#247 What Every Doctor Needs to Know About Insurance

Hey, everyone. Hope you've had another great week. This week. A lot of things are going on in the world, especially where I'm at in California. Going to talk more about that and it's really brought up the subject of really making sure that you're protected as well as your loved ones in so many different ways. We're going to be talking about the topic of insurance today. Everything you need to know in a short period of time. And if that's you and you want to learn more about it, stay tuned. Welcome to the Passive Income MD Podcast, where we talk about creating your ideal life through multiple streams of income. If you enjoy hearing about this stuff, make sure to hit subscribe. Now, let's get on with the show this week in the news, especially in my area, everything is concerning the wildfires going on in California. Obviously, this is a huge tragedy. There's so much going on right now. Our hearts and prayers go out to those impacted. Those are my friends, those are family members, former colleagues. So many people in my community and our community were impacted in some ways. So definitely know that we are thinking about you. We've also been active in helping with some of the relief efforts, and I hope we can continue to do so. And I hope everyone out there listening has found their way to help someone else in need, whether it's the things that are happening in your area or maybe there are some things locally that have happened to you. Of course, there have been so many different natural disasters and so many different things in different parts of the country and world. So many different people were impacted. And so hopefully everyone is safe and healthy and everyone is taken care of in a big way. And everything that was happening with the wildfire, it started some pretty important conversations in my family. We had heard of some of our family members being evacuated. Even a condo that we own close to that area was evacuated. And it made us think if we were gonna leave our home and we had to evacuate, what were the things that we would take? I had this discussion with my kids. It really put things in perspective as to what's important in our lives now. As doctors, we're so great at taking care of others, but oftentimes we don't think about ourselves. We don't think about how to protect ourselves adequately. Our families, we're so busy, sometimes these things get put on the back burner. But when things happen that are unexpected, like things that happened this week, things that happen every single week in different parts of the country and world, we realize protecting ourselves through especially insurance, it's a critical part of really establishing and building financial security. And today we're going to dive into everything you need to know. Now, as physicians, our situation is pretty unique. We obviously have a long period where we study and train and we build up a fair amount. Okay, I shouldn't say fair, significant amount of debt. But then we start making a high income relatively quickly right after we finish our residencies or our fellowships. So we are high income earners with a lot to protect. We already come saddled with all that debt. We usually take on new debt in terms of obligations like, you know, homes or cars or whatever that might be. Our jobs are also exposed in a lot of ways if something happens to our health. We've got malpractice issues, lifestyle inflation, regulatory issues. It's important to mitigate the risk as part of your financial plan. I think as part of our community, we're so great about thinking and looking forward. I know I am very good at that and I enjoy that in so many different ways. I like to look forward and always think about how to create more income, more security. Sometime I remember I have to look back at what we have and protect that and build that as the foundation so that everything can be built on top of that. So I'm going to talk about some key types of insurance, some of the core ones, some additional ones you might want to consider, and then talk about some keys for choosing and managing them, some common mistakes we might have, and then some action steps that you might want to take at the end of this. So here are some of the top ones in my mind, the core coverages that physicians should have. Number one is disability insurance. It's ultimately protecting your most valuable asset, which is your ability to earn income. You've delayed gratification for so long, you've even made an investment in your career by taking on debt. And now you're going to need that income to live your life, pay off that debt, move forward and protect your and take care of your families. Obviously, the earlier you buy in many ways, the better it is because you get to lock in lower premiums, especially if you're going to keep it for a long period of time. So many of us will lock it in in our residencies, maybe in our fellowships, with an ability to adjust or increase it as time goes on. Here's some key considerations. Really consider something called own occupation coverage, meaning that specifically what you do in the specialization that you have, if you can't do that exact type of work, then you should be eligible to claim some disability Insurance. What I mean by that is that, for example, I'm an anesthesiologist. If I was unable to do OB anesthesia in particular, it's not like I can just go back and go and be a different type of phys, we all know that. But oftentimes, if your disability insurance is not strong enough, doesn't have that language in place that's really clear and strong in that way. Oftentimes they'll just say you can get another job or another position. So that own occupation specification is absolutely important to understand. The other key consideration, there's something called an elimination period, which is kind of like a waiting period. So if something happens to you and you go file, how long before you actually start to collect on that insurance? Is that going to be 30 days, 60 days, 90 days? That might be really important for you, especially if you get hurt, because many physicians actually they live paycheck to paycheck. So how does your billing work? Do you get delayed billing when you stop at work? Whatever happens, are you going to continue to get paid out? What's that elimination or waiting period that you're willing to put off and get paid at a later time? Make sure you understand what that elimination period is. Also, you want to think about the benefit period. How