[Editor's Note: This post is one of five sponsored posts being run this summer as part of The White Coat Investor Scholarship program. Michael Relvas of MR Insurance Consultants (life and disability insurance) is one of five platinum ($2500+) sponsors of the scholarship, and each of those sponsors gets a sponsored post about their business. What's a sponsored post you may ask? Not only is the post all about their business, but they also get editorial control over what is written. If you have not yet matched my daughter's $10 donation to the scholarship fund, you can do so here. Michael has been advertising here at The White Coat Investor for years and has helped literally hundreds of your peers with their insurance needs. I have received positive feedback from dozens about their experience with him. Be sure to thank Mr. Relvas for his generous donation to the scholarship fund in the comments section and with your business.]
Michael Relvas, CFP, Independent Insurance Agent
Tell us about your practice and how you got started. Why insurance and why mostly physician disability insurance?
Probably similar to many insurance agents, my start in the insurance business was unintentional. I knew I wanted to be involved in personal finance, but my interest was mainly in planning and investment management.
Coming out of college, I interviewed with several “financial planning” firms thinking I was going to be a financial planner. I ultimately decided on a small firm near Washington D.C. and started as a junior associate to two senior advisors who each had 20+ years of industry experience. I was quite uncertain about my decision when I realized the job primarily involved insurance sales, until I experienced my first life insurance claim six months in. Being involved in the claims process and witnessing a $1.7 million benefit get paid quickly changed my perception of the insurance business.
I spent my first two years learning a lot about life and disability insurance and how important it is to always do the right thing for people. My first training exercise was to review a handful of disability insurance policies and determine the contractual differences between them, so focusing on disability insurance wasn’t exactly optional. Working with physicians happened as a natural progression though. Those were the individuals I enjoyed working with the most, so I focused my energy on marketing to physicians exclusively. A career in the insurance industry is a lot more fulfilling and meaningful when you have a specialized understanding of a niche market and select products. It’s the best way to become a truly valuable resource to consumers.
What differences do you see between clients who are WCI readers versus those who are not?
The Do-It-Yourself approach many WCI followers take with their personal finance is what stands out the most to me. Some WCI followers are such DIYers that they already know exactly what they want before ever contacting me. I’ll occasionally even get emails or quote requests with a detailed summary of the exact benefits, features, and policy design a person wants.
I personally enjoy having phone conversations to review policy differences and help with making decisions, but many WCI followers have done enough research ahead of time that they only require a brief conversation or short email exchange to make a final decision.
What are the top 3 or 4 mistakes you see doctors making when it comes to their life and disability insurance?
Buying too little coverage or for too short of a term
Many physicians assume they’ll accumulate assets quickly enough to self-insure earlier than they’ll actually be able to. This expectation can cause individuals to buy too little coverage or coverage for too short of a term. For younger physicians, determining the appropriate amount of life insurance can be done by a simple evaluation of income replacement needs and asset accumulation projections. A basic time value of money calculation can really help put things in perspective and I feel that too few physicians actually go through this type of exercise. I’m not saying that physicians should buy the largest death benefit they can, but a $1 million 10-year term policy for a physician, and parent of 2-3, earning $200k in an expensive city just doesn’t cut it. It would be very difficult for that family to accumulate $1 million within 10 years, to where they no longer need insurance. [Editor's Note: Most docs coming out of training with dependents should plan on a 30 year $2-5M policy.]
Waiting too long to buy disability insurance
Disability insurance can be expensive, particularly for certain specialties, so I understand why so many physicians delay purchasing coverage until the end of training or even during attendinghood. That said, securing coverage earlier in a physician’s career could improve the likelihood of policies being issued under more favorable terms. I see so many policies issued with exclusions that could have been avoided if the person had applied during their first 1-2 years of residency.
