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Much like disability insurance, many physicians don’t give much thought to life insurance early in their training. After all, your income isn’t as high, and you don’t have time to think about one more thing. But what would happen to your family if you suddenly died? They would still need income to get back on their feet.

In this episode, Billy discusses the reasons that early in your career is the time you most need to purchase life insurance, how to get the lowest possible rate and features that your policy must have.

Highlights from this episode include:

  • You must take care of this one thing before considering term insurance (2:51)
  • The surprising reason you should purchase life insurance, even with a negative net-worth (3:42)
  • This is the time when you need life insurance the most (4:12)
  • The secret to getting the lowest life insurance rate possible (6:20)
  • If your term policy doesn’t have this feature, it may not cover you when you need it most (7:35)

To ask questions on insurance coverage or to get a quote, please don’t hesitate to call us anytime at 704-270-2376, and I’d be glad to discuss your specific situation with you.

Read Full Transcript

Hi, I'm Billy Gwaltney and this is the CYA podcast. This show is for the physician who understands the importance of protecting everything you've worked so hard to achieve. Each week I'll bring you tips and advice to help you cut through the clutter and misinformation and show you exactly what you need to preserve your income and way of life. If you're ready to achieve the peace of mind that only financial security can bring. Let's get started.

Welcome to episode number 14, the title of today's program is as a physician, do I need to purchase term life insurance while in training as a resident or fellow? This is an excellent question. I love this question. Let's start with defining what term life insurance is a right quick term. Insurance is offered for a preselected period of time, usually 10 years, 20 years or 30 years. That's what's called the term.

(00:55): And during this term and insurance company offers you a set amount of life insurance death benefit that will be paid at your death for a guaranteed level premium during this term period. And this year, this premium typically if you're healthy is usually very low, especially compared to the death benefit that would be paid out. If you outlive the term period, the coverage either goes away. So after the 10 20 or 30 years, the coverage just the policy just stops or the premium becomes dramatically higher and I mean maybe 20 times higher or 50 times higher with the point being to call you to cancel the policy, they don't want you to keep it after the term period. And so the one question is why would an insurance company offer term insurance? And the bottom line reasons, because they know there's a very small chance you're gonna die during the term period.

(01:47): They do medical screening or medical underwriting upfront to confirm your health. And so they know what they're getting and their guidelines and their statistical analysis shows that if you fit in within a certain underwriting category and you pay that premium associated with that underwriting category, that they know what they're getting and that there's a very low likelihood that a death benefit claim would be paid. However, if it is needed, if something unforeseen did happen, they are on the hook and they have to write a check and so term life insurance plays a vital role in how people protect against unforeseen risks like death. And so now back to the original question, do you need to purchase term life insurance while you're a resident or fellow? When clients asked me this, I generally say the first priority from a, from a risk exposure standpoint statistically is disability coverage.

(02:42): You want to definitely make sure your specialty disability coverage is in place ASAP and that would be before life insurance. The chances of death are significantly lower than the chances of disability. That being said, should you still consider term life insurance? The answer is yes, if at all possible. From a budgeting standpoint, again, it can be cheap, often a lot less expensive than the specialty disability coverage, which again, the disability coverage should be purchased first is usually advisable to have at least some personal life insurance in the event of an untimely death. Now, some people might think that you know or you might think that you're not valuable yet from a financial standpoint, you've got a negative net worth because of school loans. You don't make a lot of money yet. You're still in training. Maybe you don't have a lot of people that depend on you and there's no need for life insurance, but this is rarely the case in reality, you likely have people that care deeply about you and if you passed away, leaving them something from a financial standpoint that allows them to have time to grieve is really one of the most loving things you can do.

(03:50): Now, if you have a family, if you're married and you have a spouse and you have young children, it's even more important to lock in at least some personal coverage when you go through the medical underwriting and get this coverage, you're securing your health the time to get. What I always tell people when they say, when should I time getting disability coverage or life insurance? And I say the time to get life insurance or disability coverage is when you think you need it the least, the time when you're the healthiest and you feel the most invincible is the time that an insurance company will give you their best rate and whatever you want. The time when you realize you need it often is after a doctor visit or after something has happened to make [inaudible] become front and center on your mind. And if you're not careful, that means it's too late to get it at that point.

