What Is Your Most Significant Asset That Needs To Be Protected?

Most doctors I speak to believe that their most significant assets that require protection are their homes followed by their automobiles. Although these are two important assets that need to be protected, there is an even bigger asset that needs protection: Your ability to get up each and every day and to go to work to produce an income. I refer to this as your “Human Capital Net Worth.”

Disability Insurance

Insurance is an unfortunate but necessary evil, as it can play a major role in creating and protecting your wealth plan. Early in your career, the most important coverage you can obtain is disability insurance. If you become disabled, you will most likely experience a significant decline in your income at the same time that you experience a noticeable increase in your lifestyle expenses. It is important to secure the right disability coverage and to be aware that there are different types with certain kinds of plans not giving you the necessary or desired coverage.

What Is A Rider?
When designing a disability plan for a doctor you need to consider a number of options, sometimes referred to as riders, in the plan.

Rider: Own Occupation

One of the key features in any disability plan that I develop has the “Own Occupation” rider in the contract. This means that the insurance company cannot force you to do any other job other than the job you were doing the day before you became disabled. You will receive the disability benefits if your disability prevents you from performing the same occupation you were engaged in prior to the development of the disability. If you do not have this rider, then the definition becomes “Any Occupation,” at which point you will only receive the disability benefits if you are not capable of performing any occupation that you are capable of doing.

m2Rider: Future Income Option (FIO)

Future Income Option (FIO) is another key feature that you should consider in your disability plan. As your income goes up over time, you will be allowed to increase your disability coverage without any medical requirements.

Rider: Cost Of Living Allowance (COLA)

This is additional protection in the case of a lengthy period of disability like 5, 10, or 20 years. While you are disabled, the COLA benefit protects you against inflation by ensuring that your disability benefit is adjusted annually by the change in the consumer price index.

Rider: Refund Of Premiums

Recent changes to the definitions only allow a refund of 50% of your premiums every eight years. In other words, you pay for eight years and only get four years of premiums back. Before considering this rider, I would recommend that you allow your financial planner to run the math to see if it makes business sense to include this rider in your plan.

Ownership Of Disability Insurance: Personal Or Corporate?

It is always recommended that you pay for your disability insurance policy with personal dollars. If you pay with personal dollars and you have to go on a disability claim, all of the monetary benefits received are considered “tax-free” money.
Usually the disability policy payment should be sufficient for you to maintain your current standard of living. However, in some cases you may want to bridge the gap between what your disability plan would pay out as a monthly income stream and any additional costs related to the disability. You can bridge this gap with a critical illness insurance policy.

Critical Illness Insurance

m3Critical illness insurance is a type of insurance policy that pays out a lump sum once you have been diagnosed with one of the covered conditions and you have survived for at least 30 days since the diagnosis. Over the past five years, major insurance carriers have worked together to standardize the definitions of the critical illnesses covered in the plan, and they cover a variety of major illnesses; the list covers a total of at least 25 critical illnesses. Additionally, certain carriers have included a long-term care feature in their plans called a “Loss of Independent Existence” rider. This rider means that if you cannot perform two out of the six daily activities of living (bathing, dressing, toileting, bladder and bowel continence, transferring, and eating) or have a cognitive impairment, you will also receive a lump sum. Once you receive this payment, there are usually no restrictions on how the money can be spent.

Rider: Return Of Premium On Surrender

I highly recommend the “Return Of Premium On Surrender” rider for critical illness insurance. Essentially, if you are diagnosed with a covered critical illness and live 30 days, you will receive a lump sum of money. If, however, you are not diagnosed with a critical illness, after a required length of time, usually 15+ years, you can request a return of 100% of the premiums that you paid.

Rider: Return Of Premium On Death

If you want to guarantee that you will get back 100% of your premiums, you can also add the “Return Of Premium On Death” rider. This ensures that either you will have a covered critical illness, live 30 days, and receive the one-time lump sum of money, or you will pass away for another reason, and 100% of your premiums will go back to your estate.

Ownership Of Critical Illness Insurance: Personal Or Corporate?

When it comes to making the premium payments on your critical illness insurance, you have a choice on whether or not to pay the premiums personally or to pay the premiums inside your Medicine Professional Corporation.
In conclusion, critical illness insurance is designed to pay you a lump sum immediately so that you can deal with the expenses of your illness straight away, whereas disability insurance is designed to pay you a regular income stream from now until age 65.


What's The Next Steps- (1)
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