Long-term readers have heard me recommend term life insurance over permanent life insurance many times over the last couple of years. In this post, I'll discuss four useful strategies for physicians to consider when purchasing term insurance.
#1 Buy Life Insurance on Non-Working Spouse
As a general rule, life insurance is used to protect the bread-winner(s) of a family. If no one depends on your income, you generally don't need to insure against the loss of that income. However, there are some factors you may want to consider when foregoing life insurance on a non-working spouse or partner.
Non-Working Spouse
First, it isn't very expensive to insure a non-working, healthy, 30-year-old male or female. A 10-year level term policy with a $500K face value costs about $12 a month for a female and about $14 a month for a male. That's not necessarily a reason to buy it for a stay-at-home spouse, but it does make it an option to consider.
Insuring Against Loss of Spouse's Unpaid Work
You can assign an economic value (which is what you're insuring) to the unpaid work of a non-working spouse. The spouse may be providing child care, meal preparation, home maintenance, housekeeping, snow removal, laundry service, landscaping, or other chores that you won't have any more time to perform after your spouse's death than you did before. There is a real economic value there which you may wish to insure against. You will either need to pay to have those services performed, cut back on night shifts, call, or time in clinic to do them yourself, eliminate some of your hobbies, vacations and other recreational pursuits, or some combination of the above. It might be easier to buy a few hundred thousand dollars of term insurance.
Temporarily Non-Working Spouse
The loss of income of the non-working spouse may be only temporary. If your spouse is going back to work in a couple of years when Junior starts first grade and your financial plan is counting on that additional income, then you'd better get some insurance to cover the loss of that income.
Transition Period Following Loss of Loved One
Don't underestimate the difficulty of the transition period after the loss of a loved one. You and your children will struggle with the loss. You may not even feel like working for a few months, or perhaps years. It will take time to arrange affairs, and no business or disability insurance is going to cover this. If your practice doesn't make money unless you're there, your overhead will continue to pile up. Cash in hand from the insurance will at least eliminate the financial aspects of this tragedy.
#2 Life Insurance in Medical Residency
Many residents are married with children. They have a net worth of zero, or, more likely, less than zero. Although student loans disappear at your death, consumer and mortgage loans are assessed against the value of your estate and are probably co-signed by your surviving spouse. There is probably never a greater need for large quantities of life insurance. Residency is also the ideal time to lock in long-term life insurance since you are young and healthy and thus premiums are quite low. Ideally, if you expect you'll need $2-4 Million of term insurance later, you should buy it in residency. The problem is that you have a relatively tiny income with which to pay the premiums.
Insurance companies don't like you to be worth more dead than alive. They don't want to sell you life insurance that isn't at least peripherally related to your income. I had an insurance company balk when I tried to buy a $1 Million policy while I was a military physician. They didn't care so much that I was in the military, the issue was the fact that I was in the 15% tax bracket. I was trying to buy a policy which, in addition to my other two policies, would have provided me something like 20 or 25 times my current annual income. The agent eventually was able to convince the company to sell the policy based on the fact that I would soon triple my income. Your agent may have to do something similar for you, but it shouldn't be that hard.
A bigger dilemma is deciding how to structure your life insurance.
Options for Life Insurance Structures in Residency
One option is to actually buy the insurance you need, but for a shorter term. You might think you’d get a great deal buying a 5-year term life policy, but that’s not the case. Because so few carriers sell 5-year term, the price is actually higher than buying a 10-year term policy. Here's an example:
5-Year Level Term $3 Million Policy (30-Yr-Old Female)
Annual Premium: $590
10-Year Level Term $3 Million Policy (30-Yr-Old Female)
Annual Premium: $400-450
5-Year Level Term $3 Million Policy (30-Yr-Old Male)
Annual Premium: $710
10-Year Level Term $3 Million Policy (30-Yr-Old Male)
Annual Premium: $550
$400-$550 seems a reasonable price to pay for a 10-year policy that would keep you insured through your training. You can either build around the policy after residency or cancel it (there are no fees for canceling term life) after you've locked in a more long-term solution.
If you instead decide to get a $3 Million, 30-year level term policy, you would be looking at a little over $1,300 a year for a female and about $1,761 for a male, which you may find to be simply unaffordable even though it is the policy you need.
You could buy $1 Million of 30-year level term for about $630 a year, but then you're running two significant risks.
- You actually die during residency and your family only gets $1 Million of the $3 Million they need or want.
