In this episode, Billy Gwaltney discusses the implications of canceling a disability insurance policy, emphasizing that while it is possible to cancel, it is not advisable. He highlights the importance of maintaining such coverage for financial security in case of disability, arguing that the money saved from canceling is often not invested wisely and may not provide the same level of protection as the insurance policy itself.

Takeaways: 

  • You can cancel your policy, but it’s not advisable.
  • Savings from cancellation often sit idle in checking accounts.
  • Investing last savings is not common for most people.
  • Disability coverage is crucial for financial protection.
  • Insurance companies can profit from your premiums, but so can you.
  • Having a private disability policy is a smart decision.
  • If disabled, you’ll appreciate having the coverage.
  • The money saved from cancellation does little for you.
  • Insurance provides peace of mind during uncertain times.
  • Prioritize protecting yourself with the right insurance.

Transcript:

00;00;01;23 – 00;00;18;29

Welcome to the Cover Your Assets podcast, a show for the physician who understands the importance of protecting everything you’ve worked so hard to achieve. If you’re ready to find the peace of mind that only financial security can bring. Let’s get started. Here’s your host, Billy Gwaltney.

00;00;19;01 – 00;00;47;19

Welcome to today’s episode of the Cover Your Assets podcast. I’m your host, Billy Gwaltney, and it’s good to be with you, as always. Today’s question is one that came up, from a client not long ago, which is, is it okay to cancel my private specialty disability policy? That’s an interesting question. They’ve been an attending for a while, so there are, probably innumerable a number of things that were, coming across their mind to trigger that question.

00;00;47;19 – 00;01;07;29

And so we had a discussion and just want to, kind of go through some of that with you here today. So is it okay to cancel your disability policy? Well, first, walking away is certainly an option. This is not a mortgage. Your private specialty policy, as long as you pay the premium. The insurance carrier cannot walk away.

00;01;08;00 – 00;01;29;21

They can’t cancel it. They can’t change anything. They can’t raise your rate. You, however, as a policy holder, can walk away. By simply not paying the premium. There’s no penalty for that. It doesn’t hit your credit. There’s no noth nothing there. But it is a once in forever kind of decision. So some things you want to consider before you do it.

00;01;29;21 – 00;01;49;10

Because once you do it, you can’t undo it. You would have to start over if you wanted coverage later with new medical underwriting, the training discounts wouldn’t be there if you’re no longer a trainee. And it can just be more complicated than you. Than you might think. So, few things to consider that I shared with my client.

00;01;49;10 – 00;02;12;23

And, I want to share with you. I work with thousands of physicians across the country that are, each of our client has their own unique situation that they’re thinking about and kind of, navigating life, from a financial standpoint and family standpoint. And so, walking away or canceling a disability policy, does have some pitfalls to it.

00;02;12;26 – 00;02;38;14

One the first one is that most people’s health does not improve as they get older, as we age. Maybe our health stays the same, at least for a while. But very often it’s going to decline over time. We just get weaker, more brittle. We break easier. We have illnesses. You as a physician, you know that. And so, it’s safe to say that our health doesn’t usually improve as we get older.

00;02;38;16 – 00;02;57;06

Okay, so the chances of a disability for someone in their 50s is essentially the same as someone in their 30s or 40s. So just because you’re not running as much or working out as as aggressively or, or may be traveling as much or whatever the scenario might be as you get older thinking that you don’t need this stuff.

00;02;57;08 – 00;03;22;27

Statistically, that doesn’t bear out. The second thing to consider is that self-insured, which is what you’re doing if you don’t have private insurance, you’re just going to use your own assets from yourself to cover any expenses. They call that self-insurance. From a financial standpoint, it’s absolutely brutal during a time of a claim. It, there are several reasons why.

00;03;23;00 – 00;03;47;25

One is expenses. Go up during a claim, to, most people’s assets as they build assets over the course of their, their career. Not all, but a significant percentage of those assets are in retirement accounts that are tax advantaged, which means they have penalties if you take them out too soon. There are taxes when you take them out.

00;03;47;28 – 00;04;08;13

And if you sell at a time when the market is down or, or fluctuating, you can end up walking away with less money than had you not had to sell. Also real estate and other assets, if you’re liquidating those assets, there can be penalties and, and anything we do in a hurry can lead to some unwise decisions.

