Guest Blog: Disability Insurance Premiums Increasing for Female Physicians in February
The following explainer was written for us to help alert our women doctors to a significant change in how rates for disability insurance will be increased based on their gender. Locking in your discounted rate before February 6, 2017 could save you thousands over a lifetime. Please read, and if you have any questions, reach out to your own insurance representative or contact Jeremyi, whose information is listed at the end of the article.
Individual disability insurance is more expensive to provide for women than for men, and only one of the main four disability insurance companies for physicians is still offering a “gender-neutral” discount for female residents and fellows. Sadly, after February 6th, this discount is going away. But is disability insurance that important?
Absolutely. For most young physicians, their largest asset by far is a present value of all the income they have not yet earned. Many physicians neglect to view income as a tangible asset because it comes in small increments (paychecks), much of it goes out for monthly expenses, and it is earned slowly over a very long period.
But for proper financial planning, it’s necessary to take a longer view on income. Income is a measurable, tangible asset that represents the funding of your current AND future financial obligations. If you go into practice, earn $250,000 per year, and work for 30 years, you own a $7,500,000 asset that will be responsible for funding nearly everything in your finances: Housing, food, retirement planning, college savings for kids, travel, etc. Without this single asset, the entire financial household would fall apart. Therefore, it is necessary and important to transfer this risk to a disability insurance company.
As most physicians know, employer-sponsored disability plans fall vastly short of what is needed to protect your income. This is because employers have to offer the same disability coverage to all employees, regardless of age or health history. So, to reduce risk to the insurance company, a group policy will typically require you to be 100% disabled—totally unable to work in any occupation—to pay a claim. This definition, combined with other language in the contract, make it extremely difficult to get a claim paid from a group plan.
On the other hand, individual disability insurance is underwritten and only offered to healthy applicants. Therefore, the disability insurance company can offer an “own occupation” definition of disability that will cover a physician for their specialty even if the physician is only partially disabled. However, there’s still a problem: Due to higher claim rates, females can pay nearly double the cost for individual disability coverage as males.
For years, companies have solved this by offering “gender neutral” rates to female residents and fellows to reduce the costs to male rates (close to a 50% discount). But of the four (4) main disability insurance companies for physicians (Standard, Guardian, Principal, and Ameritas), Principal is the last remaining company offering a “gender-neutral” discount for female residents and fellows (close to 50%). Sadly, after February 6th, this discount with Principal is going away.
Example: 30 year-old female internal medicine physician
|Company||PRINCIPAL – GENDER NUETRAL RATE (Now)||PRINCIPAL – FEMALE RATE (AFTER Feb 6th)|
As you can see, the cost nearly doubles for females after February 6th. There’s still time to take advantage of the lower rate, but just barely. Applications for Principal disability insurance must be started (not approved or finalized) no later than February 6th, 2017. Applicants are not obligated in any way to accept the coverage they apply for, and there is no cost to apply.
Please contact Jeremyi Sanchez at Westmark Wealth Management for quotes, information, or to start an application. He can be reached via email at Jeremyi@westmarkwealth.com, or via phone/text at 602-466-4561.