While many professionals can get by with the simple protections of auto, renters, and health coverage, that is not the case for physicians. Earning the high salary of a physician comes with its own set of drawbacks, one of which is the need to purchase and pay for many different types of insurance.
Not sure which policies you should have in place?
From malpractice to life to disability, here are the five types of insurance that every doctor needs.
Malpractice Insurance
Whether or not your state or employer requires you to carry liability coverage,, all physicians can benefit from the protection of malpractice insurance.
If you’re found guilty of a malpractice claim, your policy will cover the monetary damages, up to the policy’s liability limits, that you owe the patient. It will also cover the cost of defending yourself in court or in a pre-trial settlement.
It takes time and money to defend yourself in a malpractice suit. The right policy can save you from having to shell out tens of thousands of dollars in legal representation.
Depending on your location and specialty, malpractice insurance can cost anywhere between $10,000 and $200,000 per year. Because it’s so expensive, many physicians opt for claims-made coverage, which costs less than an occurrence-based policy. Just keep in mind that with a claims-made policy you’ll also also have to pay for nose coverage or tail insurance when the policy ends.
Checkout this article from Physicians Thrive to learn more about the pitfalls of malpractice tail insurance.
Disability Insurance
As a high income earner, would you be able to pay your bills or sustain your lifestyle if an injury or illness made it impossible for you to work and earn a salary?
For most physicians, the answer is no. That’s where disability insurance comes into play.
Disability insurance is actually income protection insurance, and it’s a way to protect your future unearned income in case an illness or injury renders you unable to work for a period of time (or for the rest of your life). All physicians need individual, long-term disability coverage and should get it early on in their career.
Most carriers allow you to buy coverage up to 60% of your current salary. As long as you pay your premiums with income you’ve already paid taxes on or had taxes withheld from, you can collect your benefits tax-free. If you purchase the maximum coverage amount, your benefits will be close to what you’re currently netting in your take-home pay.
When you purchase a disability policy, be sure to select the own-occupation definition of disability With this definition you will be eligible to collect benefits for any injury or illness that prevents you from doing your current job as a physician.
Life Insurance
If you have a spouse or dependents that rely on your income, you need life insurance.
But which type should you buy?
While most Americans opt for straightforward, low-cost term life policies, some high income earners opt for whole life coverage instead. Whole life insurance, also called permanent life, has a cash value and an investment component that can provide tax advantages.
Business Insurance
Physicians that own their own practice or are a partner in a group practice must have insurance for their business, and there are a variety of different policies you’ll want to buy.
Some of the most important types of policies that physician-owners need include:
- Business Liability Insurance: This pays for damages if someone gets injured on your property.
- Business Overhead Expense Insurance: If a disability renders you unable to work, this will pay for business expenses, such as rent, utilities, employee payroll, and the cost to hire a locum tenens physician to fill in while you’re not there.
- Workers Compensation Insurance: This pays benefits to employees if they get injured on the job.
If you live in a region that’s prone to earthquakes, hurricanes, wildfires, or other natural disasters, you may want to consider purchasing business interruption insurance as well. This covers your loss of income in cases where you cannot open your physical business during catastrophic events.
Home Insurance
Whether you have a mortgage or not, it’s essential that you protect your personal finances with a homeowners policy.
Home insurance is more than just a way to pay for medical costs if someone gets injured on your property. It includes multiple components and covers a variety of expenses, including:
- The cost to rebuild your home if it suffers irreparable damage.
- The cost to replace personal items lost in a fire or storm.
- The cost to temporarily relocate elsewhere if your home becomes uninhabitable for reasons beyond your control.
In Conclusion
No one enjoys paying for insurance policies that they hope they never have to use. Unfortunately, physicians have to pay for far more than most.
Malpractice, homeowners, life, and disability insurance are a must for every physician. And while policy premiums may impact your hard-earned salary, paying them offers peace of mind knowing that you’ll be able to maintain financial stability for yourself, for your business, and for the ones you love.
