Health Sciences Assurance Consulting, Inc. University of New Mexico Graduate Medical Education Disability Insurance Presentation Geri Everett, CLU Health Sciences Assurance Consulting, Inc. 505-796-4441 geri@hsac.com

MD In the Black Purpose of Long Term Disability is to Financially support you in the event you are unable to work in your current occupation

Types of Disabilities Reasons: range from Cancer to a hand injury caused by a rock climbing injury

Five Questions to Consider 1. Should I buy disability in Residency ? 2. What are the different types of LTD ? 3. What provisions should I consider ? 4. Where can I buy Long Term Disability ? 5. How much will LTD cost ?

Disability Insurance protects your most valuable asset – Your Ability to Earn Income Family and General Practitioners estimate and mean wage for 2015 was $187,330 (May 2015 US Dept. of Labor Bureau of Labor and Statistics) *Assumes 3% annual increases Source: http://www.bls.gov/oes/current/oes291062.htm

Match your Budget Disability premiums are based on your: Age Gender Specialty Health Benefits period Options that you select

Group Disability provided by Employer Individual disability is purchased on your own Individual is more expensive

What Benefits Should I Consider ? Noncancelable Guaranteed Renewable Residual/Partial Cost of Living Future Increase Option/ Benefit Update

Make an informed Decision Work with an agent that Represents Multiple companies

How Much will Long Term Disability Cost ? 1-3% of Gross Annual Income

Do You have any other Assets to replace your Income ? Rental properties Dividends Retirement Income Royalties

What Benefits do I look for in a LTD policy ? Most Important part of the policy is the definition of disability OWN occupation, specialty specific The fewer limitations the better Non-cancelable policy can’t be terminated by the company and premiums can’t be increased

Other important Options to Consider Residual/Partial pays if you are not totally disabled Future Increase Option allows you to buy more insurance at a later date with no new medical questions Inflation protection or Cost of Living Monthly Benefit would be increased after a claim and is tied to the CPI

Pre-existing Conditions At the time of application you will be asked health questions If you have a pre-existing health history It can be excluded or not covered by the disability policy

Resident Debt Class of 2015 All Schools Public Private Mean $166,750 (↑3%) $155,978 (↑4%) $183,066 (↑4%) Median $170,000 (↑5%) $160,000 (↑3%) $190,000 (↑6%) Doctor A Doctor B Doctor C Amount Borrowed $175,000 Length of Loan (years) 10 15 20 Interest Rate 6% Monthly Payment $1,943 $1,477 $1,254 Total paid over repayment period $233,160 $265,860 $376,200 Source: aamc.org/FIRST Medical Student Education: Debt, Costs, and Loan Repayment Fact Card October 2015

The Risk of disability: It can happen to you? Just over 1 in 4 of today's 20 year-olds will become disabled before they retire (Social Security Administration, Fact Sheet March 18, 2011) More than 1 in 5 workers will be disabled for 5 years or more during their working careers (Commissioner's Disability Insurance Tables A and C, assuming equal weights by gender and occupation class) Disability is the leading cause of personal bankruptcies. It causes nearly 50% of all mortgage foreclosures, compared to 2% caused by death (Health Affairs, The Policy Journal of Health Sphere, 2 February 2005)

University of NM GME Sponsored Disability Insurance – Ends June 30th You will have a one-time enrollment period of 30 days from the policy end date to convert your coverage. Fellowship/ Group Disability Insurance Benefits? Does Program offer Disability Insurance? Group or Individual If Group: Conversion to individual after completion True “Own Occupation” Definition

GME Resident Group Long Term Disability Insurance Plan 60% of Salary to a maximum benefit of $5,000 University paid benefits Pays benefits after 90 days of disability Benefits are taxable income Benefits offset with Social Security and Worker Compensation

AAMC Survey of Resident/Fellow 2015-16 Stipends Salary Pre-tax After-tax PGY1 $4,190 $2,514 $2,137 PGY2 $4,352 $2,611 $2,219 PGY3 $4,531 $2,719 $2,311 PGY4 $4,711 $2,827 $2,403 PGY5 $4,879 $2,938 $2,498 PGY6 $5,086 $3,052 $2,598 PGY7 $5,266 $3,159 $2,685 PGY8 $5,464 $3,278 $2,787 **Assumes 15% tax bracket Source: https://www.aamc.org/download/312786/data/2015stipendsurveyreportfinal.pdf

