Refinance & Disability Insurance

[zyx189]

Hi,

I am a 4th year medical student going into EM. With graduation coming in a few weeks I am trying to get some of my financial and other insurance information in order.

1. My plan post-match was to consolidate and refinance my loans w/ a private company. I am not a good candidate for PSLF and other forms of loan forgiveness (overall loan burden 90k). Does anyone have any experiences with any companies (such as DRB, SoFi, etc.)? Any pitfalls/problems you had during this process or something you wish you would have known earlier? Do they typically have extra fees if you pay off your loan early?

2. I was speaking with people at Mass Mutual about an own-occupation disability plan. I was quoted $52/month (~$640/year) plan for $2,500/month benefit that would go in effect 90 days post disability. It has an option to increase benefits by $7,500 post-residency to a $10k/month without any additional health screenings (obviously premium would increase accordingly). I am in my late 20s w/ no medical problems. Is this an appropriate rate? Anyone have experiences with this company? Any other companies you recommend looking at?

3. Apart from The White Coat Investor, book recommendations on personal finance, retirement, and investments?

Thanks!

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[mvenus929]

I would get as many disability insurance quotes as possible. I vaguely remember hearing that Mass Mutual was getting away from own occupation, but can't remember all the details around it. I went with Principal and got a good rate, with the option to increase to 17K. Guardian also had reasonable rates and benefits.

 

[zyx189]

So any other companies apart from these I should be looking at? Guardian/Berkshire, Principal, Northwestern Mutual, MetLife, Standard, Union Central
From perusing the forums, many people seem to be going with Guardian.
I will call up some financial groups in the area to set up appointments and look at different policies.

 

[MD Financial Services Scott]

Mass is back in the own occ disability market but be sure that you are looking at a level premium or what we would call graded premium (one that goes up). You might also want to see if you can get a bigger policy than $2500 since if you can only go to $10k where that might seem like a lot you might ask a few attending's if they can live on $10k. In addition think about the fact that you might hold this contract for 20-30 years and then what is that $10k going to be worth. Certainly check Guardian, Ameritas, and Principal as those 3 have a tendency to lead the pack.

 

[da8s0859q]

Have refinanced with SoFi personally for over twice the amount you're talking. Know many that worked with them or DRB.

My experience was great. Quick approval. All-electronic process, easy, relatively fast. Not the absolute lowest variable rate, but low, far better than 6.8%, and with my planned payoff, of negligible comparison versus a slightly lower rate with another company. They do work with Mohela to service their loans which seems to annoy some people, but it's not been a particularly troublesome experience for me (as much as I wish it was kept in house with SoFi).

My DRB friends were a little less enthused -- but, n= small number.

As for DI: would vote for Guardian. I have a policy with them. Cross-shopped Principal and Northwestern Mutual (polarizing topic here).

Guardian recently reworked their own-occ language to be a little more all-inclusive, is my understanding -- will defer to Scott to speak more intelligently to this -- but in the end, are highly touted for a reason.

On the face of it, your quote seems reasonable. A $2500 benefit in residency isn't terrible. Your FIO for a total of $10k is nice. Nicer with adjustments for COL/inflation over time which Scott alludes to above.

Would argue that $10k-$15k monthly is a reasonable target for most up front as you're getting the rest of your financial life established in later residency into the first little while of being an attending, but that's my two cents.

 

[fahimaz7]

I took ameritas for 12.5k. I agree with the above. Max it out if you can now...

 

[PistolPete]

I have Standard for 5k in residency, pay about $1700 per year with riders for own occupation, non-cancelable, future purchase option of 10k, cost of living adjustment, residual disability and 2 year mental health/substance abuse limitation.

 

[MD Financial Services Scott]

Have refinanced with SoFi personally for over twice the amount you're talking. Know many that worked with them or DRB.

My experience was great. Quick approval. All-electronic process, easy, relatively fast. Not the absolute lowest variable rate, but low, far better than 6.8%, and with my planned payoff, of negligible comparison versus a slightly lower rate with another company. They do work with Mohela to service their loans which seems to annoy some people, but it's not been a particularly troublesome experience for me (as much as I wish it was kept in house with SoFi).

My DRB friends were a little less enthused -- but, n= small number.

As for DI: would vote for Guardian. I have a policy with them. Cross-shopped Principal and Northwestern Mutual (polarizing topic here).

Guardian recently reworked their own-occ language to be a little more all-inclusive, is my understanding -- will defer to Scott to speak more intelligently to this -- but in the end, are highly touted for a reason.

