Life Insurance 101: Do I Really Need It?

Every day, physicians in every type of practice are presented with hard evidence about the one inescapable truth: sooner or later, we’re all going to die. One might think, then, that doctors would exceed the national averages for those who maintain life insurance policies. One would be wrong. According to statistics from the AMA and others, as many as 40% of physicians forego life insurance altogether.

There are probably many reasons for this, but one of them is that the demands on your time—and on your income—are significant. You may face lingering medical school debt, practice and community commitments, family obligations, and plenty of invitations from financial advisors and life insurance salespeople. Given all your other priorities, the many priorities competing for your salary, and what many consider the complex world of life insurance products, this important step in your financial planning understandably often gets shifted to the back burner. It shouldn’t.

In addition, people who don’t pursue life insurance often think about it as an expense, rather than as an investment. While that is true of certain types of life insurance, it isn’t true of all of them. Over four parts, let’s take a look at an introduction to life insurance, options to consider, and ways to choose the right policy for you.

Key Questions to Ask When Considering Your Need

The biggest, of course, is “Do I need life insurance?” Only you know the answer to that. If you are single and plan to stay that way for a while, you may not need coverage at all. But if you have financial dependents or may in the near future, you’ll want to think about some protection. You will also ask yourself:

• How much life insurance do I need?
• Is now the right time to establish it?
• For how long will I need it?
• What type of life insurance makes the most sense for my needs and overall financial plan?

We’ll get to all those questions over the course of the series. Before we get there, however, there’s a rule of thumb about life insurance needs that endures but probably shouldn’t. People considering life insurance have long been told that they’ll need a policy that covers 6 to 10 times their gross annual income. This estimation is both pointless and potentially damaging, because it is so vague as to be useless and so ignorant of your financial goals as to be possibly counter to what you want to achieve. Like almost all financial questions, the amount of coverage you will need is a highly personal decision that can’t be trimmed to a standardized formula.

In Part 2, we’ll look at the different types of life insurance, along with the key features and benefits of each.