00;04;08;16 – 00;04;33;13

And so you’re talking about taking assets that oftentimes are taxed oftentimes or penalized depending on the market conditions, can be sold for a loss or at a lower value than otherwise they would have been. And then using that money to pay expenses that are increasing, compared to insurance where it is specifically designed to cover those expenses.

00;04;33;16 – 00;05;05;14

The benefits are typically received without tax from if you’re talking about private specialty disability coverage, if the premium is paid with after tax funds, then the benefit is received without tax. And it’s also systematic. It shows up on the same day every month. You know, the amount, you can plan on it, you can budget around it and so, if you’ve done the planning properly, then hopefully you have enough insurance to still fund retirement to take care of medical expenses, hopefully.

00;05;05;16 – 00;05;25;29

And to, to allow you to not have to tap into those assets that you spent a lot of time building up. And not have to be penalized and accept more money or accept less money than you would have otherwise been able to get had you been able to ride it out, to use it when you had planned on using it originally?

00;05;26;02 – 00;05;51;14

The next thing is that, when it comes to your asset, when we think about assets, your most important asset, your most valuable asset, is not your retirement account. It’s not your house. It’s not your real estate portfolio. It is you. It is your ability as, surgeon, radiologist, pediatrician, whatever your specialty is, your ability to to get out of bed and go perform at a high level.

00;05;51;16 – 00;06;20;27

The specialty that your employer’s paying you a good wage to do. And your family has gotten used to getting a paycheck from this asset. From a financial standpoint, every two weeks or every twice a month or monthly, however frequently you get paid. And that is your most important asset if you do, an analysis, of determining the value of that asset over the entirety of your career, it’s a big number.

00;06;20;29 – 00;06;43;07

So ensuring your most valuable asset is just smart business. I mean, if you talk to Warren Buffett, if you talk to, anybody. This this made a lot of money, in business or those kind of things. If you say, do you insure your most valuable assets? And they would say, absolutely. The smart ones would. Warren Buffett liked it so much that he bought an insurance company, Berkshire.

00;06;43;09 – 00;07;05;27

Because he believes that much in insurance. He doesn’t need the insurance from a financial standpoint, necessarily, but it’s just smart to take pennies, to pay dollars to cover expenses versus taking a dollar or more to to try to pay that dollar when you’re self insuring. So, there are a number of things to factor into this.

00;07;05;29 – 00;07;36;25

Another thing that a lot of people will tend to assume if they’re thinking about getting rid of their insurance, is that they just basically don’t think they’re ever going to need it. And so why waste the money? And that hopefully it is wasted money. Hopefully you don’t need it. But if you do, all of our clients that are on claim were healthy enough, or at least healthy ish, healthy enough to get the insurance when they got it, okay, they never thought they would need it, but they ended up using it.

00;07;36;28 – 00;08;00;13

Over 90% of claims are illness is not injury, so it’s usually not the catastrophic car accident that does it. Although those things certainly happen statistically over 90% or illnesses, the biggest percentage are musculoskeletal conditions. So you hurt your back, you can’t get out of bed, you can do telemedicine, but you can’t do your day to day duties that you were doing before you hurt your back.

00;08;00;16 – 00;08;20;17

So are you now disabled? If you’ve done your disability insurance correctly and you have the true specialty coverage with one of the top four carriers, then then you are going to get paid. If your doctor says you can’t do your specialty because of that injury or illness, and then you have the freedom to go earn money doing something different.

00;08;20;20 – 00;08;43;12

It is very naive, at best. Putting it mildly, to assume that if you can’t do surgery, you could just do clinic and still make as much money. Or if you can’t do interventional cardiology, you could just slot in and be a general cardiologist because the only disability is going to occur to you is you’re going to chop off your hand, that statistically, that’s not what happens.

00;08;43;15 – 00;09;08;01

We do have clients that earn money doing other things while their own claim, because they have the freedom to do it and it doesn’t impact their disability benefit, but none of them ever did it right away. When a disability occurs, it is a gut punch. It takes time, months, sometimes years before someone can maneuver enough to be able to go do something else and earn income.

00;09;08;03 – 00;09;33;13

It is it is incredibly valuable to have a disability policy that gives you the freedom to go do that. And doesn’t require you to do that. But if your expectation is that if a disability occurs, you can just go do something else in medicine, again, that’s naive at best. Some might call it foolish. It’s just not, an advisable approach when it comes to the security of your family.

