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.
(00:28): Welcome to today's episode of the cover, your assets podcast. This is Billy Walt, your host, and as always, I'm excited to be with you. Today we're gonna tackle the question of how do I budget for disability while I'm in training? How do I pay for it? That's an excellent question in working with thousands of resident and fellow physician clients across the country in obtaining their specialty disability coverage that they'll take without, throughout their careers.
(00:56): This question comes up a good bit for whatever reason, the top insurance companies in this market place kind of roll out the red carpet to trainees, to residents and fellows. They offer their largest discounts by a long shot to trainees. If you secure those, those discounts, you keep 'em forever. The medical screening can be easier or quicker. And for whatever reason, that's for trainees, when you become an attending, I do work with attendings that for whatever reason, just, you know, never get around to this in training. And for the most part, they pay more. I'm pretty consistently, they're just fewer discounts that can be had for an attending compared to a trainee. And so, as I said, the red carpets rolled out and the catch 22 is that that resident or, or fellow physician is trying to figure out where they're gonna get the money to pay for it.
(01:46): And so it's a great deal. Assuming you can afford it, which can be a big assumption. One reason I work with physicians and enjoy it is I really admire what you do, what my clients do. It's not easy to put your life on hold for years to become really good, did something and go into significant debt in a lot of cases for the privilege, and then always have the pressure of getting the diagnosis correct, or the surgery, right? That's a big deal and our, and we need more of you not less. And so, and thinking through this particular question, I do have a lot of empathy and I want to help clients navigate through this. And I'm just putting this out here as food for thought on how to potentially answer this question. Obviously it's your decision and I'm happy to help you if, and when the time comes, when you're ready, anytime there are limited resources wise, allocation of those limited resources as vital.
(02:42): We don't want to, the penny wise and dollar foolish is the saying, you may have heard or missed the forest for the trees. And, and so what I typically tell clients that just wanna make sure this is clear, and then you make the decision from that point. Your most important asset will never be your house or your 401k or your, some kind of investment account. Your most important asset will always be your ability to get up every day and go do what you do that you're highly skilled and highly trained to do. And it pays you hopefully a significant income throughout your career, your family and your lifestyle depend on that. The bills being paid depends on that vacations depend on that future school and college education depends on that. And so investing in this most important asset is important and that the argument can be made that, that, that should be an investment that's made first protecting that asset should be first and all else flows from this.
(03:42): Okay? And so the foundation of your financial plan is not your retirement plan. It's your disability insurance, because if your ability to earn income goes away, then everything else crumbles. None of the other accounts matter if there's no income generated to fund them. And so protecting this most important asset is vital. And so while you're in training again, the argument can be made to consider not putting money into a 401k or other savings account or investment account instead of getting disability insurance, that you should protect your most important asset before you fund retirement, especially when you're in training. Again, I'm not a financial advisor, but that is something that, that is wise to consider. At least also have clients say, Hey, should I get life insurance also? And my response typically is get it, if you, if you, you certainly need it. And at some point you should get it.
(04:43): But if you're looking statistically at your biggest exposure as a late twenties, early thirties, mid thirties, physician who's assuming is, is at least healthy-ish that biggest exposure is not death. It's not even lawsuits as much as it is a disability, an illness or injury preventing you from performing your specific duties is by far your biggest exposure from a financial standpoint, kind of the worst case scenario is most likely to be a disability, much more than death or some other type of situation. And so covering this I is wise to do and to do it sooner than later. Now, again, I, I say that from a knowing that my clients are living on peanut butter sandwiches and maybe macaroni and cheese and an occasional vegetable thrown in, or what have you. And so I understand that the top companies and I, I have this conversation routinely with clients allow trainees to purchase up to of 5,000 a month of coverage.
(05:44): That's the maximum that they'll let trainees purchase without financial underwriting. And so you can purchase 5,001 company has recently increased it up to 6,000. Let's say for argument say is 5,000. There's no law or rule that says you have to start at 5,000, so you can start lower. Okay. And if you do it correctly, let's say you start at 2,500 or 2000 or a thousand, whatever it is and you go, well, why would I do that? Well, there are a few reasons. One is it's, it's less expensive. Okay. There's a linear relationship between the cost and the purchase amount. So if 5,000 a month of coverage costs, you know, $150 a month, then it's reasonable to assume, and you can verify that 2,500 is gonna cost about 75 a month, somewhere in that ballpark or potentially less. And so it's, it's more budget friendly, but the benefit of doing that is you still check the majority of the boxes that getting coverage in training is meant to check.
(06:40): Number one, it checks the box of having at least some coverage you want coverage sooner than later. It's not like the chances of a disability are suspended while you're in training. And you, you don't have much of a chance to be disabled in training, but it's gonna increase exponentially when you become an attending and can afford insurance. That's not how risk works. It's there. Whether you can afford to cover the risk or not. And so you still have a chance to be disabled. You want to cover that sooner than later, at least to some level. The second thing it does is the medical screening. You go through again, if it's done correctly, you go through that once forever. And so when you are approved the policy, if it's structured correctly, could include, what's called the future insurability option that lets you increase coverage either while you're in training or after you finish training and become an attending based on your higher income.
(07:30): And when you can afford more coverage. And when you go to do that increase, you don't have to go through any medical screening at the time. So if you're in training and you've got a year or two years or five years, or however long before you become an attending, a lot can happen in your health. In the meantime, to cause getting the medical screening approval or medical underwriting approval five years from now, more complicated than doing it now. And so doing it now gets it done. You're done forever and you never have to re visit that again. And you can increase your coverage regardless of any health change in the future. The third thing it does is that it locks in the trainee discounts. Again, if it's done correctly, when you go to increased coverage, you're gonna get access to the trainee discounted rate forever.
(08:15): So if you start it out at 5,000 a month of coverage, let's say, and you have the ability to increase up to a total of 20,000 as an attending, you would get the trainee discounted rate on all amounts. You purchase up to 20,000. The same is true. If you started at 2,500 or 2000 or 1000, whatever you increase to in the future could ha again, if structured properly, w we make sure our clients have this. When you go to increased coverage, you'll get that trainee discount on the increase. Also, there are two companies currently, there may be more in the, in the near future that will allow you to start at 2000 or 2,500 or some lower amount and still have access to their total future 20 or 30,000 insurability pool in the future. Historically, if you started at less than 5,000, that would also limit how much of the total future insurability you could have.
(09:08): And you, you may not have known that, but that was the case. So if you started at 2,500 a month of coverage, you may only be able to increase up to a cap of say, 10,000 instead of 20,000, had you started at, at the $5,000 initial benefit amount. And so I, at the risk of confusing you as you listen to this, I just wanna make sure that I, that I mentioned this, cuz it's worth trying to make sure it's clear that if you do it correctly, you can start at 2000 or 2,500 and still have the ability to increase up to a total of 20,000 or even 30,000 with one company now, depending on your specialty, without ever having to go back through medical screening and with the trainee discount included on all of that. And so that could be a much more budget friendly approach to making sure you ensure your most important asset so sooner rather than later, hopefully when you're healthiest. And so I hope this has been helpful. I would be happy to discuss this in more detail. I just felt compelled to make sure we got this topic out there because this does come up a lot about the budgeting and limited resources and training. Please feel free to text me any time to arrange a conversation or with any questions. My I number is 7 0 4 2 7 0 2 3 7 6. Again, that's 7 0 4 2 7 0 2 3 7 6. And until we meet again, this is Billy GU. It's been a pleasure and thank you as always for your time.
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