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Ep 008 – Getting Disability Insurance in Residency

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  1. Trevor’s Background on Disability Insurance [0:03:34]

  2. What Trevor Did On Getting Disability Insurance [0:09:04]

  3. Catastrophic Plan – What Is This? [0:11:01]

  4. Importance Of Own Occupation Rider [0:12:54]

  5. Future Increase Option Rider/Guaranteed Benefit Update Rider [0:14:03]

  6. What Makes A Good Insurance Company? [0:22:31]

  7. Why Will You Get A Cost Of Living Or Inflation Rider [0:28:06]

  8. Insurance As Part of A Financial Plan [0:33:30]

  9. Diversifying Risk: Two Insurance Companies [0:36:15]

  10. We Can Help You Get Disability Insurance At Financial MD [0:43:45]

Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board certified ophthalmologist with a full time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here’s your hosts, Jon and Trevor.

Jon: Hey everyone! Welcome to the eighth episode of the Financial MD Show. Hope you’ve been having a good time listening through all the episodes and learning stuff. Today, we’ve got a fan favorite. This is a highly requested topic both through emails and correspondence, and after getting requests on podcast topics as well as just getting straight up questions in the webinars and lectures and things that we do. Disability insurance is what we’re talking about today, which is great, because I’m knowledgeable on it, Trevor is knowledgeable on it, and we’ve had some good and bad experiences, but there’s a lot of mixed information out there and we hoped to straighten some of that out today. We’ll give you some tips on how to buy it, how to shop for, what to look for, what not to do, and ultimately how do you feel you’ve done well and just protect your finances. Without further ado, here’s today’s show.

Jon: Obviously, there is a lot to talk about when it comes to disability insurance. Huge topic of conversation. When we do our workshops, all the time, disability insurance comes up almost without fail and rightly so. I think as financial planners at Financial MD here, we’re obviously big believers that that’s a big part of a financial plan. Today, I wanted us to riff a little bit on. Let’s talk about shady insurance agents or shady insurance practices a little bit and what to do if you’re just flat out, “I don’t want to necessarily pick this one person to help me find my options. I’m just going to go around educate myself and figure out which shops to go to get disability insurance.” Trevor, that’s what we’re talking to today. Part of the reason that we met is I think you did that more than anybody else that I had known up to that point, or residents anyway as far as taking initiative, getting to know the disability insurance world and saying, “I’m going to go figure this out.” Let’s start with that. Give me some background on what you did when you decided, “I need to get disability insurance.” How did that whole process even start?

Trevor’s Background on Disability Insurance [0:03:34]

Trevor: That’s a good question. When did I first look at it? I think I looked it up in medical school and I misunderstood and thought that I couldn’t get it at the time because I didn’t have income yet so I waited and start residency which is a bummer. I think I mentioned before that from lots of studying, of course, occasionally, your neck gets a little sore. You’re looking down all the time, whatever you were reading and you didn’t take a break, and exam was several hours. For whatever reason, I was like, man, I should like – I’m learning about how great medicine is and how it can really help us and I wanted to be a good, healthy person. As a medical student I’m like, you know it, yeah. I’m like and you do kind of get a little inspired. I want to take care of myself. It’s like I’m going to pop over to the university health service to get a free visit. I’m going to pop over there, talk to a doc. They have physical therapists there and they have PMNR docs. I made an appointment with PMNR. I was just like, “Yeah, this part’s always getting kind of tight on this side.” I’m right-handed. With the mouse and the computer, whatever, like reading books. I made them just like getting some strain or something. I got a physical therapist then I was working on some stretches and stuff and strengthening exercises. By the time I applied for disability insurance, the disability companies did not like that I had went to the doctor once for neck soreness. Spine exclusion was one of the – I don’t think they call it a rider, I guessed it’s called an exclusion – when you have a preexisting medical issue. It’s not like health insurance where they are not allowed to add those. It’s actually the entire industry of insurance is based around excluding people that are going to be potentially more expensive.

Jon: That’s how they are profitable.