If you aren’t able to afford the maximum monthly benefit available to you as a resident, buy less but at least buy something. Most insurers allow for Future Increase riders of 3-4X the base monthly benefit, so buy what you can afford and make sure you include a benefit increase rider on the policy. Hopefully your health doesn’t change throughout training but this strategy would at least provide some protection if it does.
Not Asking Enough Questions
Although many physicians are diligent researchers, especially WCI readers, I believe there are still too many who don’t do enough research or ask enough questions when buying life and disability insurance. I hear from physicians all too often who want to revise or replace existing policies because they didn’t pay enough attention to detail when they first bought their coverage. Many residents barely have enough time to sleep, so I understand why they are unable to devote more time to these decisions. That said, spending a couple of hours and working with an experienced and objective agent who is willing to review all of your options can go a long way.
There are too many service providers marketing to physicians, many of which are not as experienced as they claim to be, and physicians therefore need to protect themselves better by gathering more information and asking more questions. For example, if the insurance agent you’re working with only recommends one company and without validating that recommendation by providing you with other options as well, you should be asking why. It might very well be the right recommendation, but it’s your hard earned money and your family’s protection on the line so you should have a complete understanding of your options before making a final decision.
What do you think about Metlife no longer selling disability insurance? Do you think this will increase rates across the board?
It’s never good when a major insurer like MetLife exits the business, especially since they were one of the most competitive options for a number of medical specialties. We’ve seen rates fluctuate over the years, both up and down, but I don’t think MetLife’s exit will directly cause rates to increase across the board.
Aside from an obvious staff downsizing within their disability insurance division, I don’t think we’ll see much of a change for policy holders. Their underwriting process has slowed down, call centers will likely be transferred overseas, and hold times might increase, but I still expect overall service and claims evaluation to remain comparable. I expect it to be fairly seamless for consumers and given their Income Guard policy’s strong contractual language, find no reason not to continue recommending them until September.
This news was mostly bothersome to me because I fear it might reduce the likeliness of residents/fellows securing coverage. MetLife’s competitive rates for FM/IM physicians, IM-subspecialists and some surgeons made disability insurance more affordable for residents than it was previously. MetLife exiting the market will cause physicians to pay higher premiums for a comparable policy, buy less coverage with comparable premium dollars, or simply purchase a less comprehensive policy. MetLife has been the no-brainer option for many physicians during the last few years, particularly men, and it’s upsetting to see that option go.
For those who aren’t aware, MetLife will no longer be accepting applications for individual disability insurance after 9/1/2016. If you’re an FM doctor, IM doctor, IM-subspecialist, or surgeon (except orthopedics) and are considering buying coverage, you should really speak with an agent before the end of August.
You have worked with a lot of military doctors in the past. Do you have any tips for them to help them get life and disability insurance both before and after coming on to active duty? What are the pitfalls there?
Although it isn’t great, military doctors have the best selection of options during medical school, residency and fellowship. Standard Insurance Company, one of the Big Six Insurers, will offer coverage to these individuals on a normal basis so long as call-up orders have not yet been received. This is a great option since it allows physicians to secure comprehensive, own-occupation coverage under the same terms as a non-military doctor. The downside is that Standard isn’t always the most competitively priced option so you might be paying a premium.
Once call-up orders are received, a military doctor’s options are limited to MassMutual, Lloyd’s of London and some professional association policies. Unfortunately, each of these policies will have some limitation: policy terms can be less favorable than with traditional IDI policies and benefit levels can be highly limited. Nonetheless, having some coverage is better than not having any. Military doctors can secure one of these policies during their AD time and then secure a new policy following their exit.
Military exiting exams are gold mines for the insurers because they often find a number of things disclosed there. This obviously shouldn’t change what military doctors disclose during their exiting exams, but you should be aware that anything disclosed and any VA disability benefits you receive will be accounted for and likely excluded on an individual disability insurance policy.
Why is it important to purchase insurance from an experienced agent?
It isn’t just experience that I think is important. There are plenty of experienced insurance agents that aren’t necessarily that great. I feel it’s important to work with an agent who has a good mix of experience and objectivity.
