Life Insurance isn’t nearly as complicated as most insurance agents make it out to be. Simple fact of life - we’re all going to die - question is, will you own insurance when it happens, and will you own enough to support your family when you’re gone?
Worry less about “what type” and more about “how much.” Insurance can help replace your income and future income in the event of you not being around anymore. The “what type” question can be answered simply by determining if you want to “rent” the insurance or “buy” it.
“I have delivered one too many death claims during my 30 yrs. of working with physicians … never once did the family ever ask what type of life insurance my client had … just thankful that they had it.” - Shaun McDuffee, Founder and CEO
The answer is really going to depend on the stage of your career and your specific situation - just the answer you wanna hear right?! it depends….
For those that are in the earlier part of their career with the majority of your earning years in front of you, we have an easy “rule of thumb.” For every $1 million of life insurance coverage you have, it will replace about $50,000/yr. of income to your family. As a resident or fellow in training, you automatically financially qualify for $3 million of coverage based purely on the fact that you are a physician in training. We realize that it’s more than our “rule of thumb” based on how much you make as a resident, but your income won’t be at that level for long. Early in your career, we are looking to protect as much of your income as we can at the cheapest cost. With a majority of your earning years in front of you and others likely dependent on your income, having a solid risk management strategy in place is the foundation for a stable financial future.
For those that are later in your career, we start to look a little more at “what type” in conjunction with “how much.” There are a variety of different life insurance products out there that will allow us to help maximize retirement income and provide cash during a long term care event. Most think that life insurance only benefits those when you pass when in reality there are several different “living benefits.” Talk with your Twin Oak specialist to see if something in our “toolbox” might be a fit for your situation.
Types of Life
There are two main types of life insurance, term and permanent.
Think in terms of renting a house. With term life insurance, you pay your monthly premium for the duration of the term length (10, 15, 20, 30 yrs). If you unexpectedly pass away during this time, your family will receive the death benefit. This is simplest form of life insurance.
Permanent life insurance
Using the same analogy, this would be like buying the house. Since you own the policy, it will stay with you your entire life (or as long as you pay for it). Instead of paying “rent”, similar to owning a house, you will build “equity” within the permanent life insurance policy in the form of cash value.
Term Life Insurance
Term insurance is temporary and is typically the most cost-effective way to insure large amounts of shorter-term risk.
When a majority of your earning years are in front of you, the kids are young and more is dependent of your income - your life insurance need is largest. At this stage of your career, we recommend getting sufficient coverage to make sure that your family is covered in the event of you not being around anymore.
We typically include a convertible option on a term life insurance policy - meaning you have the ability to convert your coverage to permanent life insurance at any point during the term. This becomes especially important if you have a change of health during the term. Once the term ends, you may not qualify (health wise) for more coverage. With the convertible option, there are no medical questions asked when a policy is converted. This essentially locks your current health status.
Permanent Life Insurance
Given the name, permanent life insurance is something that you own and that will protect you until you pass away and as long as premiums continue to be paid. Permanent policies are more expensive because of the longer term protection, but there are several aspects of the policy that provide “living benefits” - benefits that you can use before you pass away.
For example, a permanent life insurance is a powerful tool used to help maximize your retirement income. Connect with a risk management specialist as we are more than happy to describe what we mean by that.
We will also typically set up our permanent life insurance policies with a chronic illness benefit. Meaning once you experience a long-term care event, you get access to a portion of the death benefit to help pay for expenses (sometimes up to $20,000/month). As traditional long-term care insurance gets more expensive, this is a cost effective way to cover both risks.
Speak to a twin oak risk management specialist if you would like to learn more about permanent life insurance!
Based on current federal tax law, there is uncertainty as to whether some or all benefit payments from life insurance Chronic Illness Agreements are taxed when received. We cannot assure you that Chronic Illness Agreement benefit payments will be treated as tax-free death benefits. Please consult a tax advisor before purchasing a Chronic Illness Agreement.
With Life Insurance, one of the main drivers of cost is your health rating. Depending on which carrier you choose, we would then apply with that carrier to get a health rating.
You will have to complete a telephone interview (20-30 min.) and labs. For the labs, we can schedule someone to come to your house or work - whenever is easiest for you. No cost to you and still no obligation on your end.
Once we have our health rating, we can look at a variety of different options. This allows us to show you exact pricing and select coverage specifically tailored to your needs!
Connect with a Twin Oak specialist and we can either include this in your free disability comparison summary or just let us know that you are only interested in Life.