Today’s guest post is actually from the guy that I bought my life insurance from, Bob Deighton. He is also a sponsor of this blog, a relationship that began well after I was a client of his. I asked Bob to walk through the process of getting me life insurance. The goal is to help educate everyone on this process. Remember, if anyone depends on your income, term life insurance is a must to protect yourself from financial catastrophe. We are also getting near the time of year that graduates should be making sure they set up their life insurance before they become attendings. So, here is Bob’s life insurance advice to physicians…
Hello, my name is Bob Deighton with Deighton Financial Services LLC. I am Jordan’s life insurance agent. Earlier this year, I was able to help Jordan find an excellent term life policy. Jordan found me via White Coat Investor and Term4sale.
(Ed.-I was about 5 months away from graduating fellowship when I bought my insurance.)
About 80% of our clientele are physicians, so I wanted to share how we found the right policy for Jordan. I also would like to share some general life insurance trends and pieces of advice we’ve given our physician clients over the years.
(Ed. – Before going further, I want to emphasize that we are talking about TERM life insurance, NOT whole life insurance. For 99.9999% of the physicians out there, especially new graduates, term life insurance is what you need. If someone is trying to sell you whole life insurance, find someone else!)
Finding Jordan the right term life insurance
Jordan’s financial situation was similar to what we see from most physicians coming out of residency or fellowship. But, he had some medical history that would have prevented him from qualifying for the best rate class with most companies.
(Ed. – Unfortunately, this is something that worried me before getting life insurance. If you have a medical issue, it is even more important to work with an independent agent. You can find Bob as well as Larry Keller, another great and honest independent agent, on my recommended list.)
Before I had Jordan submit an application, I shopped his case with over 30 companies. We found a company that would offer him the best pricing class despite his medical issue. I reached out to underwriters at several companies before deciding on a recommendation. Once I made a recommendation, we submitted an application. In the end, Jordan was able to secure a $3 million, 30 year term policy at the preferred plus underwriting class or lowest pricing.
(Ed. – Needless to say how stoked I was!)
Jordan’s case illustrates the importance of working with an independent agent. As an independent agent, I can cast a wide net when comparing quotes from different companies. Each company has a different underwriting guide, and a knowledgeable agent will know which companies are more lenient or strict on specific medical issues that come up in underwriting. Choosing the right company could mean the difference between a standard rate and a preferred plus rate. This can be the difference of paying twice as much for the same coverage!
This is typically how we advise physicians in different age groups to structure their term life insurance plans:
- 30-40 year old physicians typically buy 20 or 30 year term policies. The idea is to decrease later in the term period as they build their savings, retirement funds, and real estate investments. Total face amount of $2,000,000 to $5,000,000 term, and sometimes laddered between 20 and 30 year term. The most common scenarios are $2mil/20 year and $2mil/30 year.
- 40-50 year old physicians often buy a 20 year term and a smaller 30 year term. It is a good idea to look at plans that include chronic + critical illness benefits on the 30 year term. These benefits allow you to collect part of the death benefit while you are living if you are diagnosed with a heart attack, stroke, cancer, or need long term care. Getting these benefits on a term policy is inexpensive compared to buying critical illness coverage or long term care insurance separately. The most common scenarios are $3mil/20 year and $2mil/30 year.
- 50+ year old physicians sometimes buy 15 or 20 year term policies or ladder 10 and 20 year term policies. The most common term life scenarios are $2 mil/20 year and $3 mil/15 year. For physicians in this age group, it may be appropriate to look at hybrid life/LTC insurance policies. These policies cover future long term care needs, as the need for long term care coverage can outweigh the need for term insurance once people are 65 and older.
However, every person’s financial situation is unique. It’s important to share as much information as you can with your agent or advisor so that you can find the right policy and make sure to meet your needs.
Here are some key concepts and strategies to help you get the most out of your life insurance plans:
Laddering is when you stagger coverage with different term periods over multiple policies. It is a good way to plan for changing life insurance needs as you age. However, laddering too many policies can be inefficient. Most companies charge a $60-$100 annual policy fee that is priced into the premium. We generally don’t recommend laddering more than two policies at a time.
Underwriting (with no exam/labs)
Some life insurance companies will underwrite up to $2mil in term without labs. We have one A+ rated company that has been approving about 50% of our physician clients at the preferred plus rates up to $2mil without labs and without having to meet with a nurse. Applicants complete their medical history online, and no interview or exam is needed.
The other 50% have to do labs, but they can still complete their medical history online. This saves a lot of time.
For physicians in the 50 and over age group, looking at asset based long term care or hybrid life policies/annuities can be a great way to leverage the risk of needing long term care.
Some term life policies have a chronic illness benefit. But, they will only cover up to age 80, and most people need more robust LTC coverage that extends beyond age 80.
There are many ways to fund hybrid policies. We have used hybrid policies to help many of our clients secure long term care coverage while retaining a life insurance death benefit that will be paid if they never need to use the LTC benefits.
The cost of long term care can be financially devastating, so it’s important to have a plan that will help you manage those costs if you end up needing care.
The best time to apply for hybrid life/LTC policies is in the 50s and early 60s. Applying at this age allows you to attach an inflation rider to the pool of LTC benefits. This was, you will have more coverage later on at the ages when you are most likely to need long term care.
Bringing it all together
Whatever your life insurance goals are, you need an agent who can compare quotes from a wide range of companies and provide quality recommendations. Financial ratings are important. We generally only recommend you buy policies from companies that have an A+ rating, especially at larger policy amounts.
If you would like to learn more about term insurance, please visit our website to run your own term life quotes at www.deightonfinancial.com. If you would like to learn more about hybrid policies, check out our other website, www.hybridpolicy.com.
You can also e-mail me ([email protected]) or call or text me at 941-685-8854. I look forward to hearing from you!
(Ed. – It’s true, just call or text him and he is very responsive.)
The bottom line is that physicians need life insurance if anyone depends on their salary to live – partners, spouses, kids, etc.
If you are interested in learning more about obtaining term life insurance or even reviewing your current policy, please reach out to Bob or one of my other recommended independent agents! If you are a trainee, do this before you graduate!
Do you have term life insurance? What was your experience like? Did you work with an independent agent? Let me know in the comments below!
6 thoughts on “Life Insurance Advice for Physicians”
ahh man! I laddered 3 policies! I didn’t think my rates increased vs. just using one policy though, that I know of. I think still makes sense to ask if laddering more than 2 policies comes with additional cost.
Jordan, did Bob help you calculate how much coverage you needed? Or did you calculate it yourself? I sort of calculated based on my financial plan and attainment of financial milestones, and left getting the best price to my agent.
I agree w you about laddering. I actually figured out how much coverage I needed on my own. I think that’s the best way to do it to ensure no conflict of interest.
Great post! Laddering or layering your life insurance is very savvy and the best way to get the most amount of coverage at the lowest price. Typically at a certain time in the future, the kids are grown, the house is paid down/off, medical school loans are paid off and the need for life insurance is greatly reduced. Now you even choose a 35 and 40 year term (depending on age) as well!
Thanks for the information. Could consider an article on malpractice insurance? I do not have malpractice insurance. I practice general internal medicine and I stopped doing inpatient work over 6 years ago so I believe I am in a relatively lower risk than some other specialties.
Hi Ricardo, a post on that exact topic is coming up soon! You are definitely at lower risk but all actively practicing docs should be covered by malpractice. Just too high a risk sadly. A large % of docs are covered by employer policies but there is an open market to buy if that is not an option or employer options are insufficient. Occurrence based policies are best as they have a “tail” built in