Experience is critical in allowing an agent to evaluate your overall situation, make appropriate recommendations and make the purchasing process as seamless as possible. An experienced agent should be able to clearly and accurately answer all of your questions, guide you toward the insurance policies and insurers that best suit your circumstances, needs and goals, and help you get through underwriting with the most favorable outcome possible.
Objectivity follows experience very closely though, because it allows an agent to advise their clients more thoroughly and hopefully make more appropriate recommendations. Working with an agent who isn’t objective and experienced in working with several insurers could be a costly mistake. With disability insurance, it could lead to paying a considerable amount more for very comparable, or even inferior coverage. With life insurance, it could lead to purchasing coverage at a less favorable health category, and therefore higher premium, than may be available with other insurers.
One of the things that I find most difficult for consumers is finding an agent who can avoid being impacted by personal biases and conflicts of interest. I personally believe that agents who are beyond the “hungry phase” are more capable of looking past conflicts of interest but that still isn’t always the case. Physicians should be aware that these conflicts can exist, ask their agent for disclosure of any conflicts they might have, and possibly secure a second opinion before signing on the dotted line. You might find a truly great agent to work with from the start, but it’s difficult to know with certainty.
What do you wish WCI readers knew about you, your business and insurance in general?
There is a significant conflict of interest that exists when an advisor recommends you replace your existing policy. It could be great advice, or it could also just be a way of generating a brand new commission. There are many instances where replacement makes sense, especially if you want something the existing policy does not already offer (like an improved definition of total disability, or other policy provision) or you have an opportunity to save substantial premium dollars on comparable coverage, but there are also many instances where you could be better off making changes to an existing policy rather than replacing it. Tread lightly in these situations and be sure to ask a lot of questions. I’ve seen a lot of poor recommendations regarding replacements that were clearly not made with the client’s best interest in mind.
Although my income is dependent on selling life and disability insurance policies, I truly enjoy providing objective advice and helping physicians avoid pitfalls while securing these important policies. Nothing bothers me more than seeing physicians buy policies, replace policies and make other insurance/financial decisions based on completely inappropriate recommendations that are clearly more beneficial to the agent/advisor than the client. If any reader ever gets the sense they might be getting poor advice, they can feel free to reach out to me. I’m more than happy to spend some time helping readers avoid mistakes when it comes to their life and disability insurance.
Questions about your life or disability insurance needs? Contact Michael today!
What do you think? Have you received bad life and disability insurance advice in the past? If you're a military doc, what did you do for disability insurance? How much life insurance did you buy coming out of residency and why? Comment below!
What are typical monthly premiums on a 2-5 million for 30 year policy?
U can go to term4sale.com to play around with possible numbers
Depends on age, gender, and health. But for a healthy male 30 year old, $745 a year is about where you start for a $2M policy.
That seems to be the rate for a 20 year level term; 30 year is close to $1400. What’s more, if your parents had any heart issues before age 60 you probably won’t qualify for those rates anyway.
I’m surprised you recommended 30-year term as the pricing is so much steeper. People who follow this advice of this website should need very little life insurance after working for 15-20 years. I’m definitely in favor of the ladder approach, but even then starting with 5 million seems like you are overinsuring unless your spouse has no viable way to earn income.
You’re right, my bad. I get $1295 as the cheapest on term4sale.com.
30 year is a reasonable default for most people. But the right answer is buy it for the term until you will be FI, then maybe a year or two more, just in case. I agree for many readers that is less than 20 years out of training.
Thanks for being a sponsor this year!
As WCI has stated several times, this insurance is so cheap it doesnt make sense to be stingy and underfund it. I just recently did this and used very conservative numbers to forecast asset accumulation, liabilities, and the insurance level for 10, 20, 30 years that made sense to match the forecast with a little cushion.