long do the benefits last? Do the benefits go to your 65? Do they go 67? Is it lifetime? And now things have changed over time in the insurance world, especially the disability insurance world. So it's important to know when your benefits actually go up to and then what would you do after that? You got to think about it. Then there's something called riders R I D E R S. Those are little additions to your policies that are oftentimes optional or not. That might be something that you might want to think about. There's something called a COLA cost of living adjustment because as we know, there's something called inflation out there. And so your cost of living goes up over time. So if you get paid a set fee in 20, 30 years, is that amount still going to work for you? Or do you want something that adjusts for inflation over time and goes up? Then of course that's that rider which I mentioned before. Do you want to be able to purchase additional disability without having to get another medical exam? And for a lot of people that's really important because you never know when you get injured before you get a disability insurance. Oftentimes those things might be excluded from your disability. So the earlier you get it, a lot of times it makes sense because you might have that back pain, those fractures before oftentimes having childbirth and maybe having some complications from that. Oftentimes it's better to get that insurance before so everything is covered and so you don't get these exclusions later on. Next, of course, make sure you want to have life insurance. Everyone knows this. And what is this for? This is for providing for your family if the unexpected happens to you. For many of us listening to this, we are the main provider in our family. So what happens to us if we leave with a fair amount of debt, we leave with home payments. We leave with a family who has a certain lifestyle. Do you want to make sure that your loved ones are covered in case something happens to you? Now there are two major types of life insurance. There's something called term life insurance, something called whole life insurance. Again, there's all these variations, but those are the two major ones. Term life insurance means that it's covered for a certain period, 20 years, 30 years. It's often more affordable and very, very straightforward. You're getting X amount of coverage in case something happens for the next 20 or 30 years. Now something called whole life insurance, which you probably heard a lot about. Now there are pros and cons to this. I know that there are some people that are big proponents of this and there are people that are opponents of this. Depending on who you're talking to, there's some mix of insurance and investment as part of this. This can be a forced savings vehicle, but it can be very expensive. But there are situations where this might make sense for someone. Now I'm not going to go into all the nuances, but it's important for you to know what the different types are, to study those, to learn those, to see what makes sense for your situation. I'll say for the majority of you, which it is, has been for me as well, is to just have term life insurance for the next 20 or 30 years. I want coverage in case anything happens to me. My assumption is that if I can continue my prime earning years and if I do it well for the next 20, 30 years, then essentially we'll be self insured. Something with the disability insurance that you need to know as well too, that I didn't mention, is that you can stop it at any time. If you're at a point where you're completely self insured, you have enough passive income coming in the door, then you can stop those disability insurance and move on. Now, when it comes to life insurance and back to this, how much you want to get coverage for your Life insurance, there are different numbers that you might read. Part of it depends, obviously it depends on your liability, what are your house payments, what are these kind of things, and how much you want to have protected. How much income do you want for your family for X number of years? The number that you'll see quoted out there is 10 to 12 times your annual income. But many of us are high income earners. Maybe that 10 to 12 is a little bit aggressive, maybe it's having a little bit too much. Some people will take about half of that, especially if you're a high income earner earning in the high six figures. But either way, it's important to have enough coverage that makes sense for you. You can do some calculations to cover yourself, your family for that long period, just to make sure everything is taken care of. Now, obviously you don't want to buy more than you need, and maybe. Now obviously you don't want to buy more than you need. But just know that you can always scale back on it and know that when you take on certain types of insurance, like I mentioned, whole life insurance, you might hear some other different types. You're taking on an investment as well as an insurance and understand the interplay between that, the fees, what it looks like to get out of it. Those things are things that you want to really highly consider before you get into those policies and sign on the dotted line. Hey everyone, I have a question for you. What if there was a way to make your money work for you instead of the other way around? Let me ask you, are you looking for a way to create passive income and secure your financial future? Or maybe you've stayed away from real estate because you don't have time to be a landlord. Then I want to introduce you to Passive Real Estate Academy. It's the revolutionary platform that we created that teaches you how to invest in real estate passively with little or no effort on your part. In just four weeks, our comprehensive course will teach you everything you need to know about passive real estate investing and help build that confidence in you so that you know that you're making a great investment choice. We created this course for busy people like you, and we're going to guide you from every step of the way, from understanding even the most basic information to understanding the jargon and understanding underwriting so you can make sure that you're making a great investment, that you're maximizing your returns and minimizing your mistakes. And the best part, you can do this all from the comfort of your own home with absolutely no Prior experience required. So it's time to prepare yourself and learn so that you can be ready for these deals that you see. Because the time is