For seasoned doctors, it’s important to be vigilant and intentional about the coverage you need and cancel the policies you don’t. Saving on premiums can boost your investments and cash flow and open the doors to other opportunities. Now that doesn’t mean you should ditch all of your policies to the curb, but there are a few that may be outdated.
Can You Ever Ditch Disability Coverage?
Like with most areas of financial planning, whether or not you need disability coverage is unique to you and your situation. Usually, somewhere around your mid-50s, physicians should start taking a look at the diminishing return on investment for disability insurance policies and decide whether the cost is worth it. Disability insurance is expensive and it may make sense to cancel your policy as you approach retirement.
Know Your Health Needs
First things first, you need to assess your health needs. Do you have any health conditions that may impair your ability to work like vision or hearing loss or respiratory illnesses? If you’re in relatively good health and nearing retirement, it may make sense for you to cancel or at least reduce your policy.
Strive for Financial Independence
Possibly the most important factor here, though, is your financial independence. Being financially independent means that you don’t have to rely on income to pay your bills and if you don’t need that income to pay bills, then you don’t need disability insurance! Simply put, if you have reached the point where you could become disabled from medicine but could adjust your retirement plan to retire tomorrow and live a perfectly happy and comfortable lifestyle, you may be in the position to cancel or significantly reduce your policy. By doing so, you can redirect the premium dollars to fund other goals such as education accounts for grandchildren or boosting your 401k.
However, if you need your earned income to stay on track with your retirement plan, then disability insurance is still really important for your financial goals.
Signs You No Longer Need Your Life Insurance Policy
When it comes to life insurance, assess your policy through the following lenses:
- Dependents and financial obligations
- Estate Plan
- Long-term care
Do other people rely on your income?
The purpose of life insurance is to protect your family or loved ones that financially depend on your income if you die. If you no longer have dependents that rely on your income, you may be able to consider canceling or reducing your policy. For example, if your kids aren’t living with you, their college is fully funded, you have no existing debts or mortgages that need to be paid, and existing investments could support your surviving spouse, you may not need your life insurance policy.
However, any outstanding financial obligations such as co-signing a loan or future debts, signal a need to keep your policy active. As your policy nears its expiration, assess where you’re at with those financial burdens. If your death wouldn’t leave massive financial obligations to your family or loved ones, it might be time to let go of your policy and put those premium dollars to work elsewhere.
Is your life insurance policy part of your estate plan?
Life insurance can also be a major player in your estate plan especially if you have something like an irrevocable living trust for your beneficiaries or if you expect to leave behind a tax burden the life insurance is set to cover. However, if your life insurance policy isn’t part of your estate plan, you may not need it anymore.
What about long-term care insurance and retirement income?
If you’re interested in long-term care insurance, that can be done through a rider on a life policy. Long-term care is incredibly expensive, so you must plan and prepare now. A hybrid of a long-term care and life insurance policy could be the right solution for you — it all depends on your values, financial position, and what’s most important to you.
It’s also important to note that the cash value life insurance has purposes beyond just death benefit. There are many different areas that you need to consider before you decide to cancel your policy or not. Perhaps the cash value could be used as tax-advantaged supplemental retirement income!
Whether or not you need to cancel or not renew your life insurance policy is completely dependent on you and your goals. If you’ve gotten to the point where you feel like you have accumulated enough assets and savings for the people you leave behind if you die, then we would encourage a conversation with your advisor about whether you still need your policy.
Policies You Should Always Hang Onto
It may seem obvious, but as a physician, you should always hang onto your 5 main policies:
- Personal liability or umbrella
- Health insurance
As you know, life tends to throw unexpected curve balls and these policies help keep you safe throughout your entire career. These aren’t the areas where you want to skimp out or save a buck!
Conduct an Insurance Audit
Premiums can eat up a big portion of your paycheck. You want to be strategic about your coverage so you are both properly protected and effectively using your resources at the same time — this is where an audit of your insurance comes in handy.
An insurance audit is essentially a deep dive into all of your insurance policies. This process allows you to take a step back and re-establish your needs and goals and adjust your coverages if need be. Maybe you’ll be able to reduce coverage and redirect those premium payments to retirement savings or other investments. You won’t know until you break it all down!
Get the answers you need
Insurance is not a one-size-fits-all deal — the amount of coverage you do or don’t need is completely unique to your situation and your goals. It can be tricky doing it on your own! As independent advisors, you can feel confident that our team at Vestia will design and build a plan that best fits your needs.
Investment advisory services offered through Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, and Vestia Advisors, LLC. Securities offered through Ausdal Financial Partners, Inc., 5187 Utica Ridge Rd, Davenport, IA. 52807 (563)326-2064. Member FINRA/SIPC. Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, Vestia Advisors, LLC, and Ausdal Financial Partners, Inc. are independently owned and operated.
This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor. This information is not an offer or a solicitation to buy or sell securities. The information contained may have been compiled from third-party sources and is believed to be reliable.