Disability Insurance For Female Physicians: The Agony Of Defeat

[Today’s post comes from Larry Keller, CFP®, CLU®, ChFC®, RHU®, LUTCF, an insurance agent at Physician Financial Services who specializes in term life and own-occupation disability insurance for physicians. He is a sponsor of this blog, as well as many other physician finance blogs, and I can speak to his knowledge base and his professionalism since I purchased my own term life and own-occupation disability insurance from him as an intern.

I was corresponding with Larry by e-mail with questions I had associated with this post, and he explained to me that when it comes to disability insurance, females are statistically more likely than males to claim disability. Females have the unique health risks associated with pregnancy and childbirth. In addition, autoimmune disorders and psychiatric conditions that may lead to disability are more commonly diagnosed in women than men. As a result, insurance companies will offer more expensive rates to women than to men.

In this post, Larry Keller describes how women can get lower rates for their disability insurance by seeking out unisex rates rather than gender-specific rates. If you have any questions or comments, you can submit these in the post comments, or you can reach Larry by phone at (516) 677-6211 or by email to Lkeller@physicianfinancialservices.com. -WSP]

We have all been there. You decided that you need or want to purchase a certain product or service. You do your research, visit stores, search the internet and, finally, you are ready to buy – only to learn that what you purchased was once on sale and you missed out! While this is aggravating and, for a period of time, might be all you can think about, you will ultimately move on. However, how would you feel if this happened repeatedly – month after month, until you no longer needed the product or service or retired? Over time, this would likely translate to a significant amount of money that could have been put to use elsewhere. Unfortunately, this is exactly what I see, on almost a daily basis, happen to female physicians that don’t do their homework when they purchase disability insurance!

Disability Insurance and Female Physicians

Due to a higher morbidity rate, premium rates for females are substantially higher compared to their male counterparts. The solution is for female physicians to purchase a policy that includes a unisex (gender-neutral) rate structure and a discount. This is a blended rate that greatly favors females and can, generally, provide them with a savings of 40-50% off of the normal female premium rates. To qualify, one would normally purchase their policy as part of a Multi-Life Discount program through one’s employer or as part of a Guaranteed Standard Issue (GSI) program, except in Montana where all policies have unisex rates.

For example, let’s assume that we have a 30-year old female Emergency Medicine Resident in New York State purchasing a policy from MassMutual with a monthly benefit of $5,000, payable after 90 days, to age 65. Also included is an Extended Partial Disability Benefit Rider, a 3% Cost Of Living Adjustment (COLA) Rider and a $10,000 Future Insurability Option (FIO) Rider. The level (fixed) monthly, non-discounted, gender-distinct (female) premium is $331.65. However, the same policy with a unisex rate and 25% discount is $182.15 month or approximately 45% less.

Assuming the monthly benefit was never increased, if she kept her policy until age 65, the cumulative savings would be $62,790!

Another example would be a 35-year old female Attending Emergency Medicine Physician in New York State purchasing a policy from Principal with a monthly benefit of $5,000, payable after 90 days, to age 65. Also included is a Residual Disability and Recovery Benefit, a 3% Cost Of Living Adjustment (COLA) Rider, a Future Benefit Increase (FBI) Rider and a Benefit Update (BU) Rider. The level (fixed) monthly, non-discounted, gender-distinct (female) premium is $688.40. However, the same policy with a unisex rate and 20% discount is $373.93 month or approximately 46% less!

Assuming the monthly benefit was never increased, if she kept her policy until age 65, the cumulative savings would be $113,209!

What if the Savings Was Invested?

Let’s take the second example one step further. What if the difference in the annual premium was invested?

The non-discounted, gender-distinct (female) annual premium would be approximately $7,862 (compared to approximately $4,270 for a policy with a unisex rate and 20% discount) providing an annual savings of approximately $3,592.

If this was invested for 30 years at 6%, it would grow to approximately $283,977!

Summary

All too often female physicians spend significantly more money on their disability insurance premiums than they should. If possible, it is best to take advantage of existing multi-life discounts via your employer. As a rule of thumb, the larger your employer, the more likely that a discount plan will be available, which is one of the main reasons that residents and fellows are encouraged to purchase their policies during training or shortly thereafter as discounts are typically available for up to 90 days after graduation. Agents that specialize in working within the “medical market” should know of and/or have access to them. Otherwise, establishing one requires that 3-5 employees working for the same hospital or employer purchase policies from the same insurance company. With a little bit of effort, female physicians can turn the agony of defeat into the thrill of victory!

[I strongly encourage physicians to seek out an independent, knowledgeable insurance professional to help them purchase disability insurance. There are a lot of terms associated with these insurance contracts, and unlike investing, you only have to buy disability insurance once. I purchased disability insurance as an intern because I wanted to protect my current and future income as early as possible. If you haven’t yet purchased disability insurance, I encourage you to contact Larry Keller at Physician Financial Services or one of the other insurance agent sponsors of the blog. When working with any investment or insurance professional, I encourage you to do as much homework as possible beforehand and ask lots of questions.

Below is the fine print / disclosure from Larry Keller associated with this post. -WSP]

Fine Print  / Disclosure

These are the personal views of the author and may not represent the views and opinions of The Guardian Life Insurance Company of America or its subsidiaries or affiliates thereof.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 355 Lexington Avenue, 9th Floor, New York, NY 10017-6603, 212-541-8800. Securities products and advisory services are offered through PAS, 1-516-677-6200. Financial Representative, The Guardian Life Insurance Company of America, New York, NY (Guardian). PAS is an indirect wholly owned subsidiary of Guardian. Physician Financial Services is not an affiliate or subsidiary of PAS or Guardian.

This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments. This worksheet provides estimates based on certain assumptions. It is not intended to provide specific investment advice. The results are not a guarantee of performance or specific investment advice. The rate of return on investments will vary over time, particularly for longer-term investments. Investments that offer the potential for high returns also carry a high degree of risk. Actual returns will vary.

PAS is a member FINRA, SIPC

2018-68391 Exp. 10/15/2020]