As healthcare professionals, doctors devote their lives to caring for patients’ well-being and ensuring their health. Amid the demanding nature of their work, it is crucial for doctors to prioritize their own financial security and protect their loved ones in case of unforeseen circumstances.

Life insurance serves as a vital tool in safeguarding their families’ futures and may help to ensure financial stability. Here are some of the key aspects that doctors should know about life insurance to make informed decisions and help secure their financial well-being.

What Is The Purpose Of Life Insurance?

Life insurance is a contract between the policyholder and an insurance company, where the policyholder pays regular premiums in exchange for a death benefit to be paid out to their beneficiaries upon their passing.

One of the primary purposes of life insurance is to provide financial protection and support for the policyholder’s dependents after their death. It may serve as a safety net to cover various expenses, such as mortgage payments, outstanding debts, children’s education, daily living costs and more.

Do I Need Life Insurance?

Doctors, like any other professionals, should evaluate their financial responsibilities and dependents when determining the need for life insurance. Factors to consider include:

• Dependents: If doctors have dependents, such as spouses, children, or aging parents who rely on their income, life insurance could be crucial to ensuring their financial security.
• Debts and liabilities: Doctors often carry significant student loan debts, mortgages, or other financial obligations. Life insurance can help cover these outstanding liabilities, preventing the burden from falling on surviving family members.
• Business considerations: Many doctors operate private practices or are part of medical partnerships. Life insurance may be needed to obtain approval for a business loan. It may also aid in funding buy-sell agreements, helping ensure the smooth transition of the practice or partnership in the event of a partner’s death.
• Legacy planning: Often doctors would like to designate a gift to charity, family members or loved ones. Life insurance is a tax efficient tool that may be used for estate planning purposes.

What If I Have Life Insurance Through My Employer?

Many employers may offer life insurance as a benefit, but these policies are built to benefit all employees in all positions and income levels. Doctors often have higher spending and income than the average employee, so it is often recommended that doctors purchase additional life insurance.

Additionally, many employer-sponsored insurance plans are not portable, so you cannot take the benefit with you if you leave the group or retire. An individual plan can provide greater coverage options and protection throughout any career change.

When Should I Get Life Insurance?

Typically, the earlier you obtain a life insurance policy, the lower your premium will be. As you get older and potentially experience changes in your health, it may become more difficult to obtain life insurance or premiums may increase. By starting your policy earlier, you can lock in low rates and potentially save money in the long term.

Types of Life Insurance Policies

Term Life Insurance: This policy provides coverage for a specified period, typically 10, 20, or 30 years. It offers a death benefit to beneficiaries if the insured passes away within the policy term. Term life insurance is generally more affordable initially, but once the term ends, the cost may become prohibitively expensive, or the coverage may terminate.

Permanent Life Insurance: Permanent policies, such as whole life or universal life insurance, offer lifelong coverage if contractual premiums are paid. These policies often include a cash value component that may grow over time, which can be utilized for various purposes, including paying college tuition, supplementing retirement income, or any other need/want.

For doctors who have taken advantage of their qualified retirement plans, permanent life insurance policies may act as another tax-advantaged savings strategy.

How Much Life Insurance Coverage Should I Get?

Determining the appropriate coverage amount is crucial when purchasing life insurance. Doctors should consider their income, outstanding debts, future expenses (such as children’s education or mortgage payments), and the financial needs of their beneficiaries. It is advisable to work with a financial advisor or insurance professional to assess the coverage amount accurately.

Need help determining which type and coverage amount you should choose for your life insurance policy? Our Build Your Team program can get you connected to a financial advisor, insurance professional, or specialist to help you choose what is right for you, completely for free!