Ended up with a 5M, 3.5M, 1.5M ladder, for something like 2400/yr (im 37) for the first 10 years and it decreases as policies come off of course from there. Seems like a great deal to me. Got one to cover my wife as well for the period where kids are at home and she isnt working.
Thank you for supporting this site that has provided so many of us with great advice and knowledge!
It’s a great site and a great cause – I’m happy to.
Thank you Michael. Would be interested in your thoughts on graded premium DI policy for those who plan to save and be financially independent by 10 years into post-fellowship career. Do you sell many graded premium DI policies or “annual renewable” term life policies.
Graded makes the most sense when you not only are saving but plan to retire early. If you aren’t working then it doesn’t pay.
Rex, I don’t think you need to retire early for graded premiums to make sense, just have to drop the policy prior to break even point, typically about 17-20 years into policy. I think it’s a no-brainer for most docs, as is annual renewable term life. If you don’t think you can teach FI 17 years into policy, then hold off, but at least consider laddered term life policies over straight 30 year term.
The compounded early savings that can now be invested are significant.
Laddered term life policies make a lot of sense for most individuals, not even just docs. Probably ~90-95% of the policies I sell are laddered.
TheGipper –
Graded premiums area a great option for select individuals and circumstances. I have my fair share of clients that secured graded premium policies with the intention of terminating coverage within 15 years. I personally have some reservations for the majority of individuals though, because not every physician has the capability of saving enough money to be FI within 10 years. For that reason, I simply like to discuss the details at length and run through some asset accumulation projections. I would hate for a client of mine to drop their coverage prematurely because the annually increasing premium becomes intolerable at a point in their asset-accumulation-stage where they should still have coverage.
It’s also important to note that not all companies offer a graded premium option. So we aren’t just comparing graded vs. level with one company, but rather graded with one company vs. level with another. Female physicians, for example, can nearly always do better with a level premium based on unisex rates than with a graded premium based on traditional female rates.
Wow, I hadn’t heard anything about Metlife suspending new individual policy applications. Good thing I bought my policy last year.
If I already have a MetLife policy in residency, and planned on purchasing more after I become an attending (I have a rider for that), will MetLife leaving affect that at all? Will the prices skyrocket for future purchases? Is there anything I should be doing now?
That’s the same policy so I think you’re okay. You just won’t be able to buy a new one. If pricing is too terrible, and you’re still insurable, you can just buy a new policy from a different company.
Correct. When the GIO Rider is exercised, no new policy is issued.
As such, all of the policy provisions, Tate book and discounts continue to be a part of your policy.
You will simply receive new schedule pages reflecting the increase in your monthly benefit.
I am continuing to recommend MetLife’s policy on a daily basis until it is no longer available.
What’s a Tate book?
That should be rate book.
Well this topic is near and dear to my heart (literally), so I feel compelled to comment. Wonderful blog, Jim — I’ve been reading for years but this is my first time posting! This is a long comment.
I was unlucky that in December last year that a simple URI virus caused a tendon to rupture near my mitral valve causing flash pulmonary edema. Because of my nonexistent risk factors (37 yo active female, nonsmoker, normal cholesterol, systolic BP in the 100’s) and lack of chest pain, the fluid in my lungs was diagnosed as a pneumonia. After failing to improve in 6 weeks with multiple steroids, antibiotics, inhalers etc prescribed by various specialists I sought out a cardiac echo and was diagnosed with severe acute onset mitral regurgitation (acute CHF not PNA) which required open heart surgery. Thankfully, I had a disability policy – actually 2. One is Northwestern Mutual that I had gotten in residency structured on that pay grade and a 2nd Guardian Berkshire policy in the week before finishing fellowship structured on my upcoming private practice salary.
The second one (the larger policy and my main DI) was arranged during a busy period in my life. The last 2 months of my fellowship I had a research project I was completing, was actually simultaneously in a govt policy fellowship that I was juggling, had our wedding, flying back and forth for hospital credentialing, coordinating a move halfway across the country, planning a 4 month trip to SE Asia requiring multiple vaccines and visas and was looking at this DI policy. Most of my cohorts were also busy and putting the DI on the back burner, but I squeezed in time to get it taken care of so I could take advantage of an institutional discount. Glad I did! Not only was it less expensive annually, but who knew I would actually use it?
