[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.]
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!