This is an excerpt from an email exchange with current resident responding to questions about insurance.
Disability Insurance for Medical Residents
There really isn’t a need to buy further disability until you are about to enter practice. I did and continue to find DI one of the most frustrating insurance aspects of being a professional. The fact of the matter is that during residency, there is very little income to replace and policies are written based on how much you earn. I believe REDACTED with DL DAVIS representing Mass Mutual was the rep for NCBH and that is who I purchased my policy from as a fellow but I did a LOT of shopping. It’s an expensive policy per annum and not one you want to get wrong, and truth be told, I still don’t know if I got it right. I’ve had an independent review on my checklist for something like 8 years but never get around to it. Honestly, I’d love to see the residency have a independent expert come in and talk about disability insurance even it has to pay.
TL;DR: Disability is for practice when you have a lot of income to replace.
Life Insurance for Medical Residents
Life insurance however will never be cheaper than now, which is why I made it a homework assignment for the first talk. Every resident should have at least 500K if not a 1M policy. The policy needs to be able to cover your family until they get back on their feet. While most types of debt will be discharged in death, any cosigned debt will fall the survivor. That is also what life insurance is for.
Life insurance is a relatively simple, highly regulated product. I’m referring only to TERM LIFE. All other forms of life insurance need a thorough independent (not the selling agent) review. Pretty much all other forms of life insurance beside term pay huge commissions to the salesman/broker and that’s why they are heavily marketed for doctors.
I’ve been in many arguments about TERM versus other forms and the arguments are short; they end up with me saying to please bring in a spreadsheet showing how this other policy is better mathematically, and I’ll concede defeat. Not 1 person has ever done the math. There is often a lot of commentary that is usually along the lines of “but this has cash value”.
Rule #1: People suck at math.
Towards the end of training, I recommend an umbrella policy which is also quite cheap but usually requires modification of existing homeowners and auto policies. The reason is that if a roofer falls off your house, he could go after future earnings. Same with any other type of liability. Umbrella insurance is cheap and protects you against a lot.
Slander someone? It might cover you. House catch fire and set the neighbors house on fire and they sue you? Covered. All sorts of intentional and unintentional acts are covered by umbrella policies. It’s reinsurance for the common man (reinsurance is what insurance companies use to cover excessive losses).