone was pointing fingers at everyone else. It was a mess.
Even a small disability insurance policy is better than no policy. SSDI is a safety net to help people survive. It does not cover everything and for a young worker, the amount can be very small. SSDI can provide a caregiver stipend, but it is very small.
The extra expenses for medical care and a now non-working spouse are definitely significant.
I spent my entire career in the group of disability under insured out of complete ignorance. I had a group policy so that seemed like a bonus. I was also sure “that was not going to happen to me”. When I found WCI a couple years ago and learned that I should have an individual disability policy, it was too late. I got lucky and recently retired, financially independent. If I had it to do over again, I would insure myself better against disability. Thank you for the continuing financial education you provide to the oblivious like me.
Glad you won that gamble!
I agree!
Health, nutrition, exercise, & fitness were priorities for me. We think we control our health, but we don’t.
I love clinical medicine and had expected to practice into my seventies.
I unexpectedly developed disease in my thirties that finally disabled me in my fifties. My DI policies from 25 years ago pay me monthly.
I’m living on disability now. I would have survived financially without it, but it’s nice to not withdrawal from my portfolio in my fifties. This reduces risk and grows my wealth.
I continued DI even post-FI. In general, that may not be needed. But in my case, it paid off.
I get so many patients requesting me to be an independent medical evaluator so that they can fight the insurance denials. When I look at the reports of the docs working for the insurance, and all the BS reasons they write up, I have to rebut every one of them. And I’m not cheap either. As a Psychiatrist, in order for me to get disability, I would have to get both of my arms cut off, immobile in my bed and I bet that the insurance will still say I can turn on the dictation key using a pencil and my teeth. Please convince me why I should get a disability insurance, throwing my money away for service that is just going to fight me using my money.
I’ve heard that argument before, but don’t buy it. Maybe being a psychiatrist is a reason to get an “any occ” policy, but I don’t think it’s reason to not get a policy at all. Psychiatrists are usually in the lowest cost category anyway which I think adjusts for the fact that things like a wrist injury wouldn’t disable you. But a head injury would. Besides, it’s usually medical stuff that causes disability. Cancer. MS. MG. Dementia. etc. Those are going to keep a psychiatrist from working too.
One critical issue not well addressed in the article, is that for anything beyond a brief token coverage, the insurance company is not going to pay until forced to do so. I should know, I was disabled for a prolonged period and I went through the process. This will happen in the majority of cases for the simple fact that he insurer usually has nothing to loose. Under Federal law the companies pay, for all intents and purposes, no penalty whatsoever for refusing to pay and being forced to. So they will do a cursory, cherry picked review, my lawyer called it ‘the standard’ in honor of the insurance company, and deny your claim.
So first, you will have to hire a lawyer, who will take the case on contingency. To get the insurance company to pay, you WILL need that lawyer. Expect to lose in the neighborhood of 45% of your benefit to the lawyer. Or you can not get a lawyer and lose 100% of the benefit to the insurance company not paying what they owe.
Second, unlike social security disability, the lump sums you may get in back benefit (Oh did I mention it may take years to get them to pay) can result in getting caught in the minimum alternative tax. Which would not have happened if they had paid in a timely manner Too bad for you. It was certainly too bad for me. That will eat yet more of your back payment.
The point is this is not to say don’t buy disability insurance, you most definitely should. But assume you will never see half or more of the stated benefit. So find the benefit you will need if disabled and at least double it.
The cynics like to say that an insurance company is in the business of collecting premiums and denying claims. There’s obviously some truth to that.
The more “gray” your disability case is, the more likely you will need to use an attorney to get paid. The less gray it is, the less likely it is you will need an attorney and the more likely it is that you will win if you have to.
There is less gray when you buy a solid individual disability policy with a strong definition of specialty-specific, own occupation disability like those primarily sold by the agents we refer people to here:
https://www.whitecoatinvestor.com/insurance/
But if you’ve got a disability that has no abnormal labs or imaging results, you may still have a fight on your hands.
All that said, your recommendation of “doubling” what you need doesn’t seem particularly practical. Most docs CAN’T buy twice as much as they need, even if they can afford to do so.