We’re always scouring the web for good articles and studies about doctors and financial tips – and we were particularly pleased to come across this fine piece from Kevin Liu at KevinMD.com. Aiming his advice at young physicians who have just completed residency, or advanced fellowship training, and who are entering the attending physician phase of their careers. His first piece of advice for young doctors matches our beliefs precisely:
“Take care of your most important financial asset: you.”
1. Maintain health insurance coverage
Kevin goes on to write how vital it is that having invested so much money and effort into your medical education, that you don’t jeopardize all that effort by failing to insure yourself against the risk of illness or injury. His prescription: Get health insurance.
Kevin also recommends buying disability income insurance. This important cornerstone of financial planning is particularly important for doctors: It replaces up to about 50 percent of your income in the event you become sick or hurt and unable to work.
Kevin states that your employer may offer disability insurance coverage. This is often true for young physicians. But we would go further: We recommend all new doctors own their own individual disability income policy.
There are multiple reasons for this:
Guaranteed and Portable
If you own your own policy, nobody can cancel it, and you can take it with you when you switch jobs, and even when you go into private practice. Many physicians skip the step of owning their own disability policy, relying instead on their employers for coverage. But when their health changes, and they can no longer qualify for a disability insurance policy, they are frequently stuck. The dream of going into private practice may be out of reach for some, or attainable only by taking on a lot of risk.
Own Occupation
The best disability income insurance policies for doctors are own occupation policies. That means that the insurance pays income benefits if your illness or injury makes it impossible for you to continue working as a doctor. Some policies will even pay benefits if you could still work as a physician, but not in your original specialty. For example, an orthopedic surgeon requires the ability to stay on his or her feet for long periods of time, and requires tremendous dexterity and substantial physical strength.
The broader the definition of disability, the more likely the policy is to actually pay a claim, and the more valuable the policy is. But premiums for the best policies are typically higher, too. For this reason, many employers choose less robust disability policies for their employees in order to save money. (Many times, you will find that the business owners long maintained their own disability insurance coverage as individuals as well, separate from the employee benefit!)
Our recommendation: If you can qualify for your own individual policy, buy it as early in your career as possible.
2. Minimize debt
Kevin MD also recommends managing debt aggressively, and paying off debt as quickly as possible. At this point in your career, your medical school debt is a sunk cost, and at least some of the interest will be tax deductible. The real killer that disrupts physicians’ finances is consumer debt: Car loans and credit cards.
Too many physicians buy more car than they can truly afford, and rack up high-interest credit card debt that becomes surprisingly stubborn when it comes to paying it back down. And when that happens, it becomes much more difficult to find the money in the budget for the basics: Disability insurance, life insurance, retirement savings, student loan payments, and investing in your own home.
3. Protect your finances
KevinMD closes with some very good advice: Once you have adequate health and disability insurance in place, protect your future income against lawsuits and other forms of liability with some extra liability coverage on your auto insurance, and an umbrella insurance policy that protects you against very large judgments. To that we’d add some solid malpractice insurance, too!
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