Trevor: Yeah, they have to do that. People with more problems seek insurance more often.

Jon: What do they call it, Trevor? Selective – what do they call it?

Trevor: I actually just can’t remember.

Jon: Adverse selection, that’s it.

Trevor: Adverse selection, that’s right.

Jon: I got that once or twice in resident who was surprised like, wait, what? They can exclude stuff? I thought they had to cover everything.

Trevor: You’re right. For health insurance, fortunately, that was one of those good Obamacare things actually. I don’t know anyone that disagreed to that. It mentioned that they can do that for the actual health insurance. It’s terrifying. For disability, there’s paying for your income. It’s your income stability insurance, your guaranteed income. Anyways, I had that exclusion for a while. I was blown away that I would potentially have to pay more and get less out of it simply because I didn’t apply earlier before this stupid doctor visit. So I’d two years reapply, do the full medical underwriting again, got it removed, because they can let you reapply later. You keep the policy just in case something else happens and then when nothing happens especially in that specific exclusion, they’ll take it off for you. Going through that process, I was like this is crazy. I didn’t understand. I would ask lots of other people, hey, do you have disability? Nobody had it. I told friends about my experience. It was difficult.

Jon: You were residency at this point or still in med school?

Trevor: I was in residency. They were just, okay. yeah, I’ll do with it later. Pretty much the standard response. I was, no, you don’t understand. They were like, well, maybe next week. It’s usually like it’s not a big deal. It’s more like I acknowledge that’s an issue and I will put it off.

Jon: Yes. I will definitely put that in my to-do list. Thank you for bringing that to my attention.

Trevor: I will definitely ignore that for a while and then I will get back to it later. For me, I was so inspired and I’ve realized that part of the cost of signing up goes to an agent and I’m already thinking like I wonder if I can make this and do a little side gig during residency because I wasn’t allowed to moonlight. That was the motivating factor. If I could have done some moonlighting then, I probably would have just done that. Like radiology residents, they make great money hanging out by the MRI in the middle of the night. I don’t understand but I would have been happy to sit by an MRI machine as an ophthalmology resident. Anyways, I got really into the whole insurance and then applied for my license and took the test and everything because of that difficulty and I wanted to help friends, family, whomever, to protect their income in case they get sick and people talk about accidents but we know that sickness, disease, ailments are really the main thing that caused people to be disabled and lose their income. Just they’re way more likely than traumas and accidents even though those happen a fair bit in young people as well. I maybe got a little off track here but that’s how I got interested in the whole thing.

What Trevor Did On Getting Disability Insurance [0:09:04]

How did I go about actually getting it? I think I just went right to White Coat Investor and then I looked and then I closed my eyes and I picked a random advertising pretty much. I think the one that sounded the nicest. I went with – and we talked about that – Set for Life, which is nice. It ended up just being I think one phone call and then a lot of emails and then a phone call with the insurance company to talk about any medical issues, more you have, the longer it is or the more OCD you are about describing details along our takes. Another reason to do it sooner because then you have a shorter phone call. Then another phone call with – maybe she just delivered – you have to deliver the final insurance thing as an insurance sales person. I think she just sent via email and then a doc you sign or something. It wasn’t too bad. It was pretty easy. I didn’t exactly know what I was getting. That’s probably a nice thing to figure out. She was an independent agent as well. Online stuff is nice. It’s convenient, but it’s not quite the same level of personal trust and assurance that I probably would have appreciated. I didn’t really understand the riders and the insurance agents are not incentivized really to make sure you understand. They’re kind of incentivized to get on the next call or write the next email. Having good materials that describe the different riders and the pros and cons and things like that would have been nice. There’s a lot of riders depending on which company you’re with. Catastrophic is a big main one.

Catastrophic Plan – What Is This? [0:11:01]

Jon: How do you feel about catastrophic? Any thoughts on whether it makes sense or not or it’s kind of a gimmick?