- You become less insurable, or even uninsurable, due to illness or the acquiring of dangerous hobbies during your training. There is no great option here, and each resident will need to decide what they are most comfortable with.
Another option is to not get a level term policy, but simply to use an Annually Renewable Term policy. It's cheap now but more expensive later. But it might be a way to get all the coverage you need for a price you can afford right now.
What I would not do, however, is avoid the issue. If you have someone depending on your income, buy something. $1 Million is better than nothing. $3 Million for 10 years is also better than nothing.
#3 Buying Life Insurance upon Residency Graduation
Due to affordability issues during residency, or simply due to marrying or having children at that stage of life, many new attendings will have a need to buy insurance. The purchase of life insurance, done properly, really only needs to be done once or twice in your life, but this is one of those times. What you choose to do at this stage depends on what life insurance you already have in place. If you are still healthy and haven't picked up any bad habits, like smoking or rock climbing, you still have lots of options.
If you sucked it up and just bought a huge, long-term policy as a resident, well, at least that is now a tiny percentage of your income.
If you decided to partially insure yourself with a smaller, 30-year policy, you now have the option to buy an additional policy or two and keep the old one in place.
If you bought a shorter-term large policy, now is probably the time to replace it with a longer-term policy.
If you have become ill, or become SCUBA certified, then you have more of a dilemma. You can wait until you are more insurable (being cancer-free for a few years may lower your premiums for instance or you can stop going SCUBA diving for a while). You can also simply pay more for a policy since you now have the means to pay the premiums.
#4 Life Insurance Laddering
The point of the “Buy Term and Invest the Difference” strategy is that your need for life insurance gradually decreases and eventually disappears as your portfolio grows. If, after 20 years, you have a $2 Million portfolio, it seems silly to keep the same 30-year level term $3 Million policy you bought upon residency graduation when you had a negative net worth. But you don't necessarily want to cancel that policy and buy a $1 Million policy. A $3 Million 30-year policy on a 30-year-old male is $1761 per year (10/2020). A $1 Million 10-year policy on a 50-year-old male is $830 per year.
A better strategy might be to ladder a policy, just like a retiree might ladder treasury bonds or CDs. Instead of buying one 30-year $1 Million policy, you could buy a 10-year $1 Million policy, a 20-year $1 Million policy, and a 30-year $1 Million policy.
Since the shorter policies are much cheaper, you can save a lot of money on premiums while still covering your insurance needs. It helps you to avoid over-insuring.
Using a healthy 30-year-old male as an example, with the lowest cost carriers available in the marketplace:
30-Year Level Term $3 Million Policy (Male)
Annual Premium: $1761 (life cycle cost = $52,830)
Laddered 30/20/10 Level Term Policy
Annual Premium for a 30-year level term $1 Million: $624 (life cycle cost = $18,720)
Annual Premium for a 20-year level term $1 Million: $370 (life cycle cost = $ 7,400)
Annual Premium for a 10-year level term $1 Million: $235 (life cycle cost = $ 2,350)
Total: $1229 (total life cycle cost of this life insurance portfolio over 30 years = $28,470)
Notice how big the savings are for laddering a policy, rather than overinsuring with the 30-year $3 Million policy – over $500 per year and over $24,360 over the products’ lifecycle!
You should also keep in mind the effects of inflation. Although inflation makes the dollars you pay premiums with worth less each year, it also makes the dollars paid out in benefits worth less. A $1 Million policy right now might only be the equivalent of $553K in 20 years. This, in essence, has the effect of automatically laddering a policy, since it costs less and is worth less over time.
What strategies have you used for your term insurance? Vote in the polls and comment below!
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Please note that Banner Life Insurance Company and William Penn Life Insurance Company of New York are Legal & General America companies.
Banner’s life insurance products are sold in 49 states and the District of Columbia. Banner is not licensed to do business in New York and does not solicit business there. William Penn’s products are sold exclusively in New York.
Therefore, if you reside in New York, and are looking to use a term rider on your base term policy to accomplish laddering and save annual policy fees, you need to look at the rates for William Penn as Banner will not appear on http://www.term4sale.com (if you input that you are in that state for a term life comparison).
While rock climbing and some other “hazardous” avocations may be an issue (which may require an exclusion from coverage or an additional premium), being SCUBA certified, generally is not a problem unless you are going deeper than 75 feet.
Why don’t they make it that climbing isn’t a problem unless you climb higher than 75 feet?
