1. Health Sciences Assurance Consulting, Inc.
University of New Mexico Graduate Medical Education Disability Insurance Presentation
Geri Everett, CLU
Health Sciences Assurance Consulting, Inc.

2. 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

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

4. 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 ?

5. 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:

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

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

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

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

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

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

12. 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

13. 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

14. 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

15. 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

16. 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)

17. 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

18. 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

19. 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:

20. 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.

21. 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.

22. 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

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

24. 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

25. 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.

26. Questions?

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

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

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

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

36. Questions?
Thank you