Trevor: First, I’ll just say for disability insurance, the main thing – for anybody that doesn’t know a lot about it which probably most people – basically it guarantees a certain percentage of your income even if you get disabled with certain qualifying conditions. If I can’t work, it depends on the companies. Some are verbiage on this, some are a little more open, a little more strict. If I can’t work, then I get paid. Usually, it’s somewhere around 65 percent or so of what my income is when I’ve verified it. If I make a hundred thousand dollars, actually even with Principal and Guardian in them because doctors make so much, they start to cap it out. If you make 80 grand, they’ll probably cover you up to pretty close to 80 grand. If you make 350 thousand, they’ll probably cover you for 65 percent or so up to maybe like 8,000 a month, 10,000 a month. Even with a lot of bills and stuff, they know you can probably get by with 8,000 to 10,000 a month in income. The upside for covering more of it isn’t that high for them. In the event you get insured, it’s outweighing injury and you pay him 20,000 dollars a month and then we charge him 300 dollars a month and then we maybe make a little bit extra. I don’t think it probably bares out the risk/reward for them. Anyways, you end up getting like 65 percent and then they figure out what things you can do with the policy so those were called riders.

Importance Of Own Occupation Rider [0:12:54]

One is own occupation that’s made famous and clear by White Coat Investor pretty well. Doctors should have that one because you don’t want to get injured and have the verbiage of your contract say, if you’re injured but can still work at McDonalds then we don’t have to pay you, and the own occupation when you have that slapped under your policy means that if you have taken work in other capacities and you can’t work in your original capacity like if I’m an eye doctor and I can no longer do eye surgery and work in the office and use the machines then I get paid even if I could work at McDonalds.

Jon: Even if you do go do something else as long as it is something else truly, you’ll still get your benefit.

Trevor: Yeah. That’s right. If I become an insurance salesman or something, then I can get benefit from the first job. What are the other main riders? We were just talking about catastrophic. So one of the other big ones before catastrophic, the guaranteed.

Future Increase Option Rider/Guaranteed Benefit Update Rider [0:14:03]

Jon: I’d say the future increase option?

Trevor: Yeah, future increase or guaranteed benefit update rider is what Principal I think calls it. Basically, if you get a pretty good increase in your income, it can’t be like teeny, tiny little steps every so often like year.

Jon: Like residency to attending.

Trevor: Yeah. Every couple of years, you have to use it and it will expire if you don’t use it. I actually just opt mine three months ago because if I wouldn’t have, I would have lost the benefit update rider. Kind of have to keep making more money if you want to increase it.

Jon: Yeah, you got to report it every three years is I think what it is basically, and if you’re making less, then they’ll drop your benefit.

Trevor: Oh, okay, you just have to keep them in a loop. That makes sense.

Jon: Yup.

Trevor: In my case hopefully, we’ll just hope that it keeps going up and that it will be that way for long. We’ll see.

Jon: You and me both.

Trevor: With COVID, I mean, we’re seeing a lot less patients so some people might be landing in a weird benefit update period, honestly.

Jon: Yeah, that’s true.

Trevor: That’s one of the best. People say get it early so you can lock in lower rates. It’s kind of true but it’s mostly that you are locking in your health.

Jon: Exactly. It’s the concept of locking in your age and health.

Trevor: Yeah. A healthier you get lower rates but mostly you just lock in your health so you don’t get any exclusions and you can put your income to the moon as you really grow your income.

Jon: That’s what we talk about with disability insurance. I remember doing a workshop and I’m talking about the concept of disability insurance, they say, “Oh well, we actually have some here at work.” And I say, “Yeah, I know you do.” That’s kind of irrelevant because a. you’re going to lose it as soon as you leave here and go into practice or go to fellowship; and b. we’re getting you this disability insurance policy. What we typically do at Financial MD is try to find the lowest disability insurance benefit just to save a few bucks but still making sure it’s fully robust. Low benefit but making sure what’s important is that the future increase, that benefit update, because the whole point is locking in your good health now so that you’re saying, “Okay, great. Now I feel better that whatever happens from here and out, if my health changes or something changes in my record or whatever, I still have that maximum potential increase I can go up to.” For example, Principal’s right now is 25,000 a month of monthly benefit that if you got a small, say, a couple thousand dollar-a-month benefit right now as a resident and you’re good, you got that in place, you know that when you go into practice if your income justifies it, no matter what happens in your health, you could get diagnosed with diabetes. You could get a shoulder injury. You could get a neck injury – all these stuff – and when you go into practice and show them your contract, your pay stub, they’ll still increase it whatever you need. They can’t look at your health anymore. I definitely think that’s the biggest one I got to hit this concept over and over again that that’s why we’re looking at disability insurance as a resident. Just protecting your income now.