(04:37): And so the time to get coverage is before your health dictates that you are not able to get it. But the other, the other answer to the question, the time to get coverage is before something bad happens. And so it's important to lock in at least some personal coverage. Once you get it during that term period, they can never take that away. And there's some conversion privileges if you do it right, that can allow you to keep that coverage forever, which I'll talk about in a minute regarding how much coverage to get. There's a term called human life value that I mentioned in the podcast. Number 13 that you might want to listen to, which in the insurance world means that an insurance company will give you 20 times your annual income up to that amount, any amount up to 20 times your annual income is something to consider as better than having nothing.

(05:25): And so factoring that in is a good way to go. It's very important to have this coverage with a top tier insurance company. There are several reasons why. One is the underwriting you want to work with a company that actually gives offers and the best underwriting categories. Some of the chop shop term companies that, and I'm not going to name any specifically, but there are some that are just term carriers and they're kind of, they're just, they're just factories for term policies and they have these rigid guidelines that are very difficult to meet. And so there's very little wiggle room for that. You want the underwriter to actually give offers in their best categories and so the medical underwriting is one reason and that's what defines a top tier carrier that actually delivers on a quote that they say is possible. The other reason or another reason to consider we're to be sure that your coverage with the top tier company is for what's called a conversion privilege that I mentioned earlier.

(06:24): What converting means is that at any point during the term period, you can convert, switch your policy from a term policy to a permanent policy and by permanent policy. It's usually like a whole life policy or universal life policy. A policy that's designed to last your lifetime and when you go to convert your medical condition at that particular point does not factor in at all. You're going to, if you got the best underwriting classification with your term policy, when you go to convert, you would automatically get the best underwriting category for that permanent policy and that's a big deal. That's very important. You, you, even if you know, if you would, you know, swear on your life that you're never going to get a permanent policy, that you're going to be self-insured and your, everything's going to go great and you're not going to need any life insurance, which rarely happens by the way.

(07:14): But if that is your, your philosophy, you never know when things are going to change. We've had situations where in the last three, two, three, five years of a term period, somebody whose health changes dramatically, they get a cancer diagnosis. There's something that happens where all of a sudden, number one, they know their life expectancy just got a lot shorter. And number two, they know that they're going to need something to cover the medical expenses and all the other things that come along because they're, their plan A is not working out. And so having the ability to convert with a top tier company and have really good permanent policies that are efficient, less expensive, more beneficial to you as a policy holder, all of a sudden becomes really important. And so having coverage with a top tier company would have one of the components of that defines a top tier company is converging privileges.

(08:02): What can you get if you ever converted and again your medical, that person who's gotten that T who I'm thinking of one client in particular who got the cancer diagnosis I think in year 18 of a 20 year policy, they were able to convert that over and their cancer diagnosis did not factor in at all and they got the best underwriting category because that's what they had gotten 18 years earlier when they bought the policy and so that was a big deal. If you go with one of these, you know, rock bottom, cheapest chop shop kind of term policy companies, then those conversion privileges are very limited, very limited. Typically. The third reason to go with a top tier company is for anytime that an ex an exception needs to be made, top tier companies are typically easier to deal with. We've had situations where we had a client not long ago where they had a, just a kind of a six month where due to work, schedule, travel, schedule, families drama going on, they got behind on their premium pendant.

(09:04): They missed it. We kept trying to get them the notice to get it paid. There the grace period expired. They were out of the country when it expired, they came back and they realize what had happened and they were, they just were begging, Hey, can we pay the premium? Can we pay the premium? Where can we get this policy reinstated? And the company that they were with allowed an exception and they allowed that exception because of me. I mean, we do a ton of business with these companies and this particular company. And so part of it was because of me, and I'm not saying that to brag, but I'm just saying that if you're with a kind of an outlier insurance company, then those kinds of exceptions just become a lot less. They're just not able to be done. They don't, they just don't do them.

(09:46): And so a top tier company, they're going to treat their policyholders with the benefit of the doubt. They're going to allow exceptions, not always, but a lot of times they'll go out of their way to try to make things right and understanding that life happens and it's okay to make an exception and those are really important factors to use or to think about whenever you're getting coverage. So I would love to talk about this in more detail with you if you have specific questions about your particular situation. In summary, it's wise to have personal life insurance in place, even as a trainee, as a fellow, as a resident. The most affordable way to do this is by getting a term policy. Again, a 10 year term or 20 year term, 30 year term. They can be really cheap and you'd be glad you did it and your family wouldn't be as well. Feel free to text me anytime to arrange a conversation or to ask questions. My number is (704) 270-2376 again that (704) 270-2376 I'd be happy to discuss your situation anytime. Until next time. This is Billy Gwaltney. I'm grateful for you carving out a few minutes to be with me and I look forward to talking with you further. Take care.

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