After you finished up medical school (4 yrs long) and went through your residency (another 3+ years) you’re already 7 years into your medical training, not to mention if you go into a fellowship after that! With all those tedious hours being spent studying and practicing it’s important that nothing happens in life to offset the hours of discipline you put in to learn your craft. Not only the number of hours put in, but the amount of debt accrued to make the dream of becoming a doctor a reality (typically around $200k+ of debt). I don’t say this to scare you, but to point out a need. If you’re to become disabled, the hospital will likely have some disability coverage listed in the benefits but most often that is a taxed benefit that does not get near to 100% of your normal take home pay. Not to mention living expenses and loan payments from the years of schooling.
When having a disability event, the hospital will typically only cover 60% of your take home pay (though can differ for each hospital) which is a taxable benefit. With a huge gap appearing between monthly income needs and actual monthly take home pay from hospitals disability a large gap appears. When this occurs, there are a few options; cut expenses and sell things to bring your living expenses down to less than 60% to live, liquidate investments to bridge the gap and sacrifice future retirement planning, or use 3 months of your emergency fund to cover expenses until disability insurance kicks in. Out of these 3 options the first is the hardest pill to swallow, yet often can be reality for some physicians. In the second option you’re still taken care of for the time being as you wade out a disability event, however, your investments will take a massive hit. If the disabling event isn’t a permanent disability, then you can recover your investments but the time it would take you to recover those investments will not be worth the price of interest you could’ve earned if you went with the third option. The final option is the wisest. Building up an emergency fund for rainy days is one of the smartest financial decisions you can make and here’s a perfect example of why. In the case of a disability, the emergency fund will be able to carry you through 3 months of expenses until disability insurance will kick in and begin paying out. This not only helps bridge the gap between what your hospital provides and what you need if the disability becomes permanent it will often pay out to age 70 when social security can kick in and retirement planning kicks in.
With disability insurance you’re able to not take a hit in your financial future by protecting your income which in turn allows you to achieve the goals you want in life no matter the circumstances. If you would like to learn more about disability insurance, please feel free to give me a call!
