Navigating the world of insurance as a physician can be challenging. While insurance is a key part of any comprehensive financial plan, it can be difficult to understand what you need and don’t need, especially since there’s no shortage of “financial advisors” happy to sell you policies. In this episode, we discuss the types of insurance physicians actually need, the purpose each serves, how to think about the “right” amount, and how to go about getting the best price. We also talk about how your insurance needs evolve throughout your career and in retirement, and where you might want to decrease (or increase) your coverage over time.
There’s a lot to take into consideration when planning your insurance needs and we hope to simplify it for you in this episode of The Physician’s Guide To Financial Wellness so thank you for joining us!
Outline of this episode
- What is insurance for and what role does it serve? [2:38]
- Protecting your income with disability insurance [5:40]
- Protecting those who rely on you financially with life insurance [10:26]
- Property and casualty insurance to protect your possessions [15:14]
- Protecting yourself personally and professionally [18:47]
- Health and long-term care insurance [21:56]
The catch 22 of insurance, love it or hate it we all need it in some form
The number one purpose of insurance is protection. You’re paying a relatively smaller amount of money each year to guard against a much larger potential risk. Some risks are small and you may choose to self insure such as a cell phone. However, there are certain risks that are much bigger and would cause serious damage to your finances, like premature death or disability, a lawsuit, or an extended stay in a nursing care facility. If any of those events happen, it could potentially prevent you or your family from being able to support your lifestyle or achieve the financial goals you have.
This is where insurance comes into play. You use it to minimize or avoid bigger financial risks, all the while knowing that the money you fork out in annual insurance premiums will likely be money out the window with nothing to show for it. If that’s the case, it means you didn’t actually have to use the insurance, which means you were able to avoid the negative situations you were guarding against. It’s a catch 22 because you’re paying for something while hoping you never have to use it.
Protecting those who rely on you and protecting the things you own
Life insurance is all about protecting your dependents, the people who would be left in a difficult financial situation if something were to happen to you. Life insurance isn’t relevant for everyone, but it’s important if you are the sole provider or if someone is relying on your income and you haven’t reached the point of financial independence yet. If you were to pass away, anyone relying on your income would still have to meet all of the financial obligations, along with saving for future goals. Even if the surviving spouse or partner is still able to work, trying to do these things on a single income could be challenging and there could be new expenses that pop-up like paying for additional childcare.
Protecting your possessions is also necessary. There are two key aspects, first is the cost of replacement, and second is liability protection, and this is where property and casualty insurance comes into play. The two most common types of property and casualty insurance are home and auto. We talk about those and why you need to have them in this episode.
Personal and professional liability protection for now and in the future
When it comes to protecting yourself from liability there are two types of risk to consider, personal and professional. Your personal liability is partially covered by your home and auto insurance. However, for people with higher net worth— like physicians— you may not be fully covered. This is where having an umbrella policy is advisable, which we explain further in the episode. Then you have professional liability, and that’s where malpractice insurance provides coverage. We know that for many physicians in the area, malpractice insurance isn’t something you need to think about as much since most of the big health systems provide it for you, but for private practice physicians, or if you’re planning to switch employers, it can be much more relevant.
We also delve into protection against health risks, which is where health insurance and long-term care insurance come into the mix. Health insurance tends to be pretty straightforward in understanding the need for it. For employed physicians, getting coverage is simple since your employer provides it. Another risk that becomes relevant later in life is the potential for long-term care needs. Unlike the other types of insurance we’ve discussed, long-term care insurance isn’t necessarily something that everyone has to have. Long-term care insurance tends to be quite expensive and depending on the type of plan you purchase, the cost of premiums can increase significantly over time after you purchase it. So the cost of insurance isn’t always worth it relative to the risk you’re protecting against.
Resources & People Mentioned
- Download our guide: The Toolkit for Optimizing Your Finances as an Employed Physician
- Blog post: Liability, Malpractice, and P&C Insurance
- Blog post: Life & Disability Insurance
- Blog post: The Types of Insurance You Actually Need