Buoyancy is more favorable to an actuary than gravity?
I used a company called Low Load Insurance (www.llis.com)for my term life policies after working with a Fee Only Financial Advisor who recommended them. They did a good job and are worth considering when looking for insurance products.
Looks like a pretty good company. Looks like they only work with fee-only advisors which is good, unless you don’t use an advisor at all. I hate the name. “Low-load” was used for mutual funds for a while. The question that always pops into my mind is “Why use low-load when you can use no-load?” Doesn’t apply to insurance, but still a bad name IMHO. But they’re not selling their services to me or any retail investor. You can’t even get a quote off their site without listing an advisor.
One extremely important strategy that was not mentioned is with regard to medical underwriting. In many cases there is a very clear advantage to working with one company over another because of the specific underwriting criteria – but it isn’t always obvious, even to the insurance agent.
For example, most insurance companies will downgrade your health category (increase your premium) if a parent has died prematurely due to cancer or cardiovascular disease. However, there are a few companies that do not downgrade for premature deaths due to cancer. Something this simple could have a significant impact on cost.
Build (height/weight) is another example. Some companies have more liberal underwriting guidelines and are able to offer more favorable health categories which could mean better pricing.
If your the perfect candidate for life insurance, this will not matter. But for the non-perfect cases, there is huge opportunity to for strategy.
This is why you find an independent agent who represents a lot of good companies and not a career agent for one specific company. Let them shop your case around.
One small (perhaps insignificant) advantage of laddering w/ different policies is that you can get the policies from different companies. This way if for some reason one insurer can’t/won’t payout when the time comes, the other one is still an option.
I’ve created my ladder using policies from Banner and Ohio National. I think it may have been slightly cheaper to use the laddered Banner product, but not much, because when I purchased Ohio National had cheaper premiums, and I don’t think they had laddered product.
It is certainly important to have life insurance, but how much is really enough and what is the purpose?
If a resident dies should he/she have purchased enough life insurance to cover an average medical career of 30 years? I think that is impractical. I see a need for a nice lump sum, but the survivors at some point need to take control of their lives by earning their own money to supplement the insurance payout. I have never been through the death of a spouse, but I think perhaps having a job might be an escape from the grief rather than living off a trust fund forever.
It certainly would build independence and spur initiative.
I don’t think you need enough life insurance to set your family up for life. You need enough to help meet their needs short term and allow them the time and flexibility to reset their plans. I’m sure the amounts differ from person to person, but I would think a year of salary for each kid and a year for your spouse along with personal savings should be enough to help meet their needs.
You need life insurance for the following:
1) Care of your children
2) Assistance to spouse – she may have put off career for yours. “getting control” of one’s life isn’t always easy when you are suddenly unexpected single parent who doesn’t have a job. Could take time.
3) pay your debts.
Most young physicians have fairly young kids so If you are married with kids I would think 1-2 million is a must. Ask yourself this. If your spouse were to die today how do you intend to work and take care of kids under 5?
If you think your spouse and kids are going to be fine on a year of your salary then I feel sorry for them. Its a bigger life change than you seem to grasp.
I completely agree with Beau. The premature death of a spouse and parent is a serious issue, and even more so if he/she is also the primary earner of the family. I’ve never had a death claim paid out where the surviving spouse said, “I probably didn’t need this much”. A premature death is not only emotionally devastating, but extremely frightening from a financial stand point for the surviving spouse.
Perhaps there are some individuals who are comfortable with leaving their families on a path that could lead to difficult times ahead. Considering I can guarantee the exact opposite for the low cost of a term policy though – the decision is simple.
I have to admit that my own circumstances include substantial personal savings so maybe I’m not particularly worried about my family starving. My wife also is highly educated and will be fine.
I agree people need life insurance. I am ok with less than some folks here and Iam ok with the idea of other people having more than I do.
Please don’t take my comments to be anything other than one man’s opinion given for free and probably worth less than that.
I have been wondering the same thing. I think I will probably go with a 10 year $1 million policy starting when we have our first kid. Enough for a house and decent income. The student loans will disappear so that is not a problem. Social Security will add a little extra protection.
There is a cost to more insurance. Run the numbers using a 6% interest rate with that $2000 a year payments. Having too large of a payout could make you a target or delay moving forward. I worry that insurance payouts remind me a lot of unemployment insurance and lottery payouts. Both of those lead people into problems. Unearned money and incentives to be complacent.