coming. So don't let the demands of your job or the current economic climate dictate your financial future. So join Passive Real Estate Academy and build that confidence to know that you're making a great investment when it comes to syndications and funds. So visit our website@ passiverealestateacademy.com to learn more and take your next step to financial freedom. Now back to the show. Next, you definitely want homeowners or renters insurance, in my opinion, especially the homeowners. For many of you, one of your very first purchases, your biggest purchase in life is probably your home. You finish residency, you finish fellowship, you have a family, and the first thing you really, really want to do is buy a home, put your roots down, feel like you have a place of your own. It's kind of like a rite of passage once you become a full fledged physician. Now, whether it makes sense to rent or buy in your hometown. How much? That's another podcast episode in and of itself. But it's important, especially what we learned right now. With everything happening with the wildfires and different hurricanes and different things in different areas, you want to protect your largest asset, and that's your home. If something happened to it or happened to all your personal belongings in your home, what would you do? Some of these things are replaceable, many are not. I can almost certainly say this was your biggest investment in life in a lot of ways, your biggest purchase. And you want to make sure that's protected and update that as you go. Now, if you're going to get a loan from the bank anyways, they're going to require you to have homeowner's insurance. So it's really not an issue. But for many of you who rent, you may want to think about having rental renters insurance, especially if you're a high end renter. Especially you want to make sure that everything in terms of your assets are protected, everything in there. Of course, if something happens to the property and it's your fault, sometimes they'll want your insurance to cover for that. So you want to make sure that's in place and that's definitely an easy check to make on the checkbox. The next is auto insurance. I think I don't need to go into that too much, but obviously accidents can happen to anyone. As physicians, oftentimes we can be targets. If something happened and they find out they see your white coat Hanging in the car, which I recommend people don't do. You want to make sure you have adequate coverage. That's of course the liability insurance if something happens. And that's obviously a requirement for every auto in every state. But you know, what is the liability insurance that you have? You want to make sure you have adequate coverage. Something happens to the vehicle itself or is in fact somebody gets hurt. Whether medical coverage, you want to make sure you have large enough policy for that to have that coverage. Otherwise you may have to come out of pocket if anything is greater than that. Now, one of the big tips is if you can bundle your policies, meaning that your home, your life, all of these things under one roof, under one company, oftentimes you can get really, really good discounts. And so there are certain larger carriers that it might make sense to bundle all of these things in one place to try to save on some premiums. And the other thing to consider is your deductibles, pretty much how much you need to pay before the insurance kicks in and starts to pay. Where do you want to set that? If you feel like you're pretty well insured, maybe you want to hire those or lift those deductibles, maybe a little higher. So your insurance costs aren't as much upfront. But maybe if it's early on, you might not have the cash to cover. If there's some certain situations, maybe you want to have a lower deductible initially just to cover those periods. But again, you want to adjust these things and constantly look at these things over time to make sure the coverage is adequate and makes sense for you at that time. Now, some additional coverages to consider. I'm going to go through them really quickly. The next one is umbrella insurance. What is umbrella insurance? Think about the umbrella itself. It's extra protection that extends beyond your standard policies, like your home or auto policies. If anything exceeds the limit on those, then the umbrella comes in to kick in over those policies to bridge that gap. It's definitely something. When you have significant assets, higher cost home or rental property, you have higher income, you perhaps may be even a bigger target. You want to make sure you have significant umbrella insurance to cover that somebody comes at your home and to your home and does work and slips and falls. Then oftentimes, unfortunately, that's on you, and you want to make sure you have adequate coverage for that. They of course, a lot of times these workers will have their own insurance, but that's not always the case. Now, umbrella insurance is typically known to be pretty Inexpensive. That's something I would recommend for anybody already has a homeowner or an auto policy. Just add some umbrella insurance on top of that. Find out how much that costs, try to bundle it with your current insurance policies and I will say it will help you sleep better at night. Of course, as a physician, there's malpractice insurance. I don't need to go over that. Business insurance, especially if you're in private practice or you got a side business, it'll cover liability, property damage, employee injuries, all of that. You want to have that covered. Another type of coverage, you may want to consider something called long term care insurance. Now that's to protect your estate or your loved ones from the high cost of long term care. As many of us know, there are times when perhaps you're in a major injury and having round the clock care or a significant type of care, it can be extremely costly and builds up really quickly, especially as people age. And so there's something called long term care insurance which goes in and covers a lot of that. Now it's known to be quite expensive, especially later on in life. And so many people end up buying these policies somewhere around their 50s to cover them for a period of time. They usually don't carry these things really early in life. Now you can, it'll be less expensive, but oftentimes people wait until a little bit later to cover that. Now some people, they get too late in their lives and they decide to get it, then it's extremely expensive. And that may not make a lot of sense. So