First-time insurance buyer? Make sure to read this.
Contributed by Christian Pearson
National Director of Dental Partnerships
Treloar & Heisel, Inc.
You’ve probably heard about how important it is to protect your ability to earn an income. This is best done through a type of insurance called disability income insurance (or “DI” for short), and alongside malpractice (or professional liability) insurance, DI forms a financial pillar of support to protect your power to generate revenues.
In this article, we will talk about the characteristics of an experienced advisor, and the basic elements that belong in any disability income policy, regardless of company.
#1: Work with an advisor who understands the needs of your industry
Makes sense, doesn’t it? If you were to climb Mt. Everest, you’d want an experienced Sherpa to guide you. Similarly, you don’t want to work with just any insurance agent or financial advisor who has access to insurance products. Identify an advisor who knows the insurance landscape, has worked with other dental professionals, and has a wide range of clients. You don’t want to work with someone who just works with folks who are new to practice, nor do you want to work with someone who specializes in older, more established clients.
An advisor who works with dental professionals will understand how you make money, and will also be respectful of the limited time you have to devote to your personal and business finances. If the advisor expects you to meet at three in the afternoon in his or her office, s/he probably doesn’t have an appreciation for the fact that you need to be seeing patients, or that you will be in surgery at that time. Find someone who is flexible enough to meet you in off hours, early morning or in the evening after work.
#2: Work with advisor who is not captive to any single company
Make sure the advisor is not beholden to a single company in terms of product offerings. You want to work with someone who can broker products from multiple firms, show you varied options and pricing. Your advisor should be able to present you with options from at least three companies, show them side-by-side, and explain the pros and cons of each company, and each of the products, then advise you on what makes best sense for you.
#3: Work with someone who understands financial planning, not just insurance
While at this point in your life you are “just” buying insurance, the type of insurance you purchase, its features and benefits, the company you buy from, and all the little details of the policy can have impact on your entire financial picture years from now. The ideal advisor should not only be knowledgeable about insurance. Find someone who can address your complete financial picture down the line. As your career progresses, your finances will only become more complicated. Working with a multi-faceted professional will help simplify your financial life, and ensure that all of your tactics are well coordinated.
It’s important have an advisor who has witnessed the entire financial lifecycle of a dental professional and knows what makes sense for you at this point in your career. If you are just about to graduate from dental school or residency, you are most likely not a candidate for investment products, or sophisticated life insurance policies. Your focus should be on building a strong financial position, which you can do by putting into place disability income insurance, and malpractice coverage. Now is the time to focus on making money and/or investing in your practice, not tying it up in investments and other products that may be difficult to exit in later years.
#4: The right advisor will ensure you have the following four elements in your disability income insurance policy
I won’t go into technical details here, to learn more about these policy features read my other articles on how to shop for disability income insurance (link). The four elements that belong in any disability income policy, regardless of company are:
1) The own occupation rider: The insurance company is obligated to pay you in the event that ‘…the insured cannot perform the main duties of his/her occupation…’ It allows someone to work in another occupation and still receive full benefits if they are unable to work in their prior occupation.
2) The future increase option: The insurance company gives you the option to increase your insurance coverage in the future, regardless of your future insurability
3) The partial disability rider: This rider ensures that you get coverage in the event that you’re still able to work, but due to disability you can’t work at full capacity.
4) The cost of living rider: The Cost of Living rider essentially protects your benefits from being eroded by inflation.
There are policies that are better than others, of course, but for the most part, if you have those four riders in your insurance policy, you will have the basics covered.