Hello,
It’s Mark Johnson from StudentLoansRx.
We want to be a key resource for you as you approach graduation.
In this communication:
- Discussion on disability income insurance.
- Dental Student Vibes Podcast Interview.
- Commonly asked student loan repayment questions from those close to graduation.
To schedule your FREE consult with one of our licensed and experienced advisors, please click FREE CONSULT.
StudentLoansRx-2021 “What You Need to Know” Series, Tip #1-Disability Insurance
You have a lot going on between now and graduation with boards, finding a job, getting licensed, and probably relocating to a new city, etc.
And, on top of that, you really need to have a plan to address your student loan debt and a few other important financial planning items like, disability insurance.
If you would like to discuss your disability insurance options with us, please email: Mark.Johnson@RBFAdvisors.net and we can set up a time to visit.
I am too sick or injured to work….what now?
Disability income insurance is an important foundational risk management tool. With many dental professionals graduating from school and residency with large six-figure student loan balances, the need to protect one’s income during a disability has never been more important.
If you are approaching graduation from school or residency you should consider the following items when evaluating disability income insurance options.
1. Is the policy a “true own-occupation” policy?
Own-occupation refers to whether or not you will receive a full benefit if you become disabled and can no longer perform the functions of your stated profession. For example, you are a dentist and are injured in a skiing accident and can longer perform the tasks of a dentist. But, you could work the front desk at the practice or perhaps teach at the local dental school. But, you can no longer perform the duties required of a dentist. A true own-occupation policy would pay a full-benefit under that situation even if you want to or need to work in another occupation, other than as a dentist.
2. Does this policy offer Graded and or Level Premium?
Many recent graduates are cash strapped and working with a limited budget as they exit dental school or residency. But, often times they still need some disability insurance coverage above and beyond what their employer might offer in a group benefit. Graded premium provides the insured a much lower initial cost of coverage compared with a similar level premium policy. However, with a graded premium policy, you will see a small increase each year in the cost of the policy whereas a level premium policy is the same cost year after year. Many policies offer the insured the opportunity to covert the policy from graded to premium in the future, perhaps once their finances are in better shape. Keep in mind that insurance agents receive a commission to sell disability income and other forms of insurance. If an agent is pushing a level premium policy hard, without consideration of your monthly budget, you might be consider working with a fiduciary, like us, that must offer solutions, without consideration of the commission we might receive.
3. Does this policy offer a student loan rider?
Again, because many dental and other healthcare professionals graduate with six-figure student loan balances, a student loan rider is a nice feature that can provide up to an additional $2,000 to $2,500 of monthly coverage for the first ten years of the policy. As a first year dentist, you might be eligible for $4,000-$5,000 of monthly base coverage, but with a student loan rider, you might ultimately be eligible for $6,000 to $7,500 of monthly coverage. Because the student loan rider drops off after the 10th year of the contract, the additional coverage is much less expensive as compared to the base coverage of the same amount. If you pay off or pay down your student loans considerably in the first few years after school, you can have the student loan rider removed from the policy and reduce the cost of the policy going forward.
4. How can I increase my coverage in the future as my income goes up?
Most disability income policies (assuming favorable health underwriting) provide the opportunity to increase coverage every so often as your income goes up. Different carriers offer different options. The two primary options are a Benefit Purchase Rider (BPR) or Future Insurability Offer (FIO). BPRs are a ‘no cost’ rider that typically allows you to increase coverage every three years, assuming your income has sufficiently risen. Some BPRs also allow you to increase your coverage before the three-year anniversary if you have experienced a 50% increase in income or more. FIO riders have an annual cost but allow for an annual increase. Which option is best for you depends on a few factors, including your expectations for the growth of your income in the first several years of your career.
In summary, protecting your income with a disability income insurance policy is foundational to any solid financial plan. There are a handful of carriers with varying levels of financial integrity to consider. Many carriers offer discounts for student/residents and can provide a base policy before you even graduate. We advise our clients not to rush into purchasing a policy (even if an agent buys your class pizza) until you understand what disability insurance benefit you might be offered through your employer. However, you should start educating yourself on the various carriers and important policy features now. Once you have a signed employment contract, with benefit package in hand, you will be in the best position to determine what, if any, additional coverage may be needed.
In addition to our work with student loan repayment and investment planning, we are also an independent insurance agent.
If you would like to schedule a time to learn more about your disability insurance options, please respond to this email and we can schedule a time to connect.
Mark Johnson, founder of StudentLoansRx interviewed on Dental Student Vibes Podcast
I really enjoyed my recent appearance and discussion with Seth, Cole and Matt, from the Dental Student Vibes Podcast.
If you are a dental student or resident, I highly encourage you to sign-up for their podcasts.
The interview is in two parts. Check them out!
Dental Student Vibes Podcast #1
Dental Student Vibes Podcast #2
To schedule your FREE consult with one of our licensed and experienced advisors, please click FREE CONSULT.
For 2021 graduates, you will have a few months after graduation to consider your options. But, on Oct. 1, 2021, interest resumes. On loan balance of $400,000 @ 6% that is $2,000/month of interest accrual!
If you are still trying to figure out the best repayment option, or want to make sure your current strategy is optimal, why not schedule a free, no-obligation, 30-minute Zoom consult with us?
Maybe we can help you avoid a massive and costly error in your student loan repayment planning.
Most frequently asked questions during our FREE 30-minute consults:
- Which repayment method is best if I wish to start or purchase a practice?
- Should I enroll in an income-driven plan?
- If so, should I choose Pay As You Earn-PAYE or Revised Pay As You Earn-REPAYE?
- When do I enroll in repayment if I will be on PSLF?
- What is my work/life situation changes? Can I change repayment plans? What are the consequences of changing plans?
- Should I refinance with a private lender? If so, which lender and when?
- How aggressive should I be in repaying student loan debt when I have other financial priorities as well?
To schedule your FREE consult with one of our licensed and experienced advisors, please click FREE CONSULT.
If you have any questions related to student loan repayment planning or any of the other financial or investment planning services we offer, please feel free to email us at StudentLoansRx@RBFAdvisors.net.