While everyone gets to make their decision as to how much life insurance to buy, I highly recommend erring on the high side. This stuff is so cheap and can make such a dramatic difference, it seems silly not to have “enough,” however much that might be.
The way I think about it is how do you want your family to live if you die? For example, my wife is a teacher. Around here, she’d be doing well to make $50K a year. That would be a dramatic lifestyle change for my family. Without life insurance, they would probably have to move out of this neighborhood, this church, these schools etc. The kids would be in day care and there would certainly be more eating out/take out. They wouldn’t be able to travel nearly as much, or go to Lake Powell every year or be involved in all the activities they’re involved in now.
On the other hand, for ~$1K a year, about 0.3% of my income, they can continue the same lifestyle they have now. The life insurance will pay off the mortgage on the principal residence, the mortgage on the investment property (bolstering the income), and provide a reasonable income, at least when combined with Social Security and my spouse’s possible income once the kids are out of the house, until retirement. My current retirement nest egg would provide after that without any additional contributions. Seems like money well spent to me.
I mean, I don’t think you need to replace every dollar in gross income you’ll earn over the next 30 years, (my life insurance is equal to about 6 times my current gross income, used to be a lot more) but you need to make sure your family has the kind of life you want them to have whether you are there or not.
I would recommend asking your spouse how much life insurance he/she wants you to have on yourself. As long as it isn’t a ridiculous amount, buy that.
If you are still DINKs then I guess you didn’t really need much life insurance. However I feel it would be unfair to kids to leave them hoping the remaining parent, and any possible stepparent, will be so kind and able to put the kids through the college you are hoping they can attend with your doctor’s salary. I let ours stop when the price started rising after the level term- decided it was betting we had no need for and low odds given our young ages: FI, kids college handled. As I quipped at that stage of our marriage I didn’t want either of us to be more valuable to the other dead than alive.
My problem is that we have not reached your point in life yet. With those circumstances, I think you probably need insurance. No kids, eventually 6 figure dual income(once my wife starts residency), I just don’t see how we would be handicapped in any significant way. Since my wife passing away would be the big problem, it comes down to how much do I need. Nothing I cannot provide until I have kids. If either of us dies without kids, we will just remarry.
I think people focus too much on a static picture of what happens when people die. People adapt to the changes and get on with their lives. Putting too much emphasis on the emotional side (IMO) leads to bad financial decisions.
Full disclosure, I work in the actuary deparment for a MCO (not currently on the actuarial track) and might lead me to look at risk different than the average population (or the average reader of this blog).
I agree it doesn’t sound like there is a huge need for life insurance in your situation. I know of many two doc couples that feel the same way. Even a two doc couple with kids might only need a “2nd to die” policy, although I’m not sure how competitive that market is with term life.
I work for Primerica life and I’ve noticed a trend in the topic of residency. Because we are the only company that i know of that offers only term insurance, we have the industries least expensive renewal rates of any company in the life insurance industry. Other companies have high renewal rates on term products because they WANT YOU TO CONVERT TO THEIR WHOLE LIFE OR CANCEL. I think our 10 year product would be a great fit for young doctors because in the case that they became uninsurable in the first 10 years, they could keep the coverage after the level term period all the way to age 95 if needed and the rate would remain affordable. I would like to find young doctors and tell them about this option. Could any of you recommend a way to go about finding these guys this strategy would work well for? Thanks, love the site!
As you say Primerica’s annual renewable term remains “affordable” after the term period ends. I would imagine that most insurance companies want to revisit your policy, IMB, & health records before reissuing your $1M policy. The rates go up much like they would if you were a tenant-at-will.
So if a term a 10y $1M term policy was $350.00/y, the rates of the 11th year aren’t close to $350. Of the existing policies that I have reviewed, its not uncommon to see 11th(expired) year rates approach a magnitude of 5x to 10x of the original level term premium. Even rarer is to see the 12th or 13th year’s premium price.
In the spirit of financial planning, it would still be in your own’s best interest to lock insurability. Either stomach a large policy early in your career, or pay for a rider that you may or may not exercise. (Guaranteed Insurability Rider)
My husband and I are both surgeons; he has finished his fellowship and I will finish mine next year. We are expecting a baby in a few months and getting ready to purchase life insurance. I am somewhat intrigued by the idea of ‘2nd to die’ life insurance, but still do think we would each want some individual coverage to help with the increased childcare and housework costs (and decreased productivity) we would inevitably incur with one death. Are there any policies that you can purchase as a couple that would provide a smaller death benefit (ex 1 million) for one spouse and a larger one if the second were to die?