Trevor: Right, yup. I mean you do protect your resident income which, heaven forbid, something happen, you would still be glad you did that.

Jon: You’re not going to be mad you had it.

Trevor: You’re not going to be mad you had it. I think I was paying 90 to 100 bucks a month during residency for the coverage of my resident salary which was 4,000 per month.

Jon: Well, you were overinsured technically because between that and your group benefit they gave you at Beaumont, you probably would have collected on 5500 bucks a month anyway.

Trevor: You’re probably right.

Jon: So that’s what they do. That was different. Insurance companies, residents are the only profession where they’ll give you more than you make. They’ll insure you for more than you make because they know you’re good for it in the future.

Trevor: Interesting.

Jon: I had a fellow that was making 65,000 to 70,000 and Guardian was able to give him – he could go up to 7500-dollar monthly benefit as a fellow and he did. I was like, “You don’t have to take that. That’s pretty expensive.” He was, “No, I want to.” I was like, “Okay.” That’s fine but it was 300 and some bucks a month.

Trevor: That’s a lot.

Jon: I know. Some people just figure they can understand chaos theory in statistics and just say, okay, but if something happens before I even go into practice, I’m going to want to be making a decent amount and not have to worry about finances because, shoot, I put in all this time in education. I want to get something for it. I get it.

Trevor: Yeah, that little bit of monthly payment is a very nice safety net. I’m glad I have it. After just updating it, I was okay, feel a little better. I think it’s going to be a little bit similar to what it feels to pay off your student loans or your home or your car. You just breathe a little bit. This is a sigh of relief like, okay, even if I get hurt. I don’t have kids yet but when I do I have that policy and there’s no exclusions and they will be provided for which is a good feeling. You don’t have to worry about if something happens. Just like when you get life insurance. If you do a dependents and you have that in place, you’re just like okay. God forbid if something happens, but at least, I would know that they’re taken cared of even if I didn’t know something was coming for me. I would know that they’re okay.

Jon: It’s getting over that hump of the avoidance of worst case scenario. People like I don’t want to think about it and that’s what prevents a lot of people from looking into it. As a financial planner, we want to talk about the optimistic future and growing towards your financial goals and doing that stuff but I’m doing our clients a disservice if I’m not saying okay but what if that doesn’t happen? What if something bad happens? How do we make sure these financial goals still happen for you or your family if you’re not around anymore and you only have to talk about it once and then you’re good. Okay, so your experience with Set For Life was pretty good.

Trevor: Yeah. That season, they got me the policy. That’s the goal. I’d say definitely the most important thing for any resident or medical student is just get the policy. If you don’t really want to spend the money yet, get the cheapest, lowest price you can with a good company so don’t skip on the company. Just skip on the coverage. Some of them have promotional prices for medical students. They’ll have just really low monthly payments. I mean, you’re already paying for student loans. It’s going to be cheaper than any book. It’s going to be cheaper a stethoscope, study materials, stuff you buy on the Amazon. It’s cheaper than all of that stuff. Easily, it’s the cheapest thing and you lock in your health. The number one thing is just get it. Just get it like today, tomorrow, this week. If you don’t have it just get it. Go ahead.

Jon: That’s what I was going to, I think, about good companies. Yeah, that’s what I’m going to go towards. What makes a good insurance company?

What Makes A Good Insurance Company? [0:22:31]

Trevor: Good question. I mean, there’s a few things.

