While most physicians in our communities know that they should get life insurance, the question of when comes up often. Everyone has different risk tolerances, so physicians often disagree on when exactly you should get life insurance. Below, we’ll go over the various considerations that may impact your decision about when the right time is for you.
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When do you need life insurance?
The conventional answer to this question is that you need life insurance once there is someone that depends on your income. While many may interpret this to mean when you have children, that isn’t necessarily the only time you should buy life insurance.
The other question physicians should ask themselves is who makes decisions based on your income, or if someone else’s life would be affected if your income is no longer there. This could mean a spouse who you want to make sure has the ability to make the decisions that are right for them without having to consider how much they have to work to live the life you want for them. This can also mean parents, siblings, or other loved ones who you support or intend to support in some way in the future, both financially or otherwise. It could also be a grandchild that you want to support or help with expenses for.
What other factors affect when you should buy life insurance?
As with most types of insurance, the older that you get, the more expensive life insurance becomes. However, most physicians are in a financial position to be able to easily afford life insurance payments, so the premiums going up by a little bit each year is usually not the reason to secure it earlier than you need.
Instead, the thing most physicians should consider is that the older that you get, the higher the likelihood of being denied for life insurance based on a medical issue that has arisen in the meantime, or have premiums go up very significantly because of those conditions. Issues like gestational diabetes or preeclampsia during pregnancy are a common example for women. Similarly, hypertension and obstructive sleep apnea can start being detected relatively early and raise premiums. More significant medical issues like cancer (no matter how treatable) or diabetes can cause you to be denied outright.
If you have a family history of a disease that tends to show up by a certain age, you likely want to secure your life insurance policy before you have had any evaluation or treatment for it, as it could preclude your ability to secure insurance.
You also don’t want to get life insurance so early that most of the years of the term it is written for will be over before you even have dependents. Most policies range from 10-30 years, so getting life insurance at 20 if you don’t have dependents means the policy will be done by 50, a point at which you may not yet have achieved financial independence or finished paying for college for your kids yet and still need another policy. Many other physicians will elect to buy their life insurance when they buy their disability insurance to check that off their basic personal finance checklist for physicians. If you know you want to get married and have children in the future, it may be better to buy while you’re on the younger side even if that part of your life hasn’t yet started just to make sure you lock in competitive rates and ensure nothing in your medical history derails your ability to get life insurance in the future.
What are some unique situations where you may want to purchase more life insurance?
There are some situations where it may make sense to consider buying more life insurance that has nothing to do with a new dependent. These could include:
Making a big financial commitment like a mortgage or a practice buy-in which will come with debt
Student loans that can’t be discharged upon death
Other unsecured debt like credit card debt or personal loans that need to be paid back from your estate before your loved ones have access
What if you already have coverage through work? Should you get more?
Many employers offer some sort of life insurance as an employee benefit. We often see questions within our online physician community asking if this coverage is enough or if doctors should get additional life insurance coverage beyond their employer plan.
Most of the time, you will need your own life insurance plan. If you change jobs, your employer plan won’t carry with you. And as we noted above, if you have a medical issue that occurs after the start of coverage, you may be ineligible to get coverage on your own later.
It’s also worth checking pricing with our life insurance brokers for doctors, as you can often get a higher benefit for the same cost versus what you’re paying through your employer. An employer's insurance plan will base their underwriting on the mean health and age of the average employee, so if you're young and healthy, this will almost definitely be less benefit than you'd qualify for if spending the same amount of your own policy.
You may also find that, depending on how much life insurance you need, your employer plan won’t provide enough coverage.
What kind of life insurance should physicians get?
There are several types of permanent life insurance, including whole life policies which frequently come up as ways to both get insurance and invest.
If you find yourself in a situation where you need to get a life insurance policy in place but are ineligible due to a health issue, one of these permanent life insurance solutions might be a good fit for you. In general, however, we almost always recommend a term life insurance policy.
Learn more about term life versus permanent life coverage.
Do you need to buy all of your life insurance coverage at once?
Absolutely not. Many people choose to stack insurance policies or ladder life insurance policies as their needs increase (or conversely, drop them as their needs decrease). For example, you may elect to get a policy when you get married and then add policies for each child that you have.
As you become more financially secure, you may think about dropping the policies one by one as well. It’s important to accurately calculate how much life insurance you need at each stage of your life and adjust accordingly.
Conclusion
Ultimately, you have to balance your risk tolerance with how early you decide to get life insurance. We do recommend that you get it as soon as a loved one is dependent on your income to be able to maintain their lifestyle. Before that, weigh the balances of age and medical status with how early you want to secure your policy. When you decide it’s time to buy, we have resources to help.
Resources for buying life insurance
Explore our related life insurance resources for doctors: