As a resident, you’re not earning your full income yet, but you are just about there, and you know what field you’ll be working in. This is a very opportune time for securing some fantastic rates, and also getting away with a level of coverage that you might not have access to for a few years after your residency is completed.
Not only can you lock your health down, but you can get discounts of up to 25%, get approved for amounts that you wouldn’t have access to for a couple years, and reduce your current premium to a fraction of what it will be once you start your practice.
Depending on where you’ll end up working, the kind of overhead expenses that you’ll have, and if you’ll partner with someone, you should have either two, or three of the strategies listed below.
Personal Disability Insurance
This one is the most important coverage that you can have as a medical practitioner. You can’t pay for the coverage with your corporate bank account, and you can’t write off the premiums, but it is the one that will keep you afloat should you become disabled or unable to perform your regular duties.
As a business owner, yes that what you’ll end up becoming, you are often key to your business/practice, and should something happen to you (injury or illness), that would prevent you from working, you’d want to know two things: first, your income won’t stop, second, your business/clinic/practice won’t need to come up with your income if you’re not producing activity or revenue for the business anymore (since you’re disabled and unable to work).
Having a personal disability insurance allows you to achieve both results:
- you will receive a tax-free income from the insurance company once you’ve satisfied the requirements listed in your contract,
- you won’t need to draw an income from your business since you’ll receive it from the insurance company, allowing you to keep that money in the business to hire your replacement or more drastic measures.
Personal disability is a policy that is owned personally, and paid personally. This way, if the time comes that you need to receive the benefit, it won’t be taxed.
It usually kicks in after 30, 60 or 90 days (depending on how much you’re willing to pay for it), and lasts for 2 years, 5 years, or to age 65.
Business Overhead Expenses Insurance
Business Overhead Expenses insurance is a policy that is owned and paid by the your medical corporation. You need to be incorporated to have access to that coverage. That policy will allow you to receive reimbursements for overhead costs like staff salaries, utilities, rent, loan repayments, accounting and legal fees…
This coverage offers a tax deduction to the company, so it is usually very well received!
It usually gets triggered after 15 or 30 days, and last for up to 24 months, after which duration you’re pretty much expected to either have gone back to work, moved on and have been replaced by someone else, or have closed the company.
Buy-Sell Disability Insurance
This one is not one that you usually end up looking into at this stage. You need to be in in a partnership with other doctors in a clinic for a couple of years before the insurance company will consider offering you the coverage. But it is good to know that it exists, for when the time comes.
Buy-Sell Disability Insurance is a policy that would allow you to buy the shares from a partner who has become disabled after a period of 12, 18 or 24 months (depending on what the shareholder’s agreement states).
This coverage requires you to have a personal disability or a group disability policy first (which you should have anyway). It pays a lump sum or a series of payouts or a mix of both, to the remaining shareholders if held personally, or to the company if the company is the owner of the policy.
That coverage is probably one of the most misunderstood policies in the market place, and is often discarded despite its significant important for a clinic with multiple partners. It doesn’t matter much what your shareholder agreement says, if you don’t have any money to back it up! That insurance coverage helps you ensure that you have the funds necessary to fund these shares back should something happen to one of your partners.
If you are looking at partnering with other doctors in a clinic environment, you need to look at this coverage at the end of your first year working together, since some of these policies can take some times to be implemented, especially if some of the partners are closer to retirement (usually a bit harder to insure).