Group Disability Plans A Basic Level of Protection… Replaces up to 60% of salary May or May not be Own occupation Coverage can be modified or cancelled Costs are not guaranteed Benefit are offset with “other income” Benefit is taxable if paid by employer You don’t own it You may have a group disability plan through your employer. A group disability plan provides only a basic level of protection. A typical group plan replaces 60% of your salary – often this amount does not include bonuses or commissions you may receive. Benefits typically begin after six months of disability. Benefits and coverage requirements are determined for you. These can be changed, or the plan can be cancelled altogether. Costs are not guaranteed for more than a year or two, so they can rise to the point where your employer drops the plan. The group plan benefit is offset by benefits received from Social Security or other government programs. And if your employer pays for coverage under the plan, benefits are taxable, reducing their value. Perhaps most important: you don’t own the coverage. If you leave your employer - or your employment is terminated - you can’t take the coverage with you, though you may have a limited right to convert the coverage to an individual plan, at a much higher, non-guaranteed cost. Group insurance may be one of the pieces in what might be called your “income protection puzzle.” But there is a big piece missing.

Individual Disability Income Policy Advantages The benefits cannot be modified or cancelled The cost can be guaranteed Benefits are not offset by other sources Benefits are tax free Strong contract provisions and policy options to meet your needs You own the policy So what is an individual disability income policy? It is a contract that you yourself own and pay for. It pays you a benefit each month that you are unable to work, and you meet the policy’s definition of disability. It can cover all forms of earned income, including salary, bonuses, commissions, and even retirement contributions. With a non-cancellable guaranteed renewable policy benefits cannot be modified, and coverage cannot be cancelled, as long as you continue paying premiums. The cost of coverage is also guaranteed. Policy benefits are not offset by other income sources such as group insurance or government programs. Since you pay for the coverage, benefits are received tax free. A good individual policy offers a variety of contract provisions designed to protect your interests and offers flexible policy options to meet your specific needs, both now and in the future. For example, you want to be able to obtain more coverage as your income rises with no medical underwriting. An important advantage with an individual policy is that you own it. This means that you can take it with you as you move from one employer to another, or become self-employed.

Insurability 20-25% of you are NOT insurable!! Are you? Most Young Professionals Don’t Realize That Many “Minor” Medical Conditions Can Prevent Them from Obtaining an Individual Disability Income Policy

Common “Issues” that causes challenges Diabetes. Back or Neck Treatment by Doctors or Chiropractors. Doctors Appointments for Stress, Anxiety, or Depression. Active Military Duty.

Disability Insurance Definitions Non-Cancelable Guaranteed Renewable Own Occupation Future Insurance Option Cost of Living Adjustment (COLA) Limitations for Mental and Nervous & Substance Abuse Residual or Partial Disability

Disability Insurance Options Determine your insurability – apply for an individual disability insurance policy. Convert your GME Group Disability Plan during Residency and then to an Individual non-cancelable own-occupation plan upon completion of residency. Wait to determine your disability insurance needs.

Questions?

Life Insurance What is Life Insurance and should I purchase some ? Life insurance protects those you leave behind from the loss of your future income in the event of death

Do I have people that Depend on my Income ? Important Factors: Family Help Spousal Income Child care if spouse has to work Education savings for children Future housing costs Most Residents need 1-2 million

Term insurance You pay the premium and if you die your family gets the death benefit paid to them You buy a policy for a set number of years No Cash value

Permanent Life Insurance Types of Products include: Whole life, universal life and variable life Family receives benefits when you die Typically there is no expiration date Investment component Premium paid into policy builds a cash value

Which Should I Choose ? Term low cost, lot of coverage for a small premium If you die at a young age, family gets replacement of your future income Permanent cash value investment component offers tax free access to cash value Offers estate protection

How Much Should I Purchase ? Depends on your Family’s financial plan Is your family financially independent ? Finishing residency at age 30, 30 year term is a good start Multiple policies

Calculating Death Benefit Existing Debts Monthly Expenses College Tuition Funeral Costs Total Subtract Assets Spousal Income Rule 10-20 Times your annual income

Cost of Term Insurance One Million, 30 year level term Female age 30, $520- $575/year Male age 30, $670- $ 700/year

UNM GME Life Insurance $75,000 Term life and Accidental Death and Dismemberment Terminates when you complete your residency

Questions? Thank you