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Emergency Medicine News


A Better Option than Disability and Life Insurance

Borden, Mark MD

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doi: 10.1097/01.EEM.0000721228.78273.a9

    Young doctors are the ripest of the low hanging fruit for insurance sales agents. Early in their training, friendly insurance salespeople track physicians like a pack of slobbering hounds. They play on their insecurities, and are willing to sell as much insurance as they are willing to buy. Should they buy it? Everyone will say they should, but is that the right answer or just the easy one?

    I terminated my life insurance and disability policies after 22 and 25 years, respectively. I have nothing to gain in this big money insurance world. I searched for an argument against disability insurance and could not find one. The arguments for disability insurance sounded good to me 25 years ago, but they are not convincing now.

    It is generally agreed that term life insurance is a good idea if you have others who depend on your income. While you are young, a term policy is not too expensive, and it is probably a good idea until the potential benefit doesn't seem important to you anymore. Re-evaluate your need every five years, and drop it as soon as your financial position is strong enough. I dropped my life insurance a few years before I dropped my disability. I should have dropped it sooner. At that point, the benefit was no longer a make-or-break amount of money to me and my family. I suppose it is fairly easy to collect life insurance money when someone dies, but I hope it is easier than collecting disability benefits.

    Insurance is a gamble, and the house (the insurance company) almost always wins. How big of a spread is there between what we get (benefits) and what we pay? The spread (the insurance company profit) pays for billions of dollars in annual insurance advertising, more than $2 billion annually in political lobbying, billions in real estate for offices, and the wages of more than two million industry employees. Gambling at a casino results in a much better return on investment on average than buying insurance.

    Peace of Mind

    Will buying disability insurance buy peace of mind? Peace of mind is important. As long as I had insurance and never needed it, I had peace of mind. This peace lasted until I needed to file for disability. I then came to realize that my Northwest Mutual occupation-specific policy for which I had paid hundreds of dollars each month for more than 20 years was difficult to redeem, essentially impossible without legal help, and not worth the effort in the end.

    In the ideal scenario, you buy a “great” (expensive) policy. A great policy is occupation-specific, which means you are disabled and eligible for payment if you cannot practice emergency medicine. Most great policies pay after an initial three-month period. You suffer an injury to your body or mind that prevents you from practicing, the payments start, and you have time to heal and hopefully return to function. Your family is saved a financial crisis. Sounds great, but....

    In actuality, here's how it will probably go. You buy a great policy, paying monthly premiums of at least several hundred dollars for many years. As the years go by, it gets more expensive and becomes more restrictive, with small changes that you try to watch carefully. But you should know that the paperwork is long, complex, and challenging. You won't be speaking to the helpful salesperson but to a claims agent who specializes in not paying out money if at all possible.

    The person assigned to me had no medical knowledge. She did understand, though, that every single form needed to be filled out completely before the claim could be considered. You will need to submit the last five years of taxes to prove you have been making a normal income as a physician and to prove a substantial decrease in that income.

    You will need to submit the medical records of physicians, primary and specialists, certifying your disability. This may be harder if you have been toughing it out while asking your fellow doctors for advice. The diagnoses will be closely scrutinized, and you will be considered for percentages of disability. Remember, you may not be in the best condition to fight for justice at this point, and it will fall on your loved ones and the attorney they will almost certainly be required to hire. The attorney will analyze your great policy closely and find every weakness.

    As an emergency physician who commuted by motorcycle and trained horses as a hobby during 20-plus years of practice, I suffered numerous painful injuries. With two MCAs and being thrown more than a dozen times, I never came close to three months of downtime. Knowing I would receive no payment without continued work, I went to my shifts with complex lacerations, fresh fractures (including a painful pelvis), broken ribs (twice), and other painful things I won't mention but that would never last the three-month minimum.

    It will need to be a rather unusual injury. Losing a leg won't do it. Losing both legs won't either. In those cases, you will adapt to using a prosthesis or a wheelchair and three months of no payment. Losing one arm or most of your vision will make intubation and suturing difficult, but you can still work in a multiple-cover ED where your fellow doctor can handle the procedures. Losing the ability to work well at night won't do it (we all will lose that after 50) because you can still get day shifts somewhere if you try hard enough. A head injury could qualify, but if it is at all subtle, proving disability will be a long tough road, which will require your brain to be working 100 percent. See the problem?

    Now picture this. Do you really want to be disabled? If you lose both legs, an arm, and an eye, you can still earn more by consulting online than your best disability policy will pay. Not only that, you will feel useful and productive.

    What are the other options? First, what will you do with the $300 a month you will save by not paying for disability insurance? You will want security with this money, so a good route is an investment account with dividends automatically reinvested. This will be an account you will not touch unless absolutely needed.

    Return on Investment

    My investment broker did the calculations. (See table.) The numbers will be much larger if you deposit a few hundred dollars extra each month into this account initially. These numbers are conservative. I calculated how much I would have now if I had invested in myself rather than in disability insurance, and it was $400,000! I paid $170 a month in the beginning and $600 at the end. Now, at age 54, my policy had been trimmed to a benefit for a maximum of three years, and I was still being charged $600 a month! Had I become disabled, my maximum total payout would have been gradually trimmed, and the still expensive policy would actually have been less than $300,000 dollars spread over three years.

    This (your savings in lieu of having disability insurance) is real money that will be yours and not open to dispute, limitations, or other interesting calculations. That is very different from your potential disability benefits, trust me.

    Bet on Yourself

    First, evaluate your debt and consolidate it at the lowest possible interest rate. Then, figure out how to pay it off fast. The only time it is worth assuming debt after your training is to leverage your purchasing power on an asset that will appreciate—real estate. Check the tax laws, but right now you can still deduct the mortgage (remove from your gross income to lower your tax bracket) on your home, and you will need deductions.

    As an emergency physician, you will want to invest in a diverse manner. Real estate ownership has done well for most people. Buying the smallest or lowest priced house in an expensive neighborhood is a good place to start. As a physician, you will have the monthly income to make it bigger and nicer, and you will have good returns at sales time. Having a few rentals is a good idea if you live in an area where there is a good rental market (the rents you charge are higher than the mortgage you pay). You may enjoy being a landlord or not. Either way it is an adventure, and you will have a stream of income. Passive (a relative concept) income is nice.

    Additional investment accounts are important, and having an advisor is a good plan, but watch the percentages and fees because they can seriously add up over time. An accountant has also been important over the years, but is a bit less important now with the decrease in ability to itemize deductions under the 2018 tax law.

    Most emergency physicians like to have a productive activity outside of work. Investing some of your time in creating a lifelong rewarding enterprise is fun and worthwhile. Mine is horses and farming. I enjoyed caring for plants between shifts, and I have hundreds of productive fruit trees. These outside enterprises can act as a shelter for some of your ED money, but this shelter is just another investment.

    You have the choice. You can bet on the insurance company, or you can bet on yourself. As a rational person, you should clearly know that the odds are massively in your favor if you bet on yourself.

    You can read more about this topic and others on my website

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