That would be a cool product, but no, I don’t know of one. Maybe the best option is to just get $1M on each of you.
Hello,
Been doing alot of research on this and thanks to your website and all the helpful comments, I have learned alot and really appreciate it. I was curious what you guys think about combining an increasing premium with a level. So right now I have a increasing premium term 80 yrs from NWM…(Long Story). But what if in 10 years I cancel that and get a 20 year level term. Would for the same 2 mil. I am 35 yrs old and non smoker but do have family history of HBP, Diebets…Is this a gamble not worth taking? Better options? Thanks again!
I agree that if you are pretty sure you’re going to have an insurance need that you ought to lock it in ASAP. Now, the NML policy is probably guaranteed, just with increasing premiums, so if that is still your best deal for insurance, might as well keep it. But if you’ve bought it in the last year or two, you can probably get a better price on a policy, whether it is annually renewable or a 30 year level term.
Thanks for the quick reply! Yes it was bought just 6 months ago. I guess my confusion comes from not knowing if I need it for more than 30 years. On terms4sale I got a quote of about 200$, level term 30. With my current NWM policy, it would be roughly the same total cost for the same 30 years. However am I right to assume that it would be better to pay the 200$ monthly now because with inflation this will not be so much in 30 years…along with the fact that when Im getting ready to retire my current premium will be almost 900$ a month. OR do I stay on my current plan and invest the rest hoping it will cover the higher premiums later…not quite sure..
Not sure there is a right answer there, but this post may help:
https://www.whitecoatinvestor.com/annually-renewable-term-insurance/
Personally, I’d dump the policy just out of principle because I don’t like the way NML does business. But that’s not necessarily the right thing to do for your finances.
Hi Brian – As WCI mentioned, these NWM “Term to 80 with Increasing Premium” policies are extremely overpriced and if you purchased it 6 months ago, I would definitely replace it with either a 20 or 30 yr level term with another carrier – There are MANY other “A+” A.M. Best rated carriers on the market today who will not only be much cheaper than NWM’s policy, but the premiums will also remain level for the full term period. It’s a no-brainer. You really have to check the “Table of Annual Premiums” within the policy, as it will show the Scheduled and Maximum premiums for each year moving forward – The numbers don’t lie, so you’re lucky that you only took this policy out 6 months ago, as this is basically a get-out-of-jail free card. NWM is also NOTORIOUS for adding on the additional Waiver of Premium (WOP) Rider as well, so there’s a good chance that it’s on the policy as well.
Also, NWM’s underwriting is typically pretty tight, which means you could’ve possibly been bumped down from their top, “Premier Non-Tobacco” underwriting/health class, to Preferred or Standard Plus NT rates upon approval (do you remember your underwriting/health class – is should listed on your “Benefits and Premiums” pages within your policy?), and you should be able to get a better underwriting/health class with many of the other term players such as Banner Life, Prudential, Mutual of Omaha, Transamerica, American General, Principal, Protective Life, etc., which would translate into lower pricing.
In fact, I just save replaced 2 NWM “Term to 80 with Increasing Premium” ART policies for a husband and wife in their late 40’s, and ended up locking them in with new 20yr term policies, while saving them almost $300/mo. If you need help with this, let me know.
Glad this has helped. Amazing site for sure.
Don’t gamble by waiting the 10 years. If health changes along the way then you are stuck with that increasing cost policy.
As a side note, SBLI has an increasing premium term plan that typically beats that Northwestern plan. Get a quote if you are considering keeping any YRT coverage. It really shines a light on what kind of a deal that existing plan is.
If you are 35, why not lock down a 30 year or 25 year level term plan? Maybe ladder it with some 20 year term so the bulk of it drops off sooner.
Another side not, Prudential just came out with a 35 year term plan.
Good luck.
Hi Joe – I was not aware that Prudential came out with a 35 year level term plan?? Are you sure that you’re not referring to American General’s “Select-A-Term” plan, as they’re the only carrier that I know of on the market who currently offers a 35 year level term plan? If this isn’t the case, then I’d be happy to know.
