There are few professions where the fragility of life is made more apparent than in the medical industry. With every shift, physicians regularly confront the reality that a person’s health can change suddenly, disrupting the lives of friends and family and compelling them to deal with the consequences of loss. Dealing with the tangible issues that arise when a person dies is a complicated ordeal on its own, compounded when you are still in the most intense periods of grief. Anything you can do to prepare for the worst-case scenario and help your loved ones in the event of an untimely death is worth considering.
Many doctors purchase life insurance to provide a level of care for their dependents and minimize the financial impact of their loss. A recent Sermo survey found that 58% of participants currently have life insurance (35% have term life insurance and 23% have whole life insurance). 33% of physicians with life insurance purchased their policy to ensure financial security for their family and dependents, and another 16% did so to replace lost income and maintain their family’s lifestyle in case of death. These sentiments are further echoed by the feelings shared by Sermo members on the issue. A pathologist spoke on the value of having a life insurance policy to calm their nerves as they perform their intense daily duties:
“As physicians, we are constantly exposed to high levels of stress, unpredictable schedules, and health risks that most people don’t face daily. This made me realize that securing life insurance is not just about financial protection—it’s about safeguarding the stability and future of those we love. Having a policy in place brings peace of mind and allows me to focus more fully on my patients and career, knowing that, even in the worst-case scenario, my family would be supported. I believe life insurance should be a foundational part of every physician’s financial strategy.”
Life insurance policies can take many forms, with many details that can be changed to fit the needs and context of each individual. It’s also important to consult with a trusted healthcare contract lawyer to ensure that you fully understand the legal terms used and other important details before completing the purchase. To help you go through the process, read on to learn about the different forms of life insurance and what to look for when evaluating a potential policy.
Why do doctors need life insurance?
Purchasing life insurance is a sensible choice for people in all industries, but it is especially important for doctors considering some specialties can involve working long hours, high liability, or high burnout risk, and their choice of work may impact their lifespan. Physicians benefit from having life insurance in the following ways:
Protecting family and dependents
Above everything else, life insurance policies are about giving your family the tools to maintain some sense of normalcy during a time of anguish. Insurance policies give your dependents the financial support they require in the event that you pass away, giving them one less thing to worry about while they mourn. Many Sermo members, such as this general surgeon in the UK, view this as the main reason to invest in life insurance: “The truth is, there is so much benefit to having Life insurance as a doctor. Doctors are among the most stressed-out groups of individuals, and they have a relatively high mortality rate. It will help protect dear family members.”
Covering substantial student loans and other debts
Attending medical school is an expensive endeavor. Most young physicians enter the workforce with heavy amounts of student loans and other debts to pay that extend well past their annual salary. No one wants their family to bear the brunt of their financial payments after they’re gone. Life insurance can help to cover outstanding balances and take some of the monetary responsibility off their plate. Be sure to verify if your loans will be forgiven if you pass away before they’re paid off. If they’re not, you may require a higher death benefit to properly shield your family from liability.
Securing future income replacement
A strong life insurance policy can serve as a substitute for your income after your death. This can minimize the financial disruption of your loss and allow your family to maintain some consistency as they reckon with losing a loved one.
Estate Planning
A recent Sermo poll found that 34% of physicians surveyed believe that it is very important for their life insurance policies to help with estate planning, and another 27% said that it is somewhat important. Crafting your life insurance policy early in your career allows you to build a sturdy foundation for younger generations in your family to pursue their goals further into the future. Estate planning also helps you mitigate the impact of estate taxes on your beneficiaries so your estate doesn’t lose any value and your family doesn’t have to consider selling or liquidating any of your assets. A US-based cardiologist on Sermo explains how they view life insurance as one segment of their overall financial strategy:
“In my opinion investment in the markets is one part of a whole life strategy that should consider expenditure, protection (life insurance), property, and pension. Asset allocation within investment according to risk tolerance is the next step. My focus is on reducing frictional cost and minimizing my time: tracker funds across different sectors.”
Supplemental Income
Life insurance policies can accrue greater value over time, providing an additional source of income and more financial agility for your family. For physicians with the good fortune to leave the hospital on their own terms, life insurance funds can also double as a resource for retirement planning. However, physicians should consider that utilizing policies as an investment vehicle may be less risky, but may also result in lower gains than typical strategies such as stocks and bonds. Always consult a financial advisor when making decisions on your overall investment planning.