On the face of it, your quote seems reasonable. A $2500 benefit in residency isn't terrible. Your FIO for a total of $10k is nice. Nicer with adjustments for COL/inflation over time which Scott alludes to above.

Would argue that $10k-$15k monthly is a reasonable target for most up front as you're getting the rest of your financial life established in later residency into the first little while of being an attending, but that's my two cents.

Guardian did re-work their language to be more visually appealing but the claims will be handled the same as before, true own specialty definition. That product has been constructed and is for sale in some states but not all as of yet, it will take some time for each state to approve it but that is normal.

My thought is to ask your agent 'how much coverage do I have to purchase to lock in current benefits AND future purchase options to take my benefit to $15k or the max offering of the carrier'? A number of carriers will have a 2x or 3x future purchase option to the base benefit, in other words if you buy $3k you can have future purchase options of $6k to $9k. Other carriers don't put a cap on the future purchase but in order to get the future purchase options you have to buy 75% of what you are eligible for at the original time of purchase.

Personally I am not a big fan of COLA since when you do the math and take the emotion out of the conversation it takes about 10-12 years ON claim for that feature to be a good deal. Now I am not saying that a 10-12 year claim can't happen I am just saying that when one looks at probabilities vs. possibilities then the value of that starts to fade away. I would rather use that premium money to simply buy more coverage for day one benefit than year 13 ON claim.

 

[zyx189]

Thank you! I will look more into it. I have appointments coming up with various different disability insurance companies (Guardian, Principal, etc.) in the area so I can compare the individual offerings. In regard to people mentioning that you want to max out this benefit as much as possible; I was under the impression the maximum disability insurance you can apply for is proportional to your income. So if my residency salary is 50k, I would not be able to enroll in a 5k/month disability plan. Or am I wrong?

The above plan I had mentioned with MassMutual does have the ability to go over 10k/month. It is just that you can increase it 10k/month w/o doing additional health paperwork. Still early in this process, so I'll have a better idea once I look at what other places and how they have structured their plans.

Scott, you were alluding to graded premium (increases yearly) vs. level premium. Which one do you recommend? For example, the MassMutual coverage is $632 for graded and $1100 for level premium (it will take until age 38 for the graded premium to be higher than the level premium). Additionally, typically at what age do people withdraw from their disability plan? Does not make sense to keep it going in your early 60s (or even late 50s) with your retirement ahead.

 

[MD Financial Services Scott]

Thank you! I will look more into it. I have appointments coming up with various different disability insurance companies (Guardian, Principal, etc.) in the area so I can compare the individual offerings. In regard to people mentioning that you want to max out this benefit as much as possible; I was under the impression the maximum disability insurance you can apply for is proportional to your income. So if my residency salary is 50k, I would not be able to enroll in a 5k/month disability plan. Or am I wrong?

The above plan I had mentioned with MassMutual does have the ability to go over 10k/month. It is just that you can increase it 10k/month w/o doing additional health paperwork. Still early in this process, so I'll have a better idea once I look at what other places and how they have structured their plans.

Scott, you were alluding to graded premium (increases yearly) vs. level premium. Which one do you recommend? For example, the MassMutual coverage is $632 for graded and $1100 for level premium (it will take until age 38 for the graded premium to be higher than the level premium). Additionally, typically at what age do people withdraw from their disability plan? Does not make sense to keep it going in your early 60s (or even late 50s) with your retirement ahead.

First off, Your Welcome.

The benefit is proportional....for the most part. As a Medical Student we can get $2500 of benefit on someone that does not make a dime but because they are in medical school their future looks bright as to earning power. As a Resident/Fellow we can get $5k-$6k since the carriers know you are about to get out of training and thus a large income jump from the $50-$60k most residents/fellows make which now justifies the $5-6k benefit. If you are within 6 months of finishing training we can use the 'New Doctor in Practice' limits that typically get $6,500-$7,500 of benefit depending on specialty and finally if you have a signed employment contract where it states your income we can then use that to justify the higher benefits even though you have not yet started the job. Just really depends on what you are doing/wanting but with a signed contract we have gotten people as much as $20k per month in benefit. I hope that the people you meet with come at it from a counseling position vs. a sales position of buy every thing you can qualify for regardless of need. Watch the riders they try to put on your policy as well as they have a tendency to bloat the policies premium.

As for Graded vs. Level, as you have noted only a few years out the cost on the graded starts to exceed the cost on the level so if you keep it a typical 20-30 years you will pay a great deal more for that graded. In addition if you decide to convert to a level then that premium is higher as well since you convert at the cost of the then current age. I looked at a graded premium last week for a client and it was $66 graded or $102 level but if they took the graded and never converted to level then the rate would eventually balloon to over $350 per month as they got into their 50's.

