Resident physicians have a lot to consider during their residency, namely what comes next: Will they pursue a fellowship? What type of practice will they pursue?
But there’s also the small matter of insurance. While it often takes the back burner, physicians in training need to make sure they’re covered by the proper insurance.
Figuring out what you need and when might feel overwhelming – but it doesn’t have to be. At the end of the day, every resident physician needs what we’ll refer to as the Big Three of insurance: health, life, and disability. Additionally, there are a few other types of insurance to cover the practical aspects of everyday life. In this piece, we’re covering personal insurance policies not related to medical malpractice, which is another crucial type.
We’ll walk you through what you need, including:
- Health insurance
- Life insurance
- Disability insurance
- Other types of insurance, like homeowners and auto insurance
Insurance for resident physicians
When most people think about insurance, health insurance is often the first type they think about – and for good reason! Health insurance is one of the most important types of insurance an individual can have at any age, regardless of how healthy they are. At the age of 26, individuals are responsible for finding their own coverage.
How much does health insurance cost?
Most employers provide some level of health insurance as part of their benefits package. Those who don’t get that offer should look into the health insurance marketplace or work with a broker or agent to secure coverage. On average, employer-sponsored plans cost $622 per month, but employees only pay around $100 of that; non-sponsored insurance increases to an average of $477 per month.
Don’t forget to find dental and vision insurance! These usually aren’t rolled into health insurance and need to be enrolled in separately. Each costs less: on average, dental insurance ranges from $15-$50 per month and vision insurance ranges from $5-$15 per month.
Consider opening an HSA
We get it: These plans can get expensive, and physicians in training are often looking for ways to save money. To avoid high premiums, look into high-deductible plans or consider opening a Health Savings Account.
A Health Savings Account (also referred to as an HSA) is a savings account designated for medical-related costs, including over-the-counter medications, surgery, and long-term care.
Like retirement savings accounts, individuals with high premiums can contribute a certain amount of money each year, up to $3,650. Those with family coverage can contribute up to $7,300.
An HSA is one of the best ways to save for medical-related expenses while taking advantage of tax benefits. Every contribution made is pre-tax, which means your annual taxable income will be lower, investments will grow tax-free, and distributions for qualified expenses will be tax free.
People tend to think that life insurance is only for those who aren’t young or healthy, but that’s not true – the reality is that life insurance isn’t meant to benefit the policyholder.
Yes, you read that right. Life insurance is designed to protect those around you if something tragic happens to you. After your death, life insurance can help your family shoulder the costs of the next steps, including covering funeral costs, debt, and your children’s education.
There are two types of life insurance: term and whole life. There’s no one-size-fits-all solution, and what you need depends on your unique situation.
Term life insurance is often the more affordable option and gets paid out if the death occurs within the time frame of the policy. This is typically between one and 30 years.
On the other hand, whole life insurance is more expensive but provides your beneficiaries with permanent death benefit coverage and cash-value components with tax benefits.
How much does life insurance cost?
Life insurance is affordable. On average, for a 40-year-old buying a 20-year, $500,000 term life policy (the most common term length and amount sold), it costs $26 per month. Of course, this depends on the amount of coverage you purchase and rates can vary.
How much life insurance do I need?
Unsure of how much you should purchase? It all depends on your income, and how much of your income goes toward supporting your household. There are a few things to think about when making this decision.
Are you single? If so, you probably don’t need much but do keep in mind that your family will be left with funeral expenses and debt to cover, so purchase accordingly.
Are you married? If yes, sit down with your partner and discuss exactly what you want your life insurance to cover. How much will your partner need if you pass? Will you need a policy that helps to cover a mortgage? If you have or are planning to have children, consider a policy that will help with education expenses.
To get a ballpark estimate of what you might need, experts recommend buying 10 times your income plus $100,000 per child.
You could also use the DIME formula:
- Add up debts and final expenses
- Estimate how long your family would need support and multiply your income by that number
- How much do you need to pay off your mortgage?
- How much will your children’s education cost?
If you’re still unsure, NerdWallet has a great calculator for this.
Disability insurance is designed to help you stay on top of your bills by providing partial income if you get injured or become too sick to work. Most residency programs do provide some disability coverage, whether it’s short- or long-term.
What’s the difference? Short-term disability offers immediate coverage for 3 to 6 months, while long-term disability provides benefits for a longer period, from 5 to 20 years or even until you retire.
There are a few key factors that we recommend looking for in disability insurance:
- A non-cancelable or guaranteed renewable policy
- An own-occupation policy (sometimes referred to as “specialty-specific” or “tier 3 coverage”), which will allow you to be eligible for benefits after beginning a new medical career
- Physicians in training should find coverage with a guaranteed future purchase option so that they can increase their benefits by showing increased pay via tax documents or pay stubs
How much does disability insurance cost?
Disability insurance premiums – the amount that you or your employer pay – really depend on your particular situation. Because of this, they can range widely from $25 per month to $500 per month.
Homeowner (or renters) insurance
Of course, there are also a few types of insurance to consider that have nothing to do with your career or health and simply keep you protected in other areas of your life.
Homeowner or renters insurance is meant to protect your property and possessions in the event of a natural disaster, theft, or other accidents. Because you’ll need to replace them, homeowner or renters insurance helps to cover the cost.
Types of coverage
Along with the typical umbrella policy, there are a few specialized types of coverage to consider.
Personal property coverage helps cushion the financial blow from damage to your personal belongings. This includes basics, like furniture and electronics; if you have higher value items, such as jewelry or art, you can buy coverage for them as well.
Liability coverage helps protect you if something happens to a guest while in your home or on your property or if you or a family member injures someone else at home. The minimum coverage is typically $500,000.
Dwelling coverage, while it doesn’t apply to renters, is extremely important for homeowners to consider. It helps protect homeowners from the exorbitant costs related to things like structural damage, including to the walls of the home or the foundation.
How much does homeowner or renters insurance cost?
Much like disability coverage, the cost of this insurance varies by situation. On average, homeowners can expect to pay close to $1,400 per year for $250,000 in coverage.
On the other hand, renters insurance is far less at an average of $168 per year.
Regardless of the stage of your career that you’re in, having proper insurance coverage is a must and will protect you and your family from the unexpected and keep you financially afloat.
This material is for informational purposes only and is not intended to provide financial, legal, tax, nor any other professional recommendations or advice.
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