Jon: I would say financial strength, stability. I guess we can kind of short cut the process and say if you really wanted to look it up or ask the insurance companies what is their rating through a company called AM Best – that’s a company that rates insurance companies and they give the A’s, A+, B, B+, B- – all those kind of things. When you’re comparing, that’s something to look at. I wouldn’t say go with the top-rated company per se. I would just say make sure that the company or companies you’re looking at all have decent ratings, and by decent, I want to say B+ or better, maybe A- or better. For example, we kind of look at six different companies if we’re getting disability insurance for residents. Here at Financial MD, we’ll typically look at six different companies – Principal, Guardian, Standard, Ohio National, MassMutual, and Ameritas. I would say they are the top six as far as how do we pick those companies. Financial strength and stability, for sure, obviously. All these companies had been around for 100+ years in some way, shape or form. They’re very strong in that sense they’re profitable. All that kind of stuff. They’ve got a ton of insurance on the books in the billions. What also we’re looking at is secondly do they have a good product for physicians, and a lot of that kind of boils down to the definition of disability when it comes to that true own occupation concept, how do you know it’s got true own occupation, and even between all those different companies. Those six companies, we know had a pretty good product, a good language for disability of true own occupation. Even between those, there would be some that I might steer one way or another. Take Guardian, for example. Guardian is probably the more expensive but they’ve got very generous languages in their definition of disability. To be very specific to say they’ve added on you can basically get a physician definition of disability and even a surgeon or a procedurally-based specialty kind of definition of disability that says if I derive more than 50 percent of my income from a particular procedure and I can’t do that procedure anymore, Guardian will consider me totally disabled, meaning, they’ll pay my full benefit if my income’s down by half because I can’t do a procedure. I may still work full time 40 hours a week. You tell me if you saw just what did consults or kind of clinic type stuff, no surgeries, would that affect a typical ophthalmologist?

Trevor: Yeah, I mean it would cut your money on half at least.

Jon: Yup, half at least, for sure, which is exactly what those types of policies are addressing so that’s where if that’s a concern to you, you may want to look at something like a Guardian. Ameritas has kind of a definition like that. But if not and you’re just like, “I just want to make sure it’s covering me as a physician in my specialty.” They’re all going to cover your specialty, that’s the big thing, of saying this is what you trained for. You didn’t necessarily get into medicine to be a doctor although definitely but specifically I wanted to be a pediatrician or I wanted to be a surgeon or I wanted to be whatever that’s what you wanted to and it just happens to fall on through medicine and doctor. How do I make sure that if I can’t do that anymore, I don’t have to do something else and that’s where that comes in. A good strong company has a good product, good definition of disability for physician. You want a company that’s got a resident discount frankly because that’s huge and the big thing with these discounts is they stick with you for the rest of your career. You could get it in your last year residency or your first year attending. The monthly benefit is not going to be a whole lot of different but what you save over the course of your career by getting it during residency and getting that discount on is huge.

Trevor: Is it a percent discount usually?

Jon: Yeah, 10 to 30 percent depending on all of those different things.

Trevor: Okay. I’m sure I got that. I just don’t remember.

Jon: Yeah, I hope so. That’s the big thing. Like we said, you’re locking in your health so you’re going to increase later. You’re locking in that discount. You know why do you get it young? The discount’s big. We’ve calculated it out before. Taking that extra money, not going for its premium, investing it, compound growth – all the kind of stuff – it’s in the six figures of what you save by getting that discount and getting it young. So, I think, the future you is going to be glad you did when you look at how much you’re saving. What else? The big riders, I guess, if I were to run through it – yeah, the future increase; yes, the true own occupation.

