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There are so many different options when it comes to choosing your insurance plan. From future insurability potential to benefits that will increase as your earning does, choosing between the wide array of plans can become overwhelming quickly. 

When looking toward your future, it can be even more difficult to decide whether you should bet on your future earning capabilities, or go with a plan that increases as your income does. 

In this episode, I’ll walk you through the benefits and pitfalls or the future insurability and benefit-increase options to prepare you for choosing an insurance plan that will truly work in your favor as you move forward in your career. 

Show Highlights Include 

  • The future insurability option writer that can get you up to $20,000 a month of coverage (1:30) 
  • The massive downside of exponentially increasing your coverage as your income increases (2:45) 
  • How to increase your insurability without paying an ongoing fee (3:35) 
  • The financial formula you and your broker should use to determine your increase eligibility on your insurance (4:00) 
  • The big stipulation that will automatically remove your benefit-increase writer from your mass mutual policy (4:25) 
  • Why the future insurability option can massively cap your insurance coverage (even if you don’t want to) (7:15)

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 today's episode of the cover, your assets podcast. This is your host, Billy Gwaltney, and I'm excited to be with you today. Today, we're going to talk about mass Mutual's future insureability option compared to their benefit increase rider. There is a little bit of difference between these two and a mass mutual has an excellent contract. And so just want to cover what the options are so that you can factor that into your decision and working with physicians across the country.

(00:56): Generally, we start out with a policy or a client. So we'll start with say 5,000 a month as a trainee resident or fellow. And then the policy would include the ability to increase up, to say a cap of 20,000 a month. Once they become an attending physician, as their income goes up again is covered in previous episodes. There's a financial formula that companies use to calculate how much coverage you can purchase based on any given salary level with mass mutual, you can start at 5,000 a month and end up at a total of 20,000 a month. You have two ways of doing this. The first one they call the future insureability option rider. This is a rider that's added to the policy where you can increase the policy benefit. Once you become an attending, essentially on every policy anniversary, you can do this as much as you want.

(01:48): As soon as you're able anywhere from five to 20,000 up to age 45, and then there's a reduced amount that you can increase by between age 45 and eight 60, but bottom line, the rider stays on the policy to age 60, if you want it. And then as your income increases, you can exercise that assuming you're not at their cap of 20,000. So this future insureability option rider is an amount of 15,000 a month. If you start with a policy of 5,000 a month, this is a favorable approach because there's flexibility. You can increase essentially on any policy anniversary, assuming your income justifies it. The downside to it is that there's a S there's a fee for it. Usually it adds about 15% to the rate. And so you're paying for the right to have this option on your policy, and which gives you the right, I should say, to increase coverage as your income goes up.

(02:45): Okay. If you can take it or leave it, if you don't want it, it just rolls forward to the next year. As you exercise amount from that 15,000, let's say in the example I gave earlier, if you have a total future insureability option pool, 15,000 a month, and you exercise 5,000 of that, then 10,000 remains in the pool. The cost for that goes down because it costs more to have a $15,000 future insureability option than it does to have a 10,000 future insureability option. So over the course of time, the cost of that rider goes down comparable. They have what's called a benefit increase rider, that functions where they're a little bit of guard rails to it. That's kind of the downside. We'll talk about that. The plus to it is that there's no ongoing fee for it. Okay? So you can reduce the cost of your policy by 15% right away.

(03:39): Okay. If you'll accept this benefit increase rider, what happens is every three years up to age 55, the underwriters mass mutual will do a calculation. If I'm your broker, I would help. But whoever your broker is, they should be involved in this to help you navigate through this, to do the financial formula, to determine how much additional coverage you might be eligible for at each three-year interval. Okay? And so whatever that amount is, you can access it up to their cap of 20,000. They have a stipulation where you need to accept at least 50% of the increase in coverage that you qualify for. At that time, if you do not accept the 50%, then they're going to remove the benefit, increase rider from the policy. Okay? The rider will terminate. If the application, including financial documentation is not submitted in every three-year interval. And so there's the only your policy anniversary.

(04:37): Every three years, you have to go through the process, even if your income hasn't increased. Okay? So it's a requirement that you go through that again, your broker can help with this. They should be able to kind of carry the weight for most of the legwork involved in that. It's not that it's not that much. And then you need to accept at least 50% of whatever you're eligible to increase by, or they'll remove the rider. Okay, this can be favorable because for two reasons, number one, there's no cost for that rider. Okay? If you have it on your policy, you don't pay that fee. Again, the future insureability option has about a 15% give or take depending on your age and your gender and your specialty and so forth what state you're in, but ballpark in that 15% range for the cost of the rider that is not there for the benefit increase rider.

(05:25): Okay. The other place that it's advantageous to consider is that if you're are a resident or fellow, and you have a length of time before you become an attending and your budget is very tight and you say, cannot afford 5,000 a month of coverage right away. That, which is what these top companies will. And mass mutual included will allow you to purchase. Again, assuming you can pass the streamlined medical screening. So if you didn't want to start at 5,000, you could start at say 2,500 or 2000 amount, less than the 5,000. And with the benefit increase rider, mass mutual still allow you to have a total pool of future coverage up to their cap of 20,000 per month. If you have the future insureability option rider that you pay extra for on your policy, the amount of that rider is actually a multiple of the initial purchase amount.

(06:20): So if you start at 5,000, you can increase up to 20. If you start at 2,500, you can only increase up to 10,000. Okay. But if you started at 2,500 with mass mutual, with this benefit increase rider, you could still have a total future insureability cap of 20,000. Okay. I know that's a lot of moving parts, especially if you're just listening to this and not see it in writing, I want to get this to you because it is important to factor in. If you're thinking about mass mutual there, they have a really strong contract it's worth knowing what your options are as far as when you go to increase. If you're okay with that, three-year interval. A lot of our clients are because they're typically increasing every three years. Anyway, that's about time to do that. There are exceptions where you don't have to wait three years.

(07:06): So if you graduate say in the second policy year, you can increase your coverage sooner. You don't have to wait for that. So they have certain triggering events that let you increase coverage outside of that three-year anniversary. But essentially for the life of the policy, up to age 55, every three years, you're going to kind of go through this process. And if you don't do it, then they take the rider off. And so that's the downside. I hope you found this helpful at least to start thinking about, I'd be happy to answer additional questions, discuss your situation in more detail, if you would like my number is 7 0 4 2 7 0 2 3 7 6 again, 7 0 4 2 7 0 2 3 7 6. Thank you for carving out a few minutes. I'm grateful for that. And I look forward to seeing you next time. Again, this is Billy Guam and take care.

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