Selecting the right insurance policies are essential to protect you and your money from potential financial setbacks.
As physicians, you have the potential to earn a high income relative to other professions. Putting parameters in place, such as purchasing long-term disability insurance, will allow you to maintain your lifestyle if unforeseen circumstances affect your ability to work.
Ensuring you have adequate coverage—including health, long-term disability, malpractice, and homeowners insurance, especially—is essential in securing your ability to earn a living and protecting your family from potential financial issues.
As you progress through your career and become more financially successful, it’s important to make plans to protect yourself and your money from unforeseen costs.
Having an emergency fund to pay for unexpected expenses is a great start, but there are several different forms of insurance coverage you need to have in place as well.
Long-term disability insurance
Unless you come from a wealthy family or already have millions in the bank, you depend on the income from your job to take care of yourself and pay for the things you need. Because of this dependency, you need to protect your ability to continue to work and earn a living.Related: Physician compensation 2023: The good, the bad, and the ugly
One of the main ways to do that is through long-term disability insurance. Long-term disability insurance pays you money if you can’t work.
If you were to get diagnosed with a medical condition, be injured in a car accident, or suffer from a chronic condition that prevented you from being able to work your current job in the same capacity, long-term disability insurance would kick in. This type of insurance pays you up to 60% of your current salary until you are able to return to work full time, or until you turn age 65.
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Term life insurance
"You may be healthy and anticipate living a long life, but nothing is promised and unexpected things may occur."
— Lisha Taylor, MD, MPH
Life insurance protects your family from financial catastrophe if you were to die before having the chance to invest money and amass a certain level of wealth. It pays your family—your spouse, kids, parents, or whomever you choose—a set amount of money when you die so they can continue to pay bills, go to college, pay for the funeral, and/or maintain their lifestyle.Related: Investing 101: 5 steps to build passive income
Most doctors who invest money only need to cover themselves for the term or time period in which they are still building wealth—for most doctors, this may be for the next 10 to 30 years. After that point, it is expected you would have enough money in retirement accounts to give to your spouse or kids if you were to pass away. Thus, for most doctors, getting term life insurance is sufficient.
"If you do not have a spouse, kids, or other family members who depend on your income, then you may not need life insurance at all."
— Lisha Taylor, MD, MPH
Renters or homeowners insurance
Renters insurance is for those who rent an apartment or a house. Homeowners insurance is for those who own their home. This type of insurance is usually mandatory for anyone who rents an apartment or owns a home, but not all coverage types are equal.
If you have expensive furniture, jewelry, clothes, or other items, then you may want to increase the coverage amount so you can replace these items if needed. Also be aware that it is your renters insurance or homeowners insurance (not your car insurance) that will insure you against any items that are stolen from your car.
This may seem counterintuitive, but that’s how this works—be sure you have the right insurance policy to cover any expensive items in your car as well.Related: Is it wiser to buy a home or keep renting?
"One of the major reasons for bankruptcy in the US is unpaid medical bills. Make sure that doesn’t happen to you."
— Lisha Taylor, MD, MPH
As we can’t predict when a medical emergency may arise, make sure that you have the health insurance you need. Although most doctors get health insurance through their job, select the plan that is most ideal for your own scenario and medical history.Read Next: 12 compensation types beyond salary to negotiate in your contract
Would you prefer a low premium with higher out-of-pocket costs for doctors visits and hospital stays? Or, would you prefer slightly higher premiums for lower out-of-pockets costs for medical care? The choice is yours.
If you are a physician-in-training or an attending who is switching jobs and currently unemployed, be sure that you have health insurance coverage during the gap. Being uninsured can lead to financial catastrophe.
"When I took 3 months off after fellowship training, I had to purchase health insurance on the federal marketplace to have coverage, and you may have to do the same."
— Lisha Taylor, MD, MPH
Every physician needs malpractice insurance. Although this insurance is usually offered by your job, make sure you have all the coverage you need.Related: 6 money mistakes to avoid as an early career attending physician
There are two main types of malpractice insurance: occurrence policies and claims-made policies. Occurrence policies cover you for anything that “occurred” while you were working at the organization, even after you left that organization. It is the most comprehensive coverage, but it is also the most expensive.
Claims-made policies are different. They cover you for any “claims-made” while you work at the organization, but they do not cover you for any claims made after you leave the organization.
If a patient waits to file a lawsuit until after you leave, then the malpractice insurance of a claims-made policy would not cover you.
Check to see what type of malpractice coverage you have—if you have a “claims-made” policy then you will also need “tail insurance” coverage for added protection.
Along with protecting yourself from medical lawsuits, you need to protect yourself from civil lawsuits as well.
If someone slips on ice at your house or your dog bites the neighbor, you want to make sure you are protected through “umbrella insurance.” You also want to make sure you are adequately covered if you get into a car accident and the person you hit happens to need expensive medical treatment or decides to sue.
Although car insurance is mandatory, many people have the standard policy (which varies by state), but this is insufficient for most people, especially doctors. The standard "liability" portion of your car insurance (the part that covers the person’s medical bills and potential lawsuit against you) may only cover up to $10,000 in costs. You need more coverage than that.
Be sure to protect yourself by increasing the liability coverage on your car insurance, then add on an umbrella policy for even better coverage.
Umbrella insurance protects you from other lawsuits that any other insurance policies may not cover. In most states, you have to increase your car insurance liability coverage first before you are eligible to purchase an umbrella policy.
What this means for you
Make sure you have the insurance you need to protect yourself and your money. Every doctor needs long-term disability insurance, health insurance, and homeowners or renters insurance. If you have a spouse, kids, or someone who depends on your income, you need life insurance. Be sure you have the right kind of malpractice insurance, increase the liability coverage on your car insurance, and add on an umbrella insurance policy.