So here are a few lessons learned from this very recent experience:
1. Get a policy for what your expenses will be on a monthly basis. Your policy payout is not reported as income for your taxes provided you made the payments with post-tax money. So you’re not reproducing your gross monthly which most of us figure when thinking about a loss of income.
2. Get a policy while in training or with a large institution if you can. I got my first policy as a 2nd year resident with the first institution, got the 2nd policy based on the attending salary before I left the second institution. Am not going to get a discount like that as part of a 5 person private practice.
3. Still have a savings buffer. The paperwork process for a claim takes a VERY long time. My first ER visit was on Dec 11 for the “PNA”, got my echo on Jan 30, had surgery on Feb 19. Went back to work partial duty April 4. Started my claims process while I was in the hospital (yes, you read that right) by calling my agents and telling them what was going on, then calling the insurance contact numbers. There were multiple rounds of paperwork and although I didn’t turn stuff around STAT, I did provide all the info on each round within about a week, sometimes 2 weeks for the harder things. I was asked for everything from my 2012 tax returns and attachments to my CPT codes for the last 18 months (I’m an orthopaedic surgeon). I just got the check for the smaller policy yesterday, and the adjuster for the larger policy said I should be getting my check this upcoming week. Which brings me to…
4. As WCI says — Live like a resident! We don’t live paycheck to paycheck. Far from it. But we didn’t consider finances even a single ounce during this time I was off work. We had plenty other things to worry about. What a luxury! Thankfully we weren’t actually depending on this money to keep our lives going and our lifestyle didn’t change a bit. I got to spend some time during those 2 months off to actually even work on our financial plan for the next 15 years. Nothing like a brush with mortality to tidy up your financial house even more.
5. Not related to DI, but financially related in and of itself — check out the medical staff office for the hospitals you have privileges. All the hospitals and systems I’m on have a professional discount policy. We ended up going out of town for my surgery (we live in Chicago, went to Cleveland) but much of my workup was done in town with my PNA to mitral valve change, then a lot of preop work was done in town. Much of this was discounted by the hospitals, but still counted towards my out of pocket limits. So when there were $200,000 charges from Cleveland, our of pocket was about $1500. All in all, the experience cost us about $2000 (would have been about $500 if we stayed in town and used one of the top heart centers in the Chicago area). Our hotel and travel expenses was about $2000 for a 2 week stint in Cleveland, but we had the ability to make that choice without batting an eye. It was worth every penny.
So although this is a very rare circumstance, and most people never have a claim, it’s good to know what happens when you do. Thankfully my story has a happy ending. My valve was reparable (no prosthetic for me!) and financially this didn’t even make a dent in our year. Normally we would have traveled somewhere in the first half of the year but we were grounded for my medical issue — so we took a vacay to Cleveland. I wouldn’t recommend that medical tourism if you could help it! This was a short disability period, but it could’ve been worse and we might have been dependent on this policy for life. But thankfully my past planning made it easy to get back on the treadmill of life in the present (literally, I am up to a light jog and intervals) and hasn’t derailed our future.
Thank you for sharing your experience!
Thank you for sharing your experience. I would point out that most disability policies stop payouts at age 65. Hence, you should plan on covering your living expenses PLUS appropriate retirement savings with the disability policy benefit.
Thanks for sharing your experience, and best wishes on your (already) speedy recovery.
The 1.7 million payout is shocking. The fact that it came out so quickly, that’s fantastic. I’m barely 21 years old now and my company has a 2x my salary life insurance policy set in place but I know that this is an important topic as I age and grow older. I haven’t contributed anything to my life insurance policy but will do so in the coming years. Thanks for sharing!