00;09;33;13 – 00;09;54;16

And when it comes to just smart business, which is insuring your most important asset. Again, we have clients on claim. The good news is that every single one of our clients on claim has gotten paid. We’ve never had, you know, we don’t have any clients who have had to hire an attorney. We had none that we’re in some kind of arbitration.

00;09;54;16 – 00;10;16;29

They all get paid. The majority of them never get paid from their employer policy. So again, another fallacy can be, well, I don’t need my private policy because I’m now at an employer that has a policy. The chances of getting paid from that are, are are not nearly as high as from your private policy. I can’t overstate that.

00;10;16;29 – 00;10;40;00

I’ve done a dozen podcast on the gaps in employer group long term disability policies. They just don’t pay out, in the majority of claims. And if they do pay out, they’re going to fight you tooth and nail. You will likely need to lawyer up. You will likely need to stay on top of that because they’re going to they’re going to require you to jump through hoop after hoop after hoop.

00;10;40;03 – 00;11;03;27

We’ve seen it up close. And so counting on an employer policy to, to help you if you’re disabled and be the only thing you rely on. Again, it’s just not it is it’s not smart business. Private specialty coverage. If you’re planning a doesn’t work out, which is you have a long, successful career, hopefully that is what happens.

00;11;03;29 – 00;11;33;11

But if that doesn’t work out, your plan B needs to be really strong. And the strongest plan B is a well designed private specialty disability policy. Then the assets you’ve accumulated can continue to be utilized for what they’re originally intended for, which is retirement. Other things that you want to do. So the only complaint we’ve ever gotten from a client, this on claim is they should have had the maximum because their expenses did go up.

00;11;33;13 – 00;11;54;23

Expenses do go up. We have had, one client in particular who didn’t have the maximum. She was disabled for two years, had, was healthy as a healthy as, as could be, never bothered to increase her coverage. Got, cancer, significant cancer. She bounced back from it because she was very healthy. She went back to work.

00;11;54;23 – 00;12;18;24

And the first thing she did when she was eligible to do it was increase her coverage to the max. And, if you’ve done your policy correctly, you’ll still be able to do that, but you can’t increase want your own claim. So that’s why you got to make sure that you have your policy in place and then have the maximum coverage before the claim occurs so that you’re not, stuck with a oh type of scenario.

00;12;18;26 – 00;12;42;22

So bottom line, can you cancel your policy? Yes. Is it advisable to cancel your policy? No. I haven’t seen a scenario yet where it made sense even. And last thing I’ll say, even if you do cancel your policy, the 2 or 3 or $400 or 500, whatever it is that you’re saving. That’s likely just going to sit in your checking account anyway.

00;12;42;25 – 00;13;04;11

Okay. It’s not like I mean, you can say, well, I’m going to invest it. Well, most people don’t invest their last $300 in their checking account. Okay. So if you have whatever you have in your checking account, the money that was going to pay for the disability coverage is just sitting there literally doing nothing. Versus yes, the insurance company has it.

00;13;04;11 – 00;13;25;15

They can make a profit on it. Yes, the disability broker gets a small percentage of that. But I would say this, whether I’m the broker or not, pay for the private disability policy. Let it do what it’s supposed to do. You won’t regret it. If you’re disabled, you will realize that it’s. It was the best, smartest thing you did from a standpoint of protecting yourself.

00;13;25;17 – 00;13;47;05

And I do hope all my clients don’t need it. I hope you end up at 65 going, well. I just wasted that money. But if you’ve if you’ve planned correctly, I doubt it’s going to keep you from retiring. It’s not going to it’s not going to affect where your kids go to college. So just do the smart thing and keep it, take it for what it’s worth, I hope you found this helpful.

00;13;47;05 – 00;14;12;10

I would be happy to discuss your situation in more detail. I love doing that. Feel free to text me at (704) 270-2376. Again. 704 2702376. Hope you found this helpful. Looking forward to talking with you on the next episode. Thank you, as always for your time. Thanks for listening to the Cover Your Access podcast and Art conduit media production.

00;14;12;17 – 00;14;32;14

New episodes drop every two weeks. If you’ve enjoyed the conversation, subscribe, rate and review this podcast. For more tips and advice, visit the website and YouTube channel. Check the show notes for links. Join us next time for another episode dedicated to helping physicians like you get your disability insurance right and protect your way of life.