Managing risks associated with high-stress professions
Regardless of their level of expertise, knowledge, or working location, life as a medical professional is a consistently intense exercise. The mental and physical fatigue of bringing in more patients and giving them the care they deserve can be draining. In the same way that the existence of a life insurance policy can ease the minds of family members, it can also soothe doctors who are comforted by the fact that their loved ones will be taken care of when they need the most support. Life insurance policies are usually tax-free and paid to the beneficiary immediately after a claim is confirmed.
Most people agree that life insurance is an important asset to have, but many people remain underwhelmed by their policy. Sermo survey results found that only 28% of participants felt that their policy adequately covered their medical practice and business interests. There are many variables to consider, and without the right support, it can be easy to overlook certain aspects.
“Life insurance is a CRITICAL and MUST-HAVE component for every physician, just like disability insurance. At any point, life can end, and we know this all too well!” said a family medicine physician in Canada. “When considering life insurance, shopping around before SIGNING ANYTHING is very important. Factors to look for include: Personal beliefs and values, annual salary (I recommend a minimum of x3 yearly income), debt burden, family lifestyle, current health, and provider reputation. For most people, term life is sufficient except when estate planning, where whole life plays a larger part. You may not have any insurance when you have significant assets, but that is less common. If in doubt, always consult a fee-for-service financial planner.”
9 types of life insurance policies
Here are the most common types of life insurance policies for physicians to consider:
Term life insurance
A term life insurance policy provides coverage for a set number of years, locking in your rate for the entire period as long as the premiums are paid. This straightforward approach to insurance makes it easier to budget and plan for the future. Term life insurance is also the most affordable life insurance in most instances. The main potential downside is that if you outlive your policy, then your beneficiaries won’t receive any payout. You may be able to renew your term life policy at the end of the term period at an adjusted rate, but only on a year-to-year basis. Your new rate would be based on your health and age at the time of renewal.
Whole life insurance
Whole life insurance is a permanent type of life insurance where your coverage lasts for your entire life, paying out regardless of when you pass away. It also includes a savings component with a fixed interest rate that builds cash value over time. The cash value of your policy won’t directly impact the death benefits after your passing, but if it grows to equal your death benefit amount after you hit a set age, your insurance will pay out the coverage amount and terminate your policy. You can also withdraw some cash value funds as a life insurance loan. Whole life insurance takes a lot of the uncertainty out of insurance planning, but it is also more expensive than other life insurance options.
Universal life insurance
Universal life insurance is another option that covers your entire life and comes with a savings component. However, this type of life insurance offers much more flexibility to the buyer. With universal life insurance, you can adjust the premiums (within limits) as well as the death benefit. The cash value is also not fixed; the rate at which it builds is based on market interest rates. This allows you to adapt the policy as your needs change, but another consequence is that the death benefit and cash value could decrease depending on the state of the market.
Variable life insurance
Variable life insurance offers the biggest potential gains on your policy. The cash value is tied to investment accounts, meaning that the amount will rise or fall depending on the performance of those accounts. Variable life insurance premiums and the death benefit are both fixed. The range of potential outcomes for your investments creates the possibility of your beneficiaries receiving greater benefits – but the risk is that poor performance could lead to a much starker conclusion. Doctors who purchase this type of policy will have to be more hands-on to ensure that their investments are successful.
“I was sold a product of variable life insurance when I was young. Oddly enough, this policy did well, but it is difficult to decide what to do with it now that I am retired”, said this family medicine physician from the States. “I’m simply leaving the death benefit in place. If I had known then what I know now, I would’ve simply purchased term and invested the difference. This takes discipline, however.”
Final expense life insurance
Also known as funeral or burial insurance, final expense insurance is a small policy that helps your family pay for end-of-life expenses like funeral costs, outstanding medical bills, and debt. The cash value of a final expense policy builds value over time with a fixed rate. These policies are more accessible to older people or those with pre-existing health conditions, which can make it difficult for them to qualify for certain insurance policies. The downside is that coverage is capped at low amounts, so the death benefit may not be fully paid if you pass away within a couple of years of taking out the policy.
Indexed universal life insurance
An indexed universal life insurance policy has a cash value that increases based on a stock market index like the NASDAQ or the S&P 500. The premiums can be adjusted as the cash value grows. Like variable life insurance, this brings more volatility to your policy but can lead to greater gains for those willing to take the risk.
