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By Dr. Charles Patterson, WCI Columnist
It is difficult to overstate the importance of appropriate insurance coverage. It is so important, in fact, that it is one of the 10 Commandments of The White Coat Investor. For those new to this precept, the idea is simple: you have worked hard to build your family, career, and lifestyle. Life circumstances—many of which are outside of your control—pose a threat to their security and preservation. Examples abound and include but are not limited to things like premature death, unforeseen disability, freak injuries that debilitate you or someone for whom you are liable, and litigious patients. Insuring against catastrophe is therefore a prudent and necessary way for a physician, including a military doctor, to protect their financial house.
For the early career professional and those in the armed forces, the same rule applies. You don’t get a pass just because you are young and healthy and because you might have a nest egg that is far smaller than that of your college bud who became a CPA a decade ago. You have a lot to lose, not the least of which is your potential for financial independence. The good news is that if you plan well now, executing an insurance strategy won’t be as expensive as it will be in five or 10 years and could even obviate the need for it later on. In the below paragraphs, I will expand on this concept and offer some general guidelines for its judicious use.
How Much Life Insurance Does a Military Officer Need?
Life insurance is straightforward: if you die unexpectedly (not that we ever see that happen as physicians . . .), you need to leave enough benefits to cover the expenses of your home. By “home,” we mean all of your financial responsibilities: the mortgage, a nest egg for your spouse, education for your children, healthcare, and living expenses for as long as you deem necessary. The only way to know how much coverage this entails is by keeping a budget and creating a written financial plan.
Once you have calculated the amount of money you would need to replace, subtract the projected benefits package provided by the DoD in the event of your death. This includes funeral costs, the Death Gratuity, a suite of Family Survivor Benefits, Tricare health coverage, and GI bill education assistance. The remainder is the amount that needs to be covered by a term life policy. Foot-stomping here: term life, not whole life.
The military offers a $400,000 policy through Servicemembers Group Life Insurance or SGLI. It costs $25 per month (somewhat expensive for this amount of coverage), and it's a decent start. But it probably won’t get you to the number you need. Picking up a term policy is quick and easy, and I have run into only a few roadblocks with regard to military service (I found out the hard way that most insurers won’t issue a new policy within 90 days of an upcoming deployment).
Life insurance shouldn’t be forever: a reasonable goal would be to have a nest egg large enough to negate the need for such a policy 20 years out of training. Because term policies are inexpensive and facile and they require thoughtful reflection on your financial goals, they should be the first step in considering your insurance needs.
Car Insurance for a Military Doc
Car insurance is a must, and not just because it's a legal mandate. If you are a frequent mover (as often we are in the DoD), be sure to update your policy to reflect the state within which your vehicle resides. This will affect your rates, which can be good or bad. But you don’t want a claim denied because you failed to disclose your whereabouts. One never knows when the insurance will be needed. From experience, I can tell you that if you move to a state that has hail the size of a baseball or one in which floods are common, the added cost of a vehicle replacement rider might be worth it.
Also, keep in mind that the average Joe and his lawyer don’t care that you are an underpaid military physician. They see the letters behind your name and won’t discriminate between you and a retina-trained ophthalmologist. The moral of that story: be generous with your liability coverage.
Homeowners/Renter’s Insurance for a Military Physician
If you are in the military, you probably shouldn’t be purchasing a home. But if you do, you will need insurance. There’s nothing quite like having a burst pipe turn your basement into a swimming pool.
A lease contract doesn’t always require renter’s insurance, but it can add an additional layer of protection for personal belongings. Moreover, if you own an umbrella policy, it might stipulate that a rental policy is necessary. These are typically inexpensive and are usually worth the cost.
Do Military Officers Need Disability Insurance?
Disability insurance is a sticky proposition for those serving. For most professionals, it's a no-brainer. If you rely on your income to meet your current and long-term financial goals, this is your policy to protect your income. Unlike term life insurance, disability insurance is expensive, and you must do your due diligence to procure the proper coverage. But disability prior to anticipated retirement is too common to not insure against.
Most physician finance experts advocate for disability coverage for military docs. The arguments are sound: military physicians (along with lawyers, PAs, NPs, dentists, and all other professionals) are every bit as at risk of disability as their civilian counterparts. More so, even. It's no coincidence that only two insurers (MassMutual and Lloyds of London) offer this sort of coverage for active duty service members. Like the death benefits described above, the DoD won’t leave you completely out to dry should a debilitating tragedy befall you. But just like SGLI, disability benefits through the VA are not robust enough to cover your financial house.
In the event of your disability (or separation/retirement), the military and the VA will evaluate you for a “rating.” In essence, this rating is a measure of the impact of your service-related health condition(s) and is used to calculate monetary compensation and lifelong medical treatment. If a disability is so severe that it precludes continued service and you are “medically retired,” the service will sometimes pay a lump sum that is calculated based on your rank and number of years on active duty. The system is convoluted, making an accurate model of hypothetical income replacement nearly impossible—and also complete conjecture. The bottom line is this: the VA is not going to replace the amount of income that you make as a medical officer, let alone what you would make as a civilian. This fact highlights the utility of disability insurance.
