Do doctors need life insurance?
Not just doctors but all healthcare workers should be covered with a good life insurance policy. Insuring your life is a very good way to secure a life of financial stability for your loved ones in case of unforeseen circumstances. This will create peace of mind in knowing that your family members are covered with a life insurance policy.
Typically, a physician‘s life insurance needs start with having student loan debt. A term life policy such as a 20-year term or a permanent policy is a good way to cover any debts.
WealthCare Financial is here to help you understand the different life insurance options you have when making such a crucial decision.
What is life insurance?
Life insurance is a way of ensuring that people dear to you can receive appropriate benefits in terms of tax-free lump sum payments in the event of your demise and allow your family to maintain their standard of living.
Similar to disability insurance, you have to go through underwriting which typically includes a medical exam. Navigating the underwriting process in some cases can be a difficult time, but as long as you are in good health and have a clean medical history you shouldn’t have any issues obtaining any life insurance products. Keep in mind, that some insurance carriers streamline this process based on how much life insurance you apply for.
As a physician, whether a rheumatologist, surgeon, or dentist, life insurance can be a very good way to ensure their family is left with something tangible such as a benefit amount after they are long gone.
What is a death benefit?
Death benefit refers to the gains benefitted by loved ones after the demise of the insured in the form of a benefit amount. Although the contract and conditions surrounding each policy vary, it provides gains for those you care about the most.
When working with an insurance agent it is important to review your insurance needs to determine the proper amount of coverage or if there‘s a need for additional coverage.
Which type of life insurance is the best for a physician?
When considering life insurance, most physicians, doctors, and dentists decide between two types of policies: term life insurance and permanent life insurance. As for which one is best, it depends on your specific situation, dependents, and net worth.
The basic type of life insurance available is Term & Permanent Life insurance. Although these types of life insurance vary based on the benefits they offer, they have a single thing in common, which is to provide a Death Benefit.
WealthCare guides you through the selection of the best life insurance for you.
Types of life insurance
- Term life insurance
- Permanent life insurance
- Whole life insurance
- Index universal life insurance
- Guaranteed universal life insurance
- Variable universal life insurance
How do different types of life insurance work?
Term Life Insurance
Let’s start by explaining what the word “Term” in this context means. “Term” basically refers to the specific period for which the insurance is covered. The term life insurance usually runs for a period of 10, 20, and 30 years.
Level term insurance expires after a specified period. During this timeframe, the premiums are typically fixed and will not increase. However, if the person is still alive after such a period, you can continue with the insurance policy but at a higher premium.
When people have financial obligations such as young children, mortgages, etc. It is the most popular because it is relatively cheap but can be costly in the long run.
Permanent Life Insurance
There are many different types of permanent life insurance, but these are the most common in the industry:
- Whole Life
- Indexed Universal Life
- Guaranteed Universal Life
- Variable Universal Life.
Many physicians look at some of these permanent life insurance coverages as an additional avenue to invest dollars on a tax advantaged basis.
Whole Life Insurance
This type of life insurance does not expire and provides a death benefit for life. One of the primary benefits of Whole Life is the ability to have cash value within your life insurance.
The insurance also offers annual dividend payments which can act similarly to an investment account but is uncorrelated to the returns of the market. Whole Life Insurance on average will outperform the returns on other fixed assets like CDs, money markets, and U.S. Treasuries.
Whole life policies have a cash value that can be used on a tax-free basis before and during retirement. Many individuals borrow money for new home purchases, home modifications, business opportunities, and even a vacation.
Indexed Universal Life Insurance
Similarly, to other permanent types of life insurance, this provides a death benefit for life. Indexed Universal Life offers a cash value component that is based on market returns. This life insurance can be invested in one of the multiple indexes such as the S&P 500, Russell 2000, and a blend of other indexes.
Individuals gravitate to this type of permanent life insurance because of the cash value protection during negative market returns. During down market years the account stays flat with no market loss for the policy year. Many individuals borrow money for new home purchases, home modifications, business opportunities, and even a vacation.
Guaranteed Universal Life Insurance
Think of this insurance as permanent term insurance. You can choose to be covered from ages 85 to 120. This type of insurance is the least expensive compared to the other permanent insurances. The account is strictly for the death benefit and has no cash value. Many individuals primarily use this insurance for estate planning.
Variable Universal Life Insurance
Usually invested in mutual funds, this permanent type of coverage participates in the ups and downs of the market. If not structured properly the insurance runs the risk of lapsing.
A policy lapse occurs when the life insurance is no longer active, meaning the insurance company is no longer legally obligated to pay the beneficiaries at the time of death.
Get the Advantage of Life Insurance
Security is assured for everyone with a life insurance policy with a credible life insurance company referred by WealthCare. It can also serve as a retirement supplement if properly structured.
