WCI Financial Boot Camp- Disability Insurance
I recently got my White Coat Investor Financial Boot Camp in the mail, complete with a sweet note from Dr. Dahle. Little did he know, I had already bought it from Amazon. His first book changed my life… I couldn’t wait to read the second one!
So, I sat down to read it on the beach in Maui.
Let’s just start by saying this isn’t a good beach read. It’s not a book that will let you leisurely peruse. Financial Boot Camp is to the point and action packed, so it is not the book I would give a complete financial neophyte who still needs some convincing to take action. I’d start with WCI’s first book for them. The Financial Boot Camp is the book I would give someone who knows why financial planning is important and is looking for hard hitting steps to get their financial house in order.
I made it about halfway through the book on the beach and decided, there is just too much here that I need to take action on, and too much content to cover in one post. So I have decided to do a series of posts on this book. I will take it chapter by chapter each week and break down how it applies to a regular, early career primary care physician’s life. Part of this is selfish because I really want to clean up my own house in the process! I challenge you to do the same with me over the next twelve weeks. Let’s go week by week and get our finances in order!
Let’s dive in.
Chapter 1: Long Term Disability Insurance
I start this process cringing. I have Northwestern Mutual disability insurance and I know Dr. Dahle doesn’t recommend it. So I’m not looking forward to this. I bought the policy before I discovered WCI. I’m glad Jim Dahle started off with this chapter even though his editors told him not to. It’s the most painful part- good to get it over with. I’ve been planning to go through my policy with a fine toothed comb. But honestly, it was a bit of a pain to secure the policy so I’m not looking forward to jumping through the hoops again.
If you’ve never bought disability insurance, you can either get it from an independent broker or one that works for a specific company. Obviously, the latter is more biased towards their own company. Then, you have to go through some paperwork and phone calls discussing your income and how much you would need should you become disabled. After that, a nurse comes to your house and draws your blood and tests your urine… you know to check you out and make sure you are who you say you are and not some crazy hoarder or drug user. Anyway, so the process is quite involved.
Why do we need Disability Insurance?
As docs, we really need to have this insurance. We spend almost 24 years getting the education to do our job- what if we got injured in a ski accident and got broca’s aphasia- there goes our whole career. But, we would still have a family to support and a mortgage to pay (and possibly also student loans to pay back). Life happens and we need extra insurance to cover us given our high debt burden and the high demands of our jobs.
So, we need insurance that will pay a disability benefit if we can’t do our jobs as physicians. Why not just count on social security disability benefits? Because to get that you must be unable to perform your current job AND incapable of adjusting to other work. There are many situations where a physician would be incapable of doing their current job but able to adjust to a job that doesn’t have the high demands of a physician. For example, if a surgeon got a hand amputated, he or she could still be a mall salesperson or a more cerebral specialty. So they wouldn’t qualify for government sponsored disability. That’s when private disability insurance kicks in to cover the surgeon’s family for all the expenses they had prior to being disabled.
This chapter on disability insurance is full of really useful information. When I read over my policy, I really didn’t know what the terms meant. Now, I know. For example, my policy is non canceallable and guaranteed renewable, which means it can’t be cancelled while I’m making the payments.
Another pro is that I get a $7000/month benefit with inflation adjustment for a relatively low cost.
Is it "own occupation"?
The biggest hangup Dr. Dahle has with NWM it seems is that it’s not true “own occupation.” Own occupation insurance means the policy will pay out if you can’t perform the job you were doing, whether or not you continued to work in a different field. Perhaps, thanks to him, NWM has changed their wording.
According to Dr. Dahle, the disability policy used to read in 2013:
You are totally disabled when both unable to perform the principal duties of the regular occupation and not gainfully employed in any occupation. If you can perform one or more of the principal duties of the regular occupation, you will be considered totally disabled if: -more than 50% of your time in the regular occupation at the time the disability began was devoted to providing direct patient care and services; –you are not gainfully employed; and -at the time the disability began, more than 50% of your medical charges came from: i. a procedure-based medical or dental specialty for which board certification is available and you are unable to perform the principal procedures of the medical or dental specialty; or ii. a non-procedure-based medical or dental specialty for which board certification is available and you are unable to perform the principal duties of non procedure-based patient care and services.
In my policy, the “not gainfully employed” provision is gone.
Medical Occupation Definition of Total Disability You are totally disabled when unable to perform the material and substantial duties of the regular occupation. If you can perform one or more of the material and substantial duties of the regular occupation, you will be considered totally disabled if: - More than 50% of your time in the regular occupation at the time the disability began was devoted to providing direct patient care and services; and - at the time disability began, more than 50% of your medical charges came from: i. a procedure-based medical or dental specialty for which board certification is available and you are unable to perform the principal procedures of the medical or dental specialty; or ii. a non procedure-based medical or dental specialty for which board certification is available and you are unable to perform the principal duties of non procedure-based patient care and services.
But, it looks like they “forgot” to take the “Not gainfully employed” provision out of other parts of policy. For example, the Total Monthly Benefit is defined like this:
This is the maximum amount of monthly benefit (Full Benefit) payable for each month of total disability between the Beginning Date and the end of the Maximum Benefit Period, when you are not gainfully employed in any occupation.
Also, since I have a side gig, I’m interested in their definition of the “Regular Occupation.” They define it as:
This is the occupation(s) you are engaged in at the time you become disabled. "Regular occupation" is not restricted to a specific company or industry.
I’m getting in the weeds here and probably boring some of you, so if you’re still reading, let’s just end this article with a few more pro’s and cons.
The price is good and the premiums go down over time- these are subsidized by dividends shared by the company. However, the dividends are not guaranteed. So far, I’ve seen my premiums drop from $332.98/month to $178.50/month for $7k/month coverage.
There is a waiver of premium if diability lasts greater than 90 days. i.e. you don’t have to pay if you’re disabled.
A big negative is that there is a limitation for disability caused by mental disorders (a common problem in physicians!). Only 24 months of payments allowed for this.
Is it or is it not true “own occupation”?
Things I learned from The Financial Boot Camp
I really hadn’t thought about the fact that disability only pays until 70. After that, you have to have retirement savings. So if I became disabled tomorrow, I’d need to save some of the disability payout for retirement. At my current lifestyle, this coverage would be enough, but it’s definitely something to keep in mind.
My payments go down over time. But really, since I’m on the FI path, I won’t need disability insurance for more than 10 years. At that point, I will be able to self insure. It may be more advantageous to have premiums that go up with time.
To Keep or Not to Keep?
So, I’m glad I have some disability insurance right now. The policy is better than nothing. But, the grey area of “own occupation” vs not, makes me a little nervous. In any case, I think I’ll start shopping around and seeing what else I can find.
Do you have a Long Term Disability Policy? Want to go through this book with me? Get the book here and let’s get our finances in gear!
Standard Disclaimer: Not meant as individualized financial advice. This post contains affiliate links.
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