To be fair, what a military doc should really be insuring against is a situation where there is a career-ending disability that precludes clinical practice (or any other work as a physician) in the civilian world. These things happen, albeit rarely. But if we were to use that as our benchmark, keep in mind that 100% of your base pay would be replaced. Subtract that number from the average compensation of your specialty, divide by 12, and you are left with the amount of monthly disability coverage you would want. Because base pay is so low (relative to physician income), the policy would be rather large. And that means (very) expensive.
For example, if you are an Emergency Medicine physician in the military with five years of active service, your base pay is about $6,000 per month. Remember: bonuses and allowances are not considered in the benefits calculation. Let’s say for argument's sake that the average civilian Emergency Medicine compensation package is worth around $30,000 per month. In theory, you would want a policy in place that could replace as much of that $24,000 difference as possible. A disability policy that large is incredibly expensive, and because the disparity in income between military and civilian docs is so great, it's not a viable option. There’s no sense in insuring a Learjet when you’re driving a Honda Civic.
A reasonable alternative might be to procure a policy that replaces your military income that would also include bonuses and allowances. For the same board-certified ED physician above, this equates to around $14,000 per month (depending on family and duty station), yielding the need for an $8,000 per month policy.
More likely than not, however, is the contingency where a military physician is disabled but can still practice in the civilian sector. What is the net result? Your income would increase upon separation, but maybe not to the degree that it would have if you had not been disabled. Do you insure against that? If so, how much? These are muddy waters, particularly when factoring in the high cost of these policies.
Over the years, I have taken an informal poll of dozens of military docs, querying them on whether they carry an additional disability policy. Exceedingly few do so—perhaps less than 1 in 5. I am not advising that we all join the lemming herd, but clearly, they have either not thought about the issue or they have concluded that the cost of additional disability insurance outweighs the risk of future earnings loss. While I am in favor of disability insurance for military physicians, it's a matter capable of debate.
Do Military Physicians Require Malpractice and Tail Insurance?
Military physicians practice on behalf of the US government—which is, in effect, immune from indemnification under the Feres Doctrine. A brief history: in 1950, the Supreme Court ruled that soldiers cannot sue the US government under the Federal Tort Claims Act (FTCA) for injuries resulting from the negligence of other service members. There are innumerable exceptions and nuances—entire legal texts have expounded on Feres. Because of this sovereign immunity, it is nearly impossible to sue the US government and to sue military physicians by way of extension. You can imagine how popular of a policy this has been over the last seven decades. But in essence, it means that when rendering care on behalf of the US government, the liability is with the government and not with you.
While the liability is not yours, it's not entirely true that you cannot be sued for malpractice while on active duty. On the contrary, this happens with some frequency. When it does, JAG files a motion to replace your name with “US Government,” and the case is adjudicated accordingly. That is not to say that this is the end of your woes: you can absolutely be reported to the National Practitioner Database; can face internal adverse administrative action; and for credentialing purposes, can be required to check “yes” when asked whether you have been named in a suit. But for our purposes here, the takeaway is that, while serving, you do not need malpractice insurance or tail coverage.
Moonlighting is a completely different story. When picking up shifts as a side gig, malpractice and tail insurance must be negotiated with the civilian practice.
Umbrella policies are useful as a supplement to existing insurance policies. They are cheap: getting millions worth of umbrella insurance will cost less than what you pay for Peloton every month. Conveniently, umbrella policies are typically only issued if sufficient insurance exists for all other salient liabilities (hence their cost). Thus, by way of being issued an umbrella policy, your insurer feels confident that your risks render its odds of use quite low. Umbrella insurance is a redundancy, but I would argue that it is not redundantly redundant. Circumstances dictate the need for all insurance, and in the case of umbrella insurance, its utility and pricing make it an easy decision.
We should conclude by recalling the entire purpose of insurance: to replace that which has been or could be lost in the event of a catastrophe. Reviewing your policies annually is a healthy reminder that your blessings are many and that risks abound. Doing so reinforces good behavior: like driving with caution; practicing evidence-based medicine in a caring manner; and enforcing healthy habits of diet, exercise, and sleep. Reviewing and understanding your policies is especially important for those in the military who are at higher risk of injury but who have a less robust means of recourse.
Yes, insurance costs money. But it's a reasonable expenditure to protect your livelihood and your financial future. For those in the military or early-career folks with seemingly little to protect, there is a tendency to want to cut corners when it comes to insurance. But let naivete be no excuse: with more sunrises ahead than have yet been experienced, ignoring this necessary foundation of your financial health is a risk not worth taking.
Have more questions about insurance and what kind of policies would be the best for you? Hire a WCI-vetted professional to help you sort it out.
If you are or were a military doc, were you fully insured, or did you skip out on some to save money? Once you separated from service, did your views on insurance change? How so? Comment below!
The views expressed in this article are those of the author and do not reflect any official position of the Department of Defense or the US government. These writings are not authorized, approved, or endorsed by any of the above entities.