If you’re a resident in training you may have never considered buying a life insurance policy. When it comes to life insurance, there are plenty of reasons to buy or not to buy, but knowing the arguments is the first step to making a decision. This article will examine arguments for and against life insurance for residents to help you determine what makes sense for you at this stage in your physician career.
Reasons Not to Buy Life Insurance as a Resident
First off, life insurance exists to replace your source of income for surviving dependents when you pass away. If you’re single, with no children, you may not have anyone relying on your earning yet. Factoring in an insurance premium into your already tight budget and resident salary may be challenging.
If you already have group life insurance coverage, that will probably be enough until you begin practicing full time.
Reasons You Should Buy Life Insurance as a Resident in Training
If you do have dependents, purchasing a term life insurance policy is a must. Term life insurance is affordable. Residents should avoid whole life and cash value insurance policies due to the cost.
One of the underwriting factors that determine the cost of life insurance is age. The younger you are, the less you will spend on coverage. So buying a policy when you’re in residency is one of the best times to secure a good rate.
A group policy is better than nothing, but it may not be enough. Additionally, group policies are dependent on your employment or association membership. These are subject to cancellation at any time. Once you have your individual policy, you can keep it as long as you pay the premiums.
Strategies for Buying Life Insurance
As you age and your family grows the policy you buy today will not give you the coverage you’ll want down the road. One way to increase your benefit later is to buy a guaranteed purchase option (GPO) rider. This is also known as a guaranteed insurability (GI) rider. It allows you to increase your coverage amount by going through the underwriting process again.
Residents can also purchase annual renewable term (ART) life insurance. This a short-term policy that affords you coverage for one year, with the option of renewing each year.
What is Annual Renewable Term Life Insurance?
ART life insurance is similar to level term life insurance., but with one key difference. Level term charges the same premium for the full length of the term period. However, ART premiums increase over time. The premiums for ART policies start out lower than level term policies. This makes them a cost-effective option for your short-term insurance needs.
Conclusion
Everyone’s family and financial situation are unique. What makes sense for one medical resident in training will not work for all. When you’re considering what your coverage needs are write down the pros and cons of buying life insurance, do a cost-benefit analysis and that should help you make the right choice.
