4 Minute Read
One of the most frequent questions that we get asked by physicians is "How much coverage do I actually need?"
While there are some instances where people will sell you too little, and some people who will sell you too much, it’s not good to be in either situation. The last thing you want to do is waste your money on too much coverage, or leave yourself and your dependents without enough.
To put it simply, the younger you are the higher your need for disability insurance is because your liabilities are high and your assets not yet developed... Ideally the older you become, the lower your need for insurance is because your self insured with money in the bank.
When looking at calculating your ideal benefit amount, it is important to understand the purpose of disability insurance and what you are insuring. Disability insurance is designed to protect and replace your income in the event of a disability resulting in an inability to practice your occupation
Basically, your disability insurance policy will be replacing your income if you are no longer able to work and your benefit amount is the payment you will receive each month.
With that in mind, there are a few factors that go into determining your ideal benefit amount, your liabilities. These liabilities are:
These factors will help you to determine your need for coverage. So let’s break each of these factors down to properly understand their significance.
Income is the biggest determining factor when looking for your ideal benefit amount because your income is what your benefit will replace. Your insurable amount is usually 60-70 percent of your gross income!
It is also important to take your savings into your calculation. When looking at benefit amounts, you will also need to think about how long you want to receive the benefit, known as your benefit period. Your savings can help you to have a shorter benefit period and may influence the amount of benefit you will need. Ideally, you would be self-insured and not need disability insurance.
Normally, your debt would not go away just because you become disabled, which is why it is important to calculate the payments you will have on debt. This can be school loans, mortgages, car loans, etc.
Another really important factor that goes into deciding your benefit amount is your dependents. The point of your benefit is to ensure that you and your dependents can maintain your normal lifestyle.
When calculating your ideal benefit amount, make sure you are thinking about how your income impacts your dependents.
Now that you understand your liabilities and how those influence your coverage amount, let’s talk about the ideal benefit amount. It is important when buying any insurance that you are purchasing the right amount. For physicians early in their careers, protecting as much of your insurable amount is often wisest.
Disability insurance is a unique type of insurance because the true own-occupation companies (which provide the most comprehensive coverage) will help you to calculate your needs individually to ensure that you are covered for the proper amount.
After filling out a quote request, the insurance companies will look at different factors like your income, your coverage through your employers, and your liabilities to ensure that you are covered to the full amount!
After you receive your quotes from the 6 own-occupation companies you will then be able to purchase coverage for the full benefit amount or choose to decrease the benefit amount.
If you would like to look into your personalized quote options you can fill out our quote request here to get your most accurate quote amounts!