Also, as others may not be aware, American General is also one of the only carriers that I know of on the market today, who offers coverage for individual years from years 15-30. American General will essentially allow you to lock-in a level term policy which is guaranteed for 15, 16, 17, 18, 19 years, etc., all the way up to 30 years. Although not often utilized, it’s not a bad option/feature to have, especially if you only need coverage for a specific period of time.
I am 41 years old. Feel a lot older than I am – I think medicine nowadays does that to a person. Should I purchase a waiver of premium?
It really depends. Do you already have an individual disability insurance (IDI) policy in-place?
The WoP Rider comes at an extra cost, so you would just have to weigh the benefit vs. the cost of the Rider and also take into account as to whether you already have an existing IDI policy.
Hello – I am working on getting disability insurance – not quite there yet
Well, if you’re going to get an IDI policy, then you may consider going with out it, but you will just need to compare the costs.
Many captive agents will automatically add the WoP onto their policies, but everyone’s situation is different. Also, keep in mind that an IDI policy would provide replacement income, which you could then use to pay premiums on your life insurance coverage, in the event that you were to become disabled. It really depends on the cost of both the IDI and WoP Rider.
Thank you!
Not a big fan of waiver of premium riders. Makes it harder to compare one policy to another. It adds expense as well. When I buy term life, I just want plain old vanilla term life.
Thank you! Getting rid of the rider saves me 1200 a year
Oooh? $1200 a year? I’d dump that rider pretty quick. Something’s odd here though. I’ve got entire policies that cost less than $1200 a year. I think my $1M 30 year level term policy was $700 and a 20 year was close to half that. Have you actually compared your entire policy at term4sale.com?
I did it through TMA (texas medical agency) Insurance trust and I just compared it with term4 sale and term 4 sale is 1000 bucks less per year!! Exact same plan!
I am taking a 3 M 30 year policy (I have a lot of dependents). Also, I am paranoid about having destitute family members when I die, so there’s that.
Thanks for the tip on the rider!
I totally agree. Either you’re buying a policy with a very large death benefit, or you’re buying it from an uncompetitive carrier, as $1,200 per year for a WoP seems extremely steep!
Most of the captive agents always try to add on the WoP, as it’s an easy upsell, but something doesn’t seem right here?
I was about to buy it through our state medical agency – I honestly had no idea people were paying so little for life insurance!
You’re welcome. 🙂 I firmly believe that if I save a lot of money for a lot of people, some tiny percentage of that will flow back to me.
I hope so – you deserve it! You’re book is a godsend to me and my husband as well. Thank you!
Good to hear! And yes, WCI is awesome – He truly cares about his readers and goes out of his way in order to always do what’s right… It’s amazing how overpriced some insurance carriers are, so it’s always good to go to http://www.Term4Sale.com first and always work with an Independent Broker, who is unbiased in their recommendations.
Hey guys….
New attending, healthy, 32yoM, baby girl and working wife at home making 110k. Ttl Debt 125k. Mortgage 550k. Savings/retirement 200k
Was quoted 4530$/yr for a 2.7 mil 30 yr level term policy. Feels high compared to what you all were saying. I looked at the recommended websites and they were much lower. The agent who quoted me said it’s because his included a waiver of premium in case I was disabled. Seems like a lot to pay. What are your thoughts? How accurate are the estimates on term4life?
It’s a lot to pay, you don’t need waiver of premium, the guy is ripping you off, and you need a new agent. How can you trust this guy after this? Those aren’t estimates. Those are the quotes (assuming your health is good.) I got the exact quote shown in that software when I bought my policy.
I completely echo what WCI is saying. This guy is totally ripping you off and probably doesn’t even know it. Based on the fact that he’s adding on a WoP (typical with many captive agents), he’s most likely a captive agent and only represents 1 carrier – You want to only work with an independent broker. Also, since you mentioned that he’s quoting $4,530/yr for a 30yr Term, I know that it’s not one of the usual culprits (Northwestern Mutual), as they don’t offer a 30yr Term, but it’s most likely one of the other expensive captive insurance carriers.
I am listed on http://www.Term4Sale.com and can vouch that all of the rates are entirely accurate – One limitation is that T4S doesn’t allow you to run quotes with WoP, but as WCI mentioned, it’s probably not even a Rider that you need. The question is what Health/Underwriting Class can you qualify for, based on your current health, family hx, hazardous hobbies, etc., but these are things that a broker will go over with you and this is called Field Underwriting.
