How Much Life Insurance Do Physicians Need?

Amber [00:00:00]:
Welcome to The Responsible Resident. I'm Amber Stitt. This podcast takes a common sense approach to financial decisions for physicians, breaking down complex topics into something clear, practical, and usable. Because you shouldn't have to have a finance degree to build financial freedom. This show is designed to help residents, fellows, and early career physicians better understand insurance, underwriting, and the financial decisions that can shape their future. In our last episode, we started with a simple idea: people first, plan second, product third. Before deciding what kind of life insurance to buy, I like understanding who we're protecting and what we want the money to make possible. Today, we're taking the next step: how much life insurance are we actually talking about? And for physicians, this question can get interesting pretty quickly. Because you may have one income today, a very different income a few years from now, and financial responsibilities that are already growing somewhere in between.

Amber [00:00:58]:
So rather than starting with one magic multiple, or one online calculator, let's talk about how the numbers can fit into the larger plan. Because there are actually 2 numbers in this conversation. When someone asks, how much life insurance do I need? There are really 2 questions underneath it. The first is, how much coverage would support the financial plan I'm trying to protect? The second is, how much coverage will an insurance company allow me to purchase based on my financial circumstances today. Those numbers aren't always identical, and for a resident, or fellow, that's completely understandable. You may be earning $70,000 or $80,000 today and be on a path toward earning several times that amount in practice, but the insurance company still has to establish financial justification for the amount being requested. This is sometimes called financial underwriting, or financial suitability. So while we're thinking about what your family might ultimately need, the carrier is also looking at whether the amount being requested makes sense based on the financial picture available at the time of application.

Amber [00:02:04]:
Here's why insurance companies look at income. Life insurance is designed to replace an economic loss, so the carrier wants the amount of insurance to have a reasonable relationship to that loss. For younger applicants, you'll sometimes see guidelines in the neighborhood of 25 times income. Although the actual multiples and financial underwriting guidelines vary by carrier, age, circumstances, and the amount being requested. But that gives us a reference point. It isn't necessarily the planning answer, and it isn't a universal formula. For physicians in training, that distinction matters because current income may not fully represent the economic life you're building toward. That's where the conversation can become more individualized.

Amber [00:02:48]:
Your employment agreement may help add context. Let's say you're nearing the end of residency, or fellowship. You're currently earning a training salary, but you've already signed an employment agreement to begin practice. Now we may have additional information. Depending on the carrier and circumstances, a signed employment contract can potentially help document the income you're moving into. That can give the insurance company a different financial picture than simply looking at the income on your most recent tax return. Again, carrier guidelines vary, but this is a good example of why a physician's life insurance conversation may not fit neatly into an online calculator. Your current income is one piece of the picture.

Amber [00:03:30]:
Your near-term career circumstances may provide additional context. Family circumstances can matter, too. Income isn't necessarily the only part of financial justification. Maybe you have young children. Maybe a partner relies on your income. Maybe you're financially supporting a parent, or another family member. There may be other circumstances that help establish why a particular amount of coverage is being requested. For larger amounts of insurance, carriers may also want more detailed financial information.

Amber [00:04:02]:
The point isn't that one family structure qualifies for more insurance than another. It's that financial underwriting is trying to understand the economic need behind the amount being requested, and that need can look different from one physician to another. Sometimes our documentation includes a cover letter to explain the family size and other dependents like parents that may rely on this money, too. This is where we can come back to "RR S2 Ep 1" and ask, "What was the plan?" Imagine a physician tells me, "If something happened to me tomorrow, I'd want the mortgage paid off." Great, that's a number we can identify. But I usually don't want the conversation to stop there. What was supposed to happen after the mortgage was paid? Was your partner going to continue working full-time, or eventually work less? Were you planning to fund college? Were you building investments? Did you want to help your parents? Were you planning to build or buy a medical practice? Was there another business? Were you building toward financial independence? What was your income supposed to help create over the next 10, 20, or 30 years? Those questions start giving the insurance number a purpose. Here's a simple example.

Amber [00:05:12]:
Imagine a family has a $500,000 mortgage. If we only ask, "How much would it take to pay off the house?" The answer is easy: $500,000. But imagine the physician also wants to provide money towards private education between elementary through high school for each of 2 children. We can add those amounts together, plus the mortgage. Maybe there are other debts, or immediate expenses. Maybe the family also wants several years of income available while everyone adjusts. Maybe part of the plan was to continue investing for the future. Now the conversation looks very different.

Amber [00:05:48]:
That's why I don't think the mortgage alone necessarily tells us the life insurance need. It's one obligation inside a larger financial plan. So, what about income replacement? Another common approach is to use an income multiple. Maybe 10 times income, maybe 15, maybe another multiple depending on the planning methodology. That's useful for creating a starting point, but let's put a physician's life around that formula. If you're a resident earning $75,000 today, a simple 10 times income calculation gives us $750,000. But if you're completing fellowship and have a signed contract to earn $350,000 in practice, does $750,000 fully represent the financial life you're building? Maybe. Maybe not.

Amber [00:06:35]:
Now take the opposite example. A physician earns $500,000 a year, but has substantial investments, no mortgage, financially independent children, and a partner who has significant assets and income. Does that household automatically need $5 million because we multiplied income by 10? Again, maybe. Maybe not. The formula gives us a starting point. The financial plan gives the number context. Online calculators can still be helpful. I like calculators.

Amber [00:07:06]:
They're efficient. They can help identify categories people may not have considered: mortgage, debt, income replacement, education, final expenses, existing assets, and insurance. All useful. Where the calculator has limitations is that it doesn't know the conversation happening inside your family. It doesn't know what you and your partner have already decided. It doesn't know which goals are essential and which ones would change if one of you weren't there. And it may not know that your resident salary is temporary. So I think of the calculator as one input, not the entire planning process.

Amber [00:07:43]:
I'd like to take a second to tell you about a FREE Medical Professional's Blueprint that I created with you in mind. At some point in your career, you realize it's not just about making more money. It's about making decisions that actually support your life. That's exactly why I created "The Pathways Perspective for Physicians." It's a simple, non-technical framework to help you think through your career, your money, your risk, and how everything connects as your life evolves. You shouldn't have to have a finance degree to build financial freedom. You don't need to have everything figured out. You just need a place to start.

Amber [00:08:21]:
You can download the FREE Medical Professionals Blueprint at: StittStrategies.com/blueprint. Your existing coverage belongs in the conversation, too. Maybe you already have life insurance through your hospital, university, or health system. That counts. Maybe you personally own a policy. That counts, too. Maybe there are substantial liquid assets available to your family. Those can be part of the analysis.

Amber [00:08:49]:
We're trying to understand the overall financial picture rather than simply adding another policy because a formula produced a large number. We'll have a separate conversation later in this series about employer-provided group life insurance because there are some important questions around portability, ownership, and what happens when employment changes. For today, the important point is simply: existing resources are part of the calculation. So what if the planning need is larger than the amount available today? This is where I think physician planning gets much more realistic. Let's say we go through the financial plan and determine that, long-term, a physician may want substantially more coverage. But based on current resident income and the carrier's financial underwriting guidelines, That entire amount isn't available today. That doesn't mean the planning exercise failed; it gives us information. Maybe an initial amount can be established now, then income changes, training ends, a new employment agreement begins, the family grows, and the insurance plan can be revisited.

Amber [00:09:56]:
That's exactly what we introduced in "RR S2 Ep 1": the plan can evolve. We don't necessarily have to force tomