As a physician, you have invested substantial time and money to be in a residency program. This puts a lot of pressure on your future income and many of your financial goals depend on your ability to work.

If at any point in your career, if you were out of work or unable to continue in your specialty as a result of an injury or illness, how much would that loss of income impact you? Almost half of all Americans would not be able to cover their bills if they did not receive their monthly income, and over 90% of physicians protect their income with disability insurance. While physicians never plan on or hope to use their disability coverage, they know having coverage can help avoid a financial disaster. Clearly, physicians see the value and desire to protect themselves with disability insurance, but is it worthwhile to obtain coverage during residency?

Some residents may feel they are young and will not become disabled, that they can't afford it, that their hospital provides coverage, or have questions about how much coverage they need, or think they should wait until they are working in their specialty.

Here are the main reasons to obtain disability insurance during residency.

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8 Reasons to Obtain Disability Insurance During Residency

Discounted Rates

During residency, you can qualify for discounts with most of the top rated carriers. These discounts can result in a 10-30% reduction in the cost of the policy. The benefit is the discount remains after you graduate and with most carriers, you can also apply the discount when you increase coverage after residency/fellowship ends.

Take Advantage of Starter Packages

Disability insurance carriers generally allow you to protect about 60% of your income. Insurance carriers have starter packages, also known as beginning professional limit programs, that allow certain occupations to lock in coverage amounts that exceed their current income. As a resident or fellow, you can lock in up to a $5,000 monthly benefit. This benefit is not taxable, so it is more coverage than a resident or fellow would qualify for based on income. There are also starter packages that apply for medical students and higher limits for soon-to-be and recent graduates of a residency/fellowship program. It is most beneficial to max out coverage up to these starter limits, while they are available. Often this is more coverage than a physician qualifies for on their own.

Rates Are Based on Your Age

The younger you are when you get coverage, the less you pay. Since rates are based on age, it is strategic to get coverage established as early as possible. If you’re in your 20’s or 30’s the rates might not change much from year to year, but slight annual changes turn into large changes over a 3-5 year period. That is why it is best to lock in as early as you can. Delaying the purchase of disability insurance until you are an attending, causes rates to be significantly more than earlier on in your residency, which often results in selecting less or inferior benefits.

Lock in Your Good Health

The younger you are when you get coverage, the less you pay. Since rates are based on age, it is strategic to get coverage established as early as possible. If you’re in your 20’s or 30’s the rates might not change much from year to year, but slight annual changes turn into large changes over a 3-5 year period. That is why it is best to lock in as early as you can. Delaying the purchase of disability insurance until you are an attending, causes rates to be significantly more than earlier on in your residency, which often results in selecting less or inferior benefits.

  • A PGY 4, that happened to be a former college football player, had gained about 25 lbs during his residency.  While he had a strong build at 5’10, 240lbs, his weight gain resulted in him paying a 25% increase for his policy.

  • A right-handed dermatologist received a policy with a right-hand exclusion.  This exclusion resulted from a fracture while on a post-residency adventure trip.

  • A female GI consulted a cardiologist since she believed she was experiencing palpitations.  While the cardiologist assured her, she was fine, she was suggested to complete follow up treatment was diagnosed with VT.  This caused her coverage to be adversely affected and extremely limited.

  • An anesthesiologist in his third year was told by his fiancé his snoring was unbearable.  As a result, he went for a sleep study and was diagnosed with sleep apnea.  The diagnosis resulted in a limited policy with high rates. 

Disability Can Happen

While it may seem premature, having coverage can help provide you with options in the event you suffer a disabling event. Take a moment to watch this video and learn about a fellow physicians journey:

Own Occupation Clause

When you get a policy with an own occupation definition, as offered by carriers such as, Ameritas, Guardian, Mass Mutual, Ohio National, Principal, and Standard, you’ll still be properly covered even if you change specialties. This makes getting coverage during residency or your intern year very beneficial. Prior to declaring your specialty, you could lock in a rate that’s 10-20% less and you can have benefits locked in that you may not qualify for if you applied once you became a surgeon, anesthesiologist or emergency medicine physician. You will not have to get a new policy or redo it if you change specialties or subspecialize.

Quick and Easy Process

During residency and/or fellowship the insurance carriers can waive some of the requirements typically associated with obtaining coverage. If you apply while in residency and fellowship you will not have to submit tax returns or complete a medical exam to qualify for coverage. This saves a lot of time and makes obtaining coverage during residency super easy!

Ability to Increase Benefits in the Future

Applicants in “good” health can include provisions that allow them to increase their disability benefit in the future, without having to pass new medical assessments. This means you lock in coverage now and any future conditions that come up will not impact current or additional coverage. With some carriers, such as Principal, Guardian, and Standard, this benefit can be added to a policy at no additional cost. With Principal, during your residency or fellowship, you can purchase a top-quality policy for $25-50/month (rates vary based on age, gender, and specialty) that can lock in your ability to increase up to a $30,000 monthly benefit in the future.

Get a personalized disability insurance policy designed to ensure you get paid if you can't work due to injury or illness.

How much coverage can you get?

Insurance carriers have special starter programs designed for residents and fellows. Take advantage, these programs can be better than other options in the future.

  • Resident & Fellows can get a $5,000 monthly benefit 
  • Graduating resident & fellows can get up to a $7,500 monthly benefit
  • These Starter packages can lock in your health and allow you to increase up to a $20,000 monthly benefit, without any future medical underwriting
  • We can help design coverage to lock in your health for up to a $30,000 monthly benefit, without any future medical underwriting.

Schedule a free consultation with Specialized Disability Insurance Services

Do you think it is advantageous to obtain disability insurance during residency? If you found this post helpful, please share it with your friends and find the time to arrange a call with a disability insurance specialist to learn more.