A Tale of Two Cities of Poor Health: Shocking Effects on Disability Insurance

Sometimes, individual disability insurance coverage isn't the answer. Sometimes, your best answer is not through a financial advisor or an insurance agent.

Hold on a moment. Let me explain.

Here's why...

A few years ago a physician with a specialization in internal medicine had just signed his first contract. He was so excited!

He was deeply, deeply in debt—well over $250,000—plus he was helping to pay family loans that totaled over another $150,000, and in additional to all that he was helping to financially support his parents.

He was scared, frustrated, and looking for direction.

In my opinion, he definitely had to get individual coverage. He was single and his extended family was dependent on his income.

However, his health sucked! He was 150 pounds over his ideal weight. He had issues with depression, asthma, heart palpitations, and much more!

With all of these issues going on, his medical records were thicker than a text book!

I wasn’t too keen on the individual coverage. I didn’t think he would have much of a chance of getting it, but decided to try anyhow.

Yeah, we failed. Couldn’t get coverage. Ain’t gonna happen.

However, that’s not the end of the story. There’s more…

His current employer in residency allowed him to convert his existing group policy without underwriting.

The agent from the employer tried to sell him a policy with lots of bells and whistles. I advised him to strip it down, but still get great coverage! That was awesome!

If your health is less than optimal, make sure to check your residency program’s group coverage to see if you can convert the group policy to an individual one.

Fast forward another year later, I had another physician transitioning to practice—this time a neurologist just completing his fellowship.

Just like the internal medicine doc, his health sucked! Another textbook worth of medical records.

Unfortunately, there wasn’t a whole lot we could do.

He couldn’t covert group coverage to individual coverage without underwriting.

We did shop out his coverage. Unfortunately, none of the traditional carriers would accept them—a flat out decline. REJECTED!

We even shopped it out among a specialty firm—Peterson. Peterson did make an offer, but…. It was an offer that the client could refuse. It covered very little and charged more than a traditional policy.

It wouldn’t cover nervous disorders. It wouldn’t cover kidney issues. It wouldn’t cover heart issues, and it wouldn’t cover blah, blah, blah. Basically, the only thing it would cover were skeleto-muscular issues.

Thank goodness, the neurologist had group coverage and settled in with it.

I wasn't too worried because his wife is ALSO a physician and she is in great health. If his income went away, they wouldn't be in a great situation, but they wouldn't be broke either.

Getting the individual coverage would have been great, but it wasn't absolutely necessary because he wasn't the only breadwinner with a significant income.

Unfortunately, sometimes individual coverage isn’t worth the premium.

Despite what some financial advisor or insurance agents may tell you, getting individual DI coverage isn't always the best thing for you.

Make no mistake: For physicians with a high debt burden, disability income insurance is incredibly important. Every resident or fellow should spend a great deal of time pondering where they are at and where they want to go.

As a transitioning resident or fellow, consider your situation.

Are you in great health, okay health, or poor health?

If you are in relatively poor health, maybe you could convert a group policy to an individual policy before transitioning to practice.

Alternatively, are you a primary breadwinner or part of a two- physician household? How dependent is your family on your income?

Maybe individual coverage is an awesome thing to have.... or maybe.... just maybe....

It isn't?

About the Author

Dave Denniston, CFA is a professional wealth manager and financial advisor located in Bloomington, MN. He is also the author of 5 Steps to Get out of Debt for Physicians, The Insurance Guide for Doctors, The Tax Reduction Prescription, and his latest book The Freedom Formula for Physicians. You can contact him at (800) 548-1820, at dave@daviddenniston.com, grab his latest podcast at www.DoctorFreedomPodcast.com or visit his website at www.DoctorFreedomBook.com to get a copy of The Freedom Formula for Physicians.