Why Will You Get A Cost Of Living Or Inflation Rider [0:28:06]

Beyond that, secondarily, I would get a cost of living or an inflation rider so that makes sure if you had to go and claim it 35 and you’re on for 30 years until you’re 65 and it’s a 10,000-dollar monthly benefit, today, that’s nice, but 10, 20, 30 years from now that’s going to be nothing and that’s just the concept of inflation and goods and service is going up every year. You want to make sure your benefit can keep up with that because if you’ve been working, you would have gotten raises and at least cost of living raises each year and you don’t even notice inflation as much. But that’s big when you want to partial or residual rider, different companies call it different things. This rider ensures that if you, and again, different companies kind of have little tweaks in this like Guardian will say if my income drops 15 percent or more then I can collect a certain benefit. Some say if it drops 20 percent or more, but if it’s due to a loss of time or income, you can collect a partial benefit which actually the majority of claims are partials claims so you want to make sure you have that rider on there. Catastrophic, that one I don’t necessarily steer people towards that much. If they want it, fine, but it doubles your benefit if it’s like something pretty catastrophic like you’re losing an arm or leg or an eye.

Trevor: I think it’s partially activities of daily living like you can’t do a certain number of activities of daily living.

Jon: Yeah. Two of the six of ADLs or something?

Trevor: I think it’s two, so if you can’t feed yourself and you can’t shower and then you’d get a substantially large amount of money per month to cover the cost. Basically, it’s a nice thing because if something really happened to you and you didn’t have family members around or somebody who’s willing to put all their time into it then they would have to not be working as well. If you don’t have that scenario, if you can’t self-fund that then you could really end up in an assisted living facility long-term.

Jon: Good point.

Trevor: That’s the way some people I’ve talked to have viewed it. I had one guy. He and his wife both got policies and he ended up just wanting to do catastrophic. That was the thing he wanted the most because he wasn’t so much concerned about covering his income because he and his wife were both going to do very well in an internal medicine subspecialty. I thought it was just really good sort of first principles just sort of like we only need to replace one income. What are the chances both of us get hurt really, really low. So he was really going with the odds. He was like, “But in the unlikely event that I do have something happen like a stroke, the amount of money that it would cost me to stay at home and I want to stay at home would be too much even for her decent salary.” He felt that would really bankrupt them to a certain degree and he was trying to prevent losing all any sort of wealth that he would build and even though the other things are more likely, this is the one that will be more devastating so he ended going up with that. You know everybody is different. There are different goals. It’s an expensive rider so usually I don’t necessarily recommend it and people get sticker shock. When he told me that, I was, “Okay, you’re talking me into want wishing I had that on mine.” This makes really good sense. It’s a personal decision on what do you want to do with the policy. The fact that it exists at all is really cool. I mean, the whole product itself. I got excited about it just reading about it. When I was studying the licensing exam stuff, I was just, “This is insane.” As a society, we’ve created this product where you can for sure get an income over a lifetime even if you’re injured because everybody is chipping in and you get would get a great benefit if you’re disabled, and on top of that, it’s a whole industry so it creates jobs. Insurance is one of the big chunks of our GDP and it provides a great service. Not for everybody, a lot of people are paying in, and they do make a ton of money – those CEOs, those people at the top. I mean there’s a lot of money in the insurance industry but it’s a crazy product. Think about how many people on earth don’t have access to it and then all we have to do is send some emails, make a couple of phone calls, actually take the time, and I’m guaranteed income for life. That’s insane.

Insurance As Part of A Financial Plan [0:33:30]

Jon: Yup. That’s it and that’s the whole point of insurance in kind of looking at your whole insurance portfolio as a part of a financial plan because what I want to do is I want to increase the likelihood of my client’s reaching their financial goals no matter what happens. A homeowner’s insurance, car insurance, health insurance, life insurance, disability insurance, long-term care insurance – all these things are there that it’s like if you stand back and look at your portfolio, it should be like, “Yeah, okay, there’s really not anything I can think of that would take me off track from my financial goals long term.” And that’s a really great feeling because we’ve all run into people in our work or in our different circles where it’s like, “What happened to them that they just can’t seem to make ends meet?” Or they just like, “Did something happen where it just set them back permanently? Have they’ve never been able to be the same?” That’s tough. They’re but for the grace of God go like we all just kind of one situation or circumstance away from being like I’m never going to be the same again financially and insurance as crappy of a concept as it is thinking I’m paying for something that I hope I never have to use but I guess you’re paying for that peace of mind. You and I obviously, we know this stuff. We go to bed at night knowing that no matter what happens or how I wake up in the morning or what happens on my way to work, we’ll be okay financially and that’s worth a lot to me and to you I know and why we stress on this for physicians and residents specifically is because you spend a lot of time and money to you had to practice medicine and do your calling and all that stuff but to make a decent living too and I hate for that all to change just because, “Oh crap, I went to the doctor and got diagnosed with whatever and my future looks totally different.”

