One of the most common questions I get asked from physicians in training is, "When is the best time to buy private disability coverage?" The answer is easy, but almost impossible to implement - just before you become disabled.
Life would be much simpler if we could buy auto insurance right before a crash, or could buy life and disability coverage right before bad news from our oncologist. But the world does not work that way - and thankfully so. Knowing the future is a terrifying power, and being prepared is preferable as well as more realistic.
So when realistically is the best time to buy disability insurance? The answer is as soon as you know you can get it and can afford the premium.
Private disability insurance cost is based off your health, age, gender, and specialty. When applying for coverage you have to go through health underwriting to get coverage. Our health is constantly changing and we are slowly adding things to our medical history that can and will eventually impact our insurability.
"Pre-existing conditions" are things that we wish were covered, but are now excluded because insurance companies want to protect themselves from undue risk. The younger we are, the less likely it is that we've had something serious or something long-lasting happen to us, and the easier it is to get coverage.
Aside from health issues, the younger you are the cheaper insurance is as well. In general, every year you wait to purchase coverage you can expect a 5% increase in premiums on average (this may vary based on state and features chosen).
Also, while in training you probably will receive easily accessible discounts that may not be available after you complete training and go into practice. These discounts can range anywhere from 10-45% depending on the carrier. These discounts are locked in for the lifetime of the contract.
Paying for insurance is never easy, especially on a resident or fellow salary (particularly if you live in a major metropolitan area like Los Angeles or San Diego). So, if you understand how important it is to get coverage but simply can't afford to pay for it, there are ways of keeping costs down while in training so you can at least lock-in coverage and protect your insurability. It's important you talk with your advisor about these options because each option may have repercussions, but it will afford you the ability to achieve insurance on a budget.
The mentality of “I’m invincible and it won’t happen to me,” is common. However, as a physician, you see people every day who didn’t plan to come visit you when they woke up. You realize that things can (and do) happen to jeopardize your ability to earn an income. Over the course of my career I’ve had two clients wait on getting coverage only to become disabled and uninsurable while waiting to get coverage. What matters is that you get something while you know you can get it and are insurable, because insurability can change in an instant.
Written by Max Clifford, Financial Advisor.