In fact, I just ran $2.7MM 30yr Term quotes at the top Preferred Plus NT Health/UW Class based on a 32yo Male and here are the rates – As you will notice, his quote for the SAME exact policy are more than double! I even ran these same quotes at Standard NT (average UW Class) and the rates were around $3,700/yr – Based on your age, you should definitely be able to qualify for something better than Standard NT.
32yo Male Preferred Plus NT WITHOUT WoP – $1,781.00 annually
32yo Male Preferred Plus NT WITH WoP – $2,128.23 annually
Should I be buying more life insurance now?
34M physician married to 30F nurse entering PhD program. No kids currently, but did purchase a house (465K, 10% down, 15yr @ 3%). Planning for a 15 year term policy on myself for $500,000 to pay off the house and perform major renovations so that it will be habitable far into the future – she could not afford the house on her current salary alone. We have no debt otherwise. We’re both in good health with a healthy lifestyle and a savings rate approaching 30%. We DO plan to have kids after she completes PhD in 4-5 years which will probably dent that savings rate.
Should I be buying more life insurance now? Thanks, as always!
I would. I see little reason for a doc with a life insurance need to carry less than a 7 figure amount. It’s not like this stuff is expensive.
I am a healthy 26 yr old male. Soon to be married within 1 year. No kids but plan to start a family in 2-3 years which hopefully includes buying our first home. Student debt was refinanced through Earnest which upon my death is forgiven. Should I consider getting a small policy ($2 a month for 100k that increases premiums every year) or a larger policy ($52 a month for 1 million) now or just wait and do nothing until someone is more dependent on my income?
I wouldn’t bother with a small policy. Either get the big one now or wait a year or two and roll the dice on your insurability.
Do you have any resources or suggestions regarding term life insurance for active duty military physicians? My wife and I are both active duty physicians who did ROTC/USUHS and thus will likely remain active duty for 20+ years. We have two children and are planning on purchasing a house soon.
Hi Mark – I’m a Life/Disability and Long-Term Care Insurance broker located in San Diego, CA, but licensed in most all 50 states.
Most carriers are OK with active duty military physicians, so long as you don’t do anything really hazardous. They typically will look at your occupation in the military and the risk associated with it, along with whether or not you have orders to deploy. There are also a few carriers who are really friendly towards active duty military, as they should be.
In fact, I’m writing a policy right now for an active duty Physician and it hasn’t been a problem with most carriers. With that being said, most carriers will not allow the Waiver of Premium Rider, assuming you’re active duty, but that’s not something that you’re probably going to want anyway. I was also able to get a Navy Seal Preferred Plus rates with a carrier last year, and he was actually heading off to Afghanistan for deployment.
Thank you for your service and hope this helps!!
Yes, term life is much easier than disability for military docs.
Okay thanks for the insight! Is it prohibitively difficult/expensive to get a good disability insurance while on active duty?
Not prohibitively.
https://www.whitecoatinvestor.com/disability-insurance-for-military-physicians/
Hi all, I am a resident physician and I finally got my disability insurance taken care of. Now I would like to consider getting myself a life insurance mainly for my wife who financially depends on me. We don’t have any kid yet, so for now, it’s mainly for my wife upon my unexpected death. What are some of the products recommended and who are the agents/brokers I can reach out to? Thank you very much in advance.
Here are your directions:
https://www.whitecoatinvestor.com/how-to-buy-life-insurance/
Here’s a list of agents:
https://www.whitecoatinvestor.com/websites-2/insurance/
You’re probably looking for the cheapest $1M+ 30 year level term policy from a reasonably strong company that you can get. If that’s too much, you’ll have to choose between a $1M+ 5 year term policy and a $500K 30 year level term policy.
Any particular reason you didn’t use the same agent who sold you disability insurance?
Great point on “Laddering Life Insurance” policies, especially for physicians. Typically in 10-20 years the student loans will be paid off and the house paid down, kids are older. Then you still have the second policy still in place to take care of your spouse and any other needs. Plus can be much less in premium that one policy 30 year policy.
One thing to consider for a non-working spouse: I once heard a caller on Dave Ramsey say that his stay-at-home wife had the same amount of life insurance on her as he had on him. Dave said something to the effect that this wasn’t necessary since her life insurance should only need to cover the monetary value of the services she provides. However, the guy replied, like it was the most natural thing in the world, that if his wife passed away he would quit work and stay home with the kids, so it was really his income that would need to be replaced regardless of which spouse died. And although I’d never heard such a concept before, it really makes a certain sense (assuming, of course, that the working spouse would prefer to stay home with their children).