of course these things depend on you and your financial situation, what your level of risk is before you decide to get the these things. But at least have a conversation about this. What other type of insurances are there? Of course there's health insurance, you don't need to talk about that. There are out of pocket costs, deductibles, coverage options for yourself and your family. Again, that may be another conversation for another podcast. Then there's something called specialty insurance for unique cases like flood insurance, earthquake insurance. Now these are not necessarily mandatory in all parts of the country. And so a lot of people automatically think or assume, assume that it's part of the policy, as we've seen in this time right now with insurances having only recently denied coverages or dropped coverages or not allowed fire coverage. And then you see this happen. How important was it for those people to make sure they had that coverage on board? And I know for a fact, since I know certain people after the fact they went to Check on what their policy actually said. Did they actually put it on? Did they put on fire insurance? Did they put flood insurance? Do they have earthquake insurance? Especially like here? Not everyone needs it in every part of the country. But it's important for you to understand what the specialty insurance is on your property, your assets, or whatever that might be. Again, those are just to protect against major catastrophes. But I don't know about you, but it's felt like over the last couple years more and more of these things are happening again. Maybe it's just more we're more aware of it through social media, through the news, but it just seems like they're happening, happening in all parts of the country every single year now. Just some key tips when you choose manage insurance. Oftentimes I suggest working with an independent broker. What does that mean? There's somebody who can shop around for the best rates and coverage. They oftentimes have access to even better rates than you would yourself. Now, of course they get compensated, but oftentimes their compensation happens to be from the actual insurance carriers. So find out for yourself how these brokers get compensated. It's okay to ask them that. They should be open and transparent about it, but oftentimes it helps because an independent one can go and shop these policies for you. I know that you and I might be too busy to go to each individual carrier ourselves, and it would be nice to have somebody do that for you and have access to great rates. Now. It's important and I absolutely believe this, and something that I maybe have been guilty of as well, and I haven't done, but I should do, which is to regularly review your policies. Your life circumstances change over time. It doesn't just change when you become a resident, to a fellow or fellow to attending, even when you have your first kid, when you have your second kid, when you move to a different home, when you start making a different income, when you become partner, when you start cutting back on medicine. All of these things are life changes. If you have a couple great investments and things do well, you want to review your policies to make sure they make sense for you in terms of your coverages. You want to make sure that you avoid paying for unnecessary or duplicate coverage, which I found before has happened. You want to understand all of your exclusions, your limitations, look at the fine print, make sure you understand what they say. And of course, if you have the opportunity, try to leverage some group rates. If you're working for a certain hospital or some of these professional associations, use whatever you can to maximize those discounts to get the best coverage possible. Now, as physicians, we often don't spend the time doing that. We don't always look and shop around our best. We don't always insure the right amount. I would say oftentimes physicians either go way over or way under. Now, it's not a bad thing if you go way over. As long as you are regularly reviewing those things to make sure that you get back in line with what makes sense. Otherwise you might be paying way too much. Other times, you might be totally underinsuring, especially for where you are in life in terms of the risk that you're taking on at that point. And the other thing is that you want to be careful when you mix investments and insurance. It goes without saying that you want your investments to be optimized and your insurance to be optimized. When you mix them sometimes with these certain types of policies, it's possible that you're not optimizing either and you just end up paying large fees. So please be aware of that. So I have a question for you. When was the last time you checked if your coverage was adequate? Has it been a year, two years, five years? I will say that at least on a yearly basis, I would consider checking this policy. If you have it on a list you can take a look at and just review the list. Make sure your coverages are enough, your deductibles make sense. The amount you're paying makes sense because it changes on a yearly basis. Don't wait to find out until it's not enough for you. Now, my family and I had a little bit of discussion. We said, where could we go where we wouldn't have to think about these things as much? And every place we listed had an issue or problem, especially when it came to a natural disaster or a challenge like that. If somebody is in a place where you don't have to deal with these things, please let us know. But it's something that's relevant for all of us. Now, I know it's not super interesting, it's not glamorous, it's not making money, making investments and hitting home runs, but it is your safety net. It is essential for protecting your family, your income, your future, and for our community. We want to support each other in hard times, but in good times, we also want to make sure we're all prepared for that. And so I want to thank you for taking the time to to listen. Please go and check that. Make sure you're in good shape and let's talk again soon. Have an amazing week. Thanks everyone. Enjoy the show. Let me know by dropping a review in the podcast app you're listening to us in. And if you haven't already, make sure to hit subscribe. Join thousands of physicians who are also on this journey to creating their ideal lives through multiple streams of income. Learn more at our Website, passive income md.com thanks again for allowing me to be a part of your journey. See you next time.