Why Doctors NEED Disability Insurance

We ought to talk about something here, and that is disability insurance. We've talked about it before on this podcast and obviously we talk about it all the time at the White Coat Investor. It is chapter one of the White Coat Investors Financial Boot Camp. It's chapter one for a reason. Because if you don't have disability insurance and something happens to you like happened to Corey, it can torpedo your entire plan, right? Nobody cares that you just invested a decade and a half into your ability to trade your time for money at a high rate. Nobody cares if you haven't insured that huge asset that you now own. It's not going to be worth anything. Nobody's going to pay you for having gone to medical school, except a disability insurance policy. So that is how you insure that asset that you have. Now, his benefit wasn't huge, right? It was 8000 or $10,000 total between the two policies. But 8000 or $10,000 is far better than nothing. And honestly, I don't even know if a brand new attending has worked for long enough to actually get Social Security disability benefit. You have to put in a certain number of quarters. The younger you are, the fewer the quarters it is. I think it can be as few as six quarters, but I don't know that that's necessarily the case for someone in their 30s. I'd have to look at the numbers exactly. But the point is, it's hard. It takes a long time. You often have to get a lawyer to get Social Security disability, and you have to be disabled from being able to do anything in order to qualify for that. Most of these good policies that you buy from our recommended agents from the, you know, big five or six companies don't require you to not be able to do anything. They just require you to not be able to do your specialty. And you know what, if you can't read, you probably can't do anesthesia. That's enough to pay out the entire benefit. And so that's why it's important to buy this stuff. And I hope hearing a real life example of someone who had to use it is helpful to you. Now, he didn't have to use it for long and that happens a lot, right? He said it was only like three months. And so I don't even know if he got into the long term disability policies that he had or in them for very long. Sounds like he had a short term disability policy as well. And that's a decision you have to make, right? Short term disability is bad, but it's not necessarily a Financial catastrophe, right? If you can't earn for three months or so, it's not the end of the world, right? If you've got a three month emergency fund, you've got the money to live on for those three months. In actuality, when you talk to people who have been disabled, it's really four months though, because they tend to not actually pay you that benefit until a month after the elimination period ends. A little bit of a. I don't know if it's a scam there, but that's the way it works. So keep in mind it's maybe a four month emergency fund is the right way to go. But that's the deal with short term disability, right, that people use sometimes. It gets used a lot for maternity kind of related stuff is where I see it. Get used a lot. Some policies will consider just like a regular uncomplicated pregnancy disability for a few months and actually pay you for that. So that's worth looking into if you're planning on having a baby. And so the real financial catastrophe is not being able to earn for the rest of your 30s, your 40s, your 50s and your 60s, right? But at least if that had happened to him, he'd be getting $10,000 a month for the next 30, 35 years and hopefully adjusted to inflation as it goes. So important, important, important stuff to buy. I can't emphasize that enough now. I no longer have disability insurance, but I'm also financially independent. You don't have to keep this stuff forever. I know it's expensive. Some of you are paying 4%, 5%, 6% of your disability insurance benefit, right? So if you're getting a $10,000 a month benefit, you might be paying $500 a month to get that. And if you have a $20,000 benefit, it might be twice that much. I understand it's expensive. So when you get financially independent, maybe give yourself a little cushion another year or two, maybe go ahead and cancel your policy. It's okay, right? You don't need it forever. You only need it when you need to protect against a financial catastrophe. Keep in mind there are some policies that have like a graduated payment where you pay less in the first few years and you end up paying more later. But that's okay if you're going for early financial independence, you actually come out ahead with those sorts of policies. So you can look for those if that's really your financial goal. If you only expect to be paying these Premiums until you're 40 or 45, you may want to look into a policy that does that.

The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.