Navigating disability insurance needs as a New Practitioner
Your Financial Pharmacist By Timothy Ulbrich, PharmD
When I talk with New Practitioners about building a solid financial foundation, insurance is a critical piece of the puzzle. Alongside other competing priorities such as student loan debt, it is easy to think, “Do I really need to spend my money here?”
Here is the question you need to ask yourself when thinking about disability insurance: how would I financially support myself and my family, pay bills, and achieve my financial goals if I became disabled and couldn’t work anymore? This may be a more likely scenario than you think. The Social Security Administration predicts that more than 25% of today’s 20-year-olds will become disabled before retiring.
Disability insurance provides you with money to cover your bills and expenses if you are unable to work. Think of disability insurance as income insurance. More likely than not, your income as a pharmacist is your greatest financial asset and you must plan to protect that income.
As you prepare to assess your need for disability insurance, here are seven important questions to consider.
1. Do I need short- and long-term disability coverage?
For most individuals, my recommendation is to focus on long-term disability insurance coverage. With a long-term policy, you will have an elimination period, which is the period between when the disability is claimed and when you can start receiving your benefit. This can be 30 days, 180 days, or somewhere in between. Typically, your sick time would be used to cover any lost pay for the short term. Combine that with a good emergency fund, and you should be able cover any lost income during this elimination period.
2. How much coverage should I get?
A general rule of thumb is to get coverage that is approximately 40% to 60% of your gross income. This should be enough to avoid you going into a financial tailspin, but not so much that it would disincentivize you from going back to work. Furthermore, 60% of your income is not too far off from what you are probably getting now with your take home pay when you account for taxes.
3. Are there certain add-ons (riders) that I should consider when buying a policy?
One important add-on (rider) we encourage pharmacists to consider is “own occupation.” This rider means that you will receive benefits in the event you cannot work as a pharmacist. Depending on the policy, “own occupation” may be included or may require an additional fee.
4. Is the coverage offered by my employer sufficient?
Your employer may offer some coverage, but it may not have “own occupation” protection, be adequate for your needs, and you may have to get re-evaluated for a policy if you leave. Therefore, a privately purchased long-term disability policy may be your best option.
5. How much will a policy cost?
Depending on your health status, age, how much coverage you buy, the length of the elimination period, and additional riders purchased, you will be looking at approximately $100 to $400 per month.
6. What should I be look out for when buying a policy?
Since insurance sales are often commission-based and can make getting an unbiased recommendation difficult, I recommend working with an independent broker who offers insurance products from several different companies, allowing you to compare policies and rates.
7. Where do I get started?
The team at Your Financial Pharmacist has a disability insurance resource page designed to help you further understand the nuances of disability insurance and to get quotes from an online independent broker. You can learn more at http://yourfinancialpharmacist.com/disability-insurance.