That was such a unique and thoughtful comment, never heard of it but it makes a lot of sense
I agree, that is an interesting perspective. I guess the question one must ask oneself is would you do that or would you hire the help you need to make up for the loss of spouse. For many docs, it’s cheaper to hire it out than do it yourself by a long shot.
Glad I came across this comment. It gave me some food for thought as I came to pose my original question:
I originally was taking the direction of WCI’s response. That is, insuring for the economic value of my stay-at-home spouse. I was wondering, specifically, what factor others had considered in that?
– Obviously childcare- how would you think about that? X children at daycare for Y years? Something else?
– For me, it would include some amount of schooling, since we plan to homeschool.
– How do taxes change if going from MFJ to a widower? I just remember how much of a break it was when my 100-200k/y salary started getting taxed MFJ instead of filing as a single, and wonder if it cranks back up if you don’t have a spouse?
I know I’m missing other thoughts, because, as a mere man, I am constantly undervaluing and underappreciating what my wife does for our family. Perhaps that’s why it sounds appealing to insure us both the same amount.
They go up if the deceased spouse was not working. Good point.
Feel like this has been in the periphery of some articles but I’m not sure I’ve seen it mentioned outright. In my final year of residency, not married, no children; 30 years old with no health problems. Haven’t bought life insurance at all yet since I have no dependents – is it worth it for me to just go ahead and buy some at graduation? Or continue to wait until I’m in a situation where someone else is actually going to be relying on my income?
I don’t think so. I’d wait until you have someone else relying on your income. Some people disagree with me, but most of them sell life insurance for a living.
Thanks! Wanted to make sure I wasn’t making a mistake by not buying as young as possible.
I’m in the later stage of my medical career. Perhaps will retire in 7 or 8 years, not sure. I invested very well and have 11M liquid assets, 4.5M in real estate assets, and own a medically related business worth over 10M.
I did the laddered term insurance but now have only one policy left at 1.5M. The estate taxes may be very high, forcing a sale of the business and I am wondering if there is a role for life insurance to prevent a forced sale of real estate and the business? Are there life insurance options in this situation that might be helpful if I were to get hit by a bus? My spouse will be fine, but my business has over 100 employees and I wonder what will happen to them if there is a forced sale of the business.
Sure. Life insurance would provide liquidity at death, but you likely need a permanent policy. Take a look at Guaranteed Universal Life and Whole Life policies, maybe in an ILIT. It can be owned by the business too.
Thanks WCI. I am going to run this by both my medical CPA and my real estate CPA to see what they think.
“One thing to consider for a non-working spouse: I once heard a caller on Dave Ramsey say that his stay-at-home wife had the same amount of life insurance on her as he had on him. Dave said something to the effect that this wasn’t necessary since her life insurance should only need to cover the monetary value of the services she provides. However, the guy replied, like it was the most natural thing in the world, that if his wife passed away he would quit work and stay home with the kids, so it was really his income that would need to be replaced regardless of which spouse died. And although I’d never heard such a concept before, it really makes a certain sense (assuming, of course, that the working spouse would prefer to stay home with their children).”
Glad I came across this comment. It gave me some food for thought as I came to pose my original question:
I originally was taking the direction of WCI’s response. That is, insuring for the economic value of my stay-at-home spouse. I was wondering, specifically, what factor others had considered in that?
– Obviously childcare- how would you think about that? X children at daycare for Y years? Something else?
– For me, it would include some amount of schooling, since we plan to homeschool.
– How do taxes change if going from MFJ to a widower? I just remember how much of a break it was when my 100-200k/y salary started getting taxed MFJ instead of filing as a single, and wonder if it cranks back up if you don’t have a spouse?
I know I’m missing other thoughts, because, as a mere man, I am constantly undervaluing and underappreciating what my wife does for our family. Perhaps that’s why it sounds appealing to insure us both the same amount.
It’s really a personal decision. What will you do if your spouse dies and what will that cost? How much do you already have? Use life insurance to make up the difference.
How much Term Life Insurance should a resident have generally? I will be entering Radiology residency this year, and the GME will be paying for a $100,000 policy from Hartford for $4/month (I am still looking into the duration). Should I be looking to purchase another policy to add on to that now, and is there any red tape to being able to buy more life insurance once having this Hartford policy? I know I did not provide the full picture, but any general guidance would be appreciated. Thank you so much