Protecting Your Greatest Asset
One in three dentists nationally will become disabled this year. What would happen to your future if you became disabled? Most people purchase insurance to protect their home, auto, and business; however, they neglect to protect their greatest asset in their quest to become financially independent: their future income.
Disability and life insurance can provide protection against tragedy by allowing one to transfer the risk of a major loss from the individual to the insurance company for a predetermined premium. The need to transfer this risk is crucial for a dentist, especially in the beginning of their career. Many dentists start out of school with a great deal of debt ($265,000 on average in student loans alone). Add to that a home mortgage and debt incurred when purchasing a practice, and a young dentist can quickly reach a debt load of $700,000 – $1,000,000.
Even though this level of debt can seem intimidating, it is absolutely manageable. A disciplined dentist can discharge their debts and begin building a retirement nest-egg simultaneously. However, doing this all depends on the dentist’s ability to produce dentistry. It is for this reason that it is so important for a dentist to protect themselves from a disability. If something were to happen to the dentist where they could no longer work, they would leave a great deal of debt to be serviced, and financial goals out of reach.
The insurance industry understands a dentist’s need to replace income in the event of death or disability; therefore, they will typically target a dentist while in dental school or residency. Even though the likelihood of a disability is far greater than that of death during a dentist’s career, it is not uncommon for a young dentist to have a small permanent life insurance policy but no disability insurance. One reason for this is because of the cost. I encourage young dentists and dental students to ask themselves the following questions:
- How much money do I need on a monthly basis to pay all bills and satisfy other financial obligations?
- What would happen to me and my practice if I became disabled longer than 12 months?
- Once I return to work full-time in dentistry, how long could I suffer a loss of income?
When setting up your insurance policies to cover this potential loss of income, it is best to first lock into an individual disability policy as early as possible in your career. A non-cancelable/guaranteed renewable policy that guarantees your future premiums, as well as protecting your occupational duties as a dentist, can be purchased. Another important definition to look for in your individual disability policy is a return to work provision. This feature of the policy will cover a loss of income if you return to work full-time; most policies stop paying you a claim at this point even if you still have income loss. Keep in mind that these are just a few of the definitions to look for. It is best to discuss all the definitions & available policy features with an independent insurance agent that specializes in disability insurance.
Protecting Yourself from an Untimely Death
If you are married and/or have a family it is highly recommended to purchase a term life policy. This type of life insurance allows you to purchase a higher amount of death benefit for a much lower premium than permanent life insurance, such as variable life & universal life. Life insurance is purchased to cover items such as the loss of income you bring into the household, any debt outstanding, and other financial obligations such as funding children’s education.
If the proper steps are taken in financial planning you will reach the point of financial independence and the need for life and/or disability insurance will eventually lower or become non-existent. As an independent insurance agent, I know my clients are always better off to keep insurance separate from their investments. This unique insurance planning philosophy will allow you to maximize your overall insurance coverage while minimizing the costs.
-Brian Wetzel is the founder and president of Brian L. Wetzel Insurance Agency, based in Columbus, Ohio. Mr. Wetzel has provided disability insurance coverage and other financial products to physicians, dentists, attorneys and other professionals across the United States for more than ten years. If you have any questions related to your insurance needs you can contact Mr. Wetzel by phone at 866-494-1275 or via email at: brian@brianwetzel.com