Trevor: Right. Yeah, it’s pretty cool stuff and doctors can certainly afford it. I mean that’s the other thing. There’s really no excuse for not having it. It’s not crazy expensive.

Jon: Yeah, that was my thought the last piece. When people ask, I say it’s 1.5 to 2.5 percent of your income is typically what we say you should budget for that.

Diversifying Risk: Two Insurance Companies [0:36:15]

Trevor: It could be less. It could be less. Mine’s amount is less than that and I’ve got good coverage because I’m healthy and I have just one policy. We didn’t tackle too much about that. I guess I’ll mention I really like the strategy of having two companies just in case one folds. It’s diversifying risk. They’re not going to fold. What happened is I heard a good podcast about that. The company fails. Technically, the state is supposed to have some money set aside. I’m sure every state is basically bankrupt right now so I wouldn’t bank on that but other companies will buy them and they buy those policies. Somebody would absorb that probably Warren Buffett or somebody like that would just buy it. I mean, they could easily support that. There’s tons of wealthy people that would just love to snap up an insurance company. Those top ones will be fine but still diversifying risk and then only certain companies will play well with each other. If you have a work policy that you can’t take with you, they don’t usually like Lincoln something like that, they won’t play well with your Principal or Guardian or your Standard. You can’t combine the two, but if you do like a Guardian and a Principal or a Standard and a Guardian, you can combine two policies and potentially have more coverage. That’s probably the main reason to do it. More coverage and the risk.

Jon: It’s that more future increased coverage when we’ve talked about doing that with some of the higher paying specialties like, hey man, you’re going to make a half million dollars one year and at that point you’re going to come to me and say, I’ve maxed out this policy. I need to get another one. What if instead of getting a decent one policy in residency, you’ve got smaller two policies and then you’ve essentially doubled your maximum benefit potential. You don’t even have to worry about anymore. You’ll never have to get another policy because if you’re an ortho or cardiology or any of those kind of things where it’s like you have potential to be in high-six figures, maybe, a million bucks a year, it’s not that farfetched.

Trevor: Yeah. The other thing that’s surprising about having two is it’s not any more expensive than having one other than if one policy just happens to be more expensive. You could cover yourself a thousand with Guardian and a thousand with Principal and it would be about the same as 2,000 with Principal, maybe a little bit more or be a little bit less than 2000 with Guardian because Guardian is a little bit more expensive.

Jon: Right.

Trevor: You don’t really lose in the cost department in the monthly payments and then some people don’t have to do underwriting for their health because they’re fortunate to be in a residency where the hospital has already set it up and made it so that all the residents automatically are insurable. So when you do a big group like that, it kind of dilutes the risk of several people having a disease in there.

Jon: Yeah, that’s so nice.

Trevor: That’s so nice. I wish my hospital had that in residency because then I would just have both. I would just keep it going. It seems like Standard does that. What’s that?

Jon: Yeah, There’s been a couple of residency programs or hospitals who I’ve talked to about that before. U of M, Henry Ford, and DMC have one with one with Standard. It’s a guaranteed issue plan and I don’t even think Standard will do them anymore for new hospitals but they’ve grandfathered in that one.

Trevor: Interesting.

Jon: I tell people because it’s guaranteed issue and I’ve seen this before where people apply and get declined, I’ll say get that first and then come see us and we can get whatever company you want. You can either keep both or drop that guaranteed issue one but at least you know you’ve got covered. I had an ER resident last summer that’s shocking because she said she was fine. She seemed fine like nothing. She applied with Principal and she applied with Guardian and they both – no, MassMutual and Principal – and they both declined her and she was surprised. I was surprised and we got a little more information and found out it was just a result of multiple little things that she didn’t think were a big deal but because she was a type that just went to the doctor for everything and they put everything in her records.

Trevor: Yeah, we do that as doctors because we see crazy stuff and so just locking it in medical school before you get medical student syndrome is a good idea.

Jon: Yup. She’s got no coverage today and she was in residency where she could have gotten a guaranteed issue.

Trevor: Now, they won’t give her that because the only reason they won’t give it to you is if you’ve been denied elsewhere.

Jon: That’s right.

Trevor: I talked to a friend from when I went to Michigan and we’re chatting about him picking up a policy. He was like, “Actually, I found out our House Officer Association.” They basically have a union there which is really cool. It’s called the House Officers Association. It was basically a union and that’s how they got it. Somebody a while ago negotiated that. Anyways, he was like I think I can get The Standard policy without doing anything. I was like go get that first and then apply for a second policy with Guardian which has better terminology so he then he has the best of both worlds which is great and he can increase it higher or he can just drop the standard one later if he wants to but you can also just keep The Standard one really smaller like 1000 or a little bit above and just slowly increase it and keep the other one as a big policy. You can make one have a lot of coverage and one have a little coverage. Never really bad to have two, and in case you’re wondering, the insurance guy who sells it to you by doing two policies now they don’t really make that much more money. You think that they would make more money but it’s a percentage of the sale.

Jon: That was the first year premium.

Trevor: Just the first year premiums and then teeny, tiny little bits of it after that. I don’t know how much it is but it’s not a lot. Nothing to get people rich, really.

Jon: Five to ten percent, maybe.

Trevor: Five to ten percent? That’s actually a little higher than I thought. Yeah, it’s not going to make them more money to do two policies so they’re not trying to upsell you. They’re trying to get you more features, more flexibility down the line. If somebody is suggesting that, I think it’s great advice to do that and you lock in your health with two companies instead of one. So if you end up not liking one or if you end up disagreeing with the guy who sold the insurance at least he gave you options. It’s great.

Jon: Agreed. Well, as usual, we’ve spent a lot of time making a boring topic fairly interesting, I think.

Trevor: Maybe, or an interesting topic boring more likely.

We Can Help You Get Disability Insurance At Financial MD [0:43:35]

Jon: We may have crossed that line, but, yeah. If this struck something for you guys out there, there’s places you can go. There are certainly people you can know you can ask other residents. At Financial MD, we’ve got a team that does disability insurance every day. We’re independent and we’d be more than happy to shop that out for you, but again, we don’t really care where you get it as long as you get it and you get it right and you get it now.

Trevor: Absolutely.

Jon: If you got questions, shoot us those questions myself or Trevor and go to website to find our info and the Facebook group, if you go to the Financial MD community, that’s the place where it’s physicians only, sharing information, sharing ideas, and just get educated and if you’re working with someone on the disability insurance or life insurance or whatever the case might be or just financial planning, make sure it’s somebody that you like and you trust and you feel like has your best interest in mind. Any other closing thoughts, Dr. Smith?

Trevor: No, that’s it. I mean it’s one of the most foundational things. It’s sort of like the insurance equivalent of an emergency fund. That’s how I look at it. Just get it done and they’ll help give you that foundation stability for everything for the future, and once it’s there, it’s even better than emergency fund. You just do it and you have forever. As long as keep paying, they’ll keep covering.

Jon: I like it. All right. Well, with that, have a great night and we’ll see you next time.

Trevor: Thanks Jon.

Thanks for joining us for another Financial MD Show. Be sure to head over to to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.

The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.

Resources and Links:

  1. White Coat Investor website –

  2. Set for Life Insurance –

  3. Retirement, Investments, and Insurance | Principal –

  4. Guardian Insurance –

  5. The Standard –

  6. Ohio National Financial Services –

  7. MassMutual: Insurance and Financial Services –

  8. Ameritas Insurance –

  9. Financial MD Facebook community –

  10. Financial MD website –

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