Simplified issue life insurance
In many cases, the approval process for standard life insurance policies can take over a month to complete. Simplified issue life insurance shrinks that timeline by removing the need for a medical exam. If you opt for this type of insurance, your coverage could potentially start within a couple of days with certain insurers. The catch is that simplified issue life insurance is often more expensive and often provides smaller coverage due to the amount of risk placed on the insurer.
Instant life insurance
Instant life insurance is a type of simplified life insurance policy where you can apply online and get coverage within minutes if approved. This is great for physicians who need immediate care, but convenience usually comes with higher premiums and limited death benefits. Insurers may also be more strict about who gets approved for instant life insurance than with other methods.
Guaranteed life insurance
You can’t get more certainty than with a guaranteed life insurance policy. With these policies, the insurer does not ask medical questions, and your application cannot be turned down for any reason, although such policies may have graded benefits or waiting periods. This type of life insurance also features low coverage amounts and beneficiaries may not receive the full payout if you pass within two or three years of buying the policy.
A Sermo survey found that a term life insurance policy is the most popular type of life insurance among physicians who voted, with 29% of participants currently using this coverage, followed by whole life (20%), a combination of permanent and term (11%), and universal (9%).
A life insurance policy that makes sense for one physician may not be as appropriate for another. It’s important to consider what you and your family specifically want out of any policy before signing on the dotted line. It’s also reasonable to change your insurance as your situation, life goals, or perspective changes.
“I cashed in an old whole life policy and purchased term life. I got it to cover any expenses or debts left or bequests made”, said an internal medicine physician from the US.
“I had a large whole life then switched to term. For about 7 years as my portfolio grew and I felt I no longer needed that large insurance safety net,” explained a financially savvy doctor also working in America. “Given the costs it was better to stay invested beginning about 5 years before retiring. Premiums saved went into the 401 and Roth. Retired at 70 without need for insurance. Most notably premiums increased and to keep stable premium cost of insurance began to eat up whole life policy”.
Key considerations for doctors when choosing a life insurance policy
Evaluating coverage needs based on income and lifestyle
Whichever life insurance option you choose to use, it is imperative that your coverage aligns with your current income and lifestyle. The amount of coverage needed is a moving target as it will vary from person to person. In the Sermo survey, 34% of physicians felt that their life insurance coverage should be worth 2 to 5 times their annual income, with another 20% believing it should be 5 to 10 times their income, and 15% content with coverage being 2 times their annual income. The right answer to this question will depend mainly on your personal circumstances.
Balancing affordability with adequate protection
While no one wants to feel like they are letting their finances dictate their thinking with something as important as life insurance, you must ensure that you can regularly pay the premiums associated with your policy. Policies with stable, fixed-rate premiums are more appealing, as they make it easier to maintain a budget and predict future expenses. Converting a term life insurance policy into a permanent one can also lock in your coverage based on your current health.
Accounting for long-term financial goals (such as retirement or education for children)
How long do you plan to work before retirement? Do you want to help your children pay for school? These and other long-term questions should be in your mind when exploring your life insurance options. The policy you choose should align with those goals in mind.
How to choose the right policy
Proper time and thought should be put into selecting your life insurance policy so that you are confident you’ve made the right choice. Most of the mistakes people make when purchasing a policy come down to two things: a lack of knowledge and a hesitance to take the time to learn throughout the process. If you’re unfamiliar with how life insurance policies work, then you should reach out to professionals and peers who can explain the details and their repercussions.
Working with a financial advisor who is experienced in physician finances can help you fine-tune your policy to more accurately meet your needs and complement your career goals. It can also be useful to consult with colleagues who have life insurance to learn how they feel about their policies and get recommendations from trusted friends.
Before picking any providers, cast a wide net of potential options and compare their premiums to find the one that best balances ample coverage and affordability. Also, consider adding additional riders such as disability waivers or accelerated death benefits to fortify your policy.
The takeaway
Life insurance isn’t just about the premiums you pay or the amount your family will receive from death benefits. It’s about providing a safety net for the ones you hold dear during a time when care and support are most needed. That care can take many forms, as there are many different types of life insurance that are best for people in different stages of their lives. Coverage gets more expensive as you age, and there is always the risk that tragedy strikes when you least expect it. The time to get a life insurance policy is now.
Creating a life insurance policy can be emotionally daunting; it’s normal to seek advice and support while working on something so serious. With Sermo, you can find a community of over 1 million verified physicians from all over the world to discuss important life decisions, medical cases, and take part in paid medical surveys. Sign up for free today and join in the latest conversations.
