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Paying Too Much For Your Disability Insurance? 

 

        By Lawrence B. Keller, CLU, ChFC, CFP®
      
       Although actuarially women are better risks for life insurance compared to men, it is the opposite for disability insurance.  As a result, women may pay 50% to 75% more for their policies.
     
      However, many disability insurance carriers offer a “multi-life” discount when several physicians from the same hospital or department purchase individual policies at the same time and a letter of endorsement is submitted by the program director, GME department or human resource director.  While these programs can produce a savings for males, this strategy allows female physicians to save up to 60% on the cost of their disability insurance. 
 
     It is important to note that many teaching hospitals and medical associations have existing programs that you can access – without having to take the time and effort to establish them.  Therefore, you should make sure to ask the insurance agent or financial planner you are dealing with about the availability of these programs. 
 
     Look at the Savings Using a Multi-Life or Association Discount
 
       Multi-Life Discount
     
     Dr. Jones, a 30-year old female Orthopaedic Surgery Resident in New York , purchased her policy from a well-known insurance company.  Assuming a monthly benefit of $3,500, a 90-day waiting period, benefits payable to age 65, a Residual Disability Rider and a 3% Cost Of Living Adjustment Rider, her fixed annual premium would be $3,055.  However, that same policy with a unisex rate and “multi-life” discount would cost $2,056… an annual savings of $999 or approximately 33% off of the normal female rates.  If she kept her policy at the same level to age 65, she would save approximately $35,000.   If she invested her annual savings at 6% for the 35-year period, her savings would grow to be in excess of $118,000!
  
      Medical Association Discount
  
      Dr. Smith, a 30-year old female Anesthesiology Resident in Massachusetts , purchased her policy from another well-known insurance company.  Assuming a monthly benefit of $3,500, a 90-day waiting period, benefits payable to age 67, a Non-Ccancellable Rider, an “Own-Occupation” Rider, a Residual Disability Rider and a 3% Cost Of Living Adjustment Rider, her fixed annual premium would be $3,300.  However, that same policy with an association discount would cost $1,426… an annual savings of $1,874 or approximately 57% off of the normal female rates.  If she kept her policy at the same level to age 67, she would save approximately $69,000.   If she invested her annual savings at 6% for the 37-year period, her savings would grow to be in excess $252,000!
  
      Summary
  
     While a “multi-life” or medical association can produce a premium savings of 10-15% for male physicians, the savings available to female physicians simply cannot be overlooked.  While, unfortunately, not many disability insurance buyers are aware that these discounts exist, it is well-known to those that specialize in disability insurance.
  
     Lawrence B. Keller, CLU, ChFC, CFP®  can be reached at (516) 677-6211 or by email to Lkeller@physicianfinancialservices.com with comments or questions.