Finally on when do we drop a policy? I have found in my practice we start having that discussion at about age 60-62 and we simply decide do we want coverage to pay the bills if something happens or do we want the assets to pay the bills, everyone is different and there is no right or wrong answer just how do you want it to happen.

 

[Smart Money MD]

I'm sort of being a Devil's Advocate on my response, but I took a risk in medical school and in residency without purchasing disability insurance simply because I didn't have any dependents at the time and I figured that I could go into a different career outside of medicine if I were permanently disabled before finishing my training. I also didn't have risky hobbies like downhill skiing either. Sure I only saved a few thousand a year for a few years, but it made a difference for me since I lived in a HCOL area with a nice 6-figure debt to my name.

I did end up purchasing DI at the end of fellowship through Principal. I ultimately hope to get to a point where I wouldn't need DI (self-insured), but that is still many years away. ;-)

 

[MD Financial Services Scott]

Smart Mo

I'm sort of being a Devil's Advocate on my response, but I took a risk in medical school and in residency without purchasing disability insurance simply because I didn't have any dependents at the time and I figured that I could go into a different career outside of medicine if I were permanently disabled before finishing my training. I also didn't have risky hobbies like downhill skiing either. Sure I only saved a few thousand a year for a few years, but it made a difference for me since I lived in a HCOL area with a nice 6-figure debt to my name.

I did end up purchasing DI at the end of fellowship through Principal. I ultimately hope to get to a point where I wouldn't need DI (self-insured), but that is still many years away. ;-)

I hear you, the best insurance is some that you did not need and did not buy! As we know the problem happens when we needed it and did not have it....

 

[abolt18]

Hi,

I am a 4th year medical student going into EM. With graduation coming in a few weeks I am trying to get some of my financial and other insurance information in order.

1. My plan post-match was to consolidate and refinance my loans w/ a private company. I am not a good candidate for PSLF and other forms of loan forgiveness (overall loan burden 90k). Does anyone have any experiences with any companies (such as DRB, SoFi, etc.)? Any pitfalls/problems you had during this process or something you wish you would have known earlier? Do they typically have extra fees if you pay off your loan early?

2. I was speaking with people at Mass Mutual about an own-occupation disability plan. I was quoted $52/month (~$640/year) plan for $2,500/month benefit that would go in effect 90 days post disability. It has an option to increase benefits by $7,500 post-residency to a $10k/month without any additional health screenings (obviously premium would increase accordingly). I am in my late 20s w/ no medical problems. Is this an appropriate rate? Anyone have experiences with this company? Any other companies you recommend looking at?

3. Apart from The White Coat Investor, book recommendations on personal finance, retirement, and investments?

Thanks!

My only question is about number 1. Why refinance in residency when you could do RePAYE and have the government cut your interest in half throughout residency?

 

[Student Loan Planner]

My only question is about number 1. Why refinance in residency when you could do RePAYE and have the government cut your interest in half throughout residency?

I do student loan consulting services professionally, and I'd agree with this. The only scenario where doing a residency refinancing could make sense is if the REPAYE program is eliminated in the consolidation of income driven repayment plans that's currently being talked about. In that case a 5.75% residency refinancing compared to a 6-8% rate on the new 'Trump plan' whatever it is would be more advantageous. In the mean time the REPAYE program in my view is the way to go.

 

[speakwhales]

I do student loan consulting services professionally, and I'd agree with this. The only scenario where doing a residency refinancing could make sense is if the REPAYE program is eliminated in the consolidation of income driven repayment plans that's currently being talked about. In that case a 5.75% residency refinancing compared to a 6-8% rate on the new 'Trump plan' whatever it is would be more advantageous. In the mean time the REPAYE program in my view is the way to go.

Looking into getting my finances in order as well and this thread came up. I'm in a similar situation, fed loans at 72k and campus-based loans (can these be consolidated to federal?) at 15k. From what I understand, my fed loans are currently at mostly 5-5.3%, which seems to be better than what most refinancing option. Is this others' finding as well? If not, I'd love to hear of options where I can get it refinanced to lower.

Also looked into REPAYE, but at this debt level, it seems like we won't have any reductions to our interest rates since our annual payment would more than cover our interest rate. Is this correct? Thanks for all of the help!

 

[Student Loan Planner]

Probably if you did variable rate instead of fixed or if you did a 5 year loan term otherwise no. You can consolidate the campus based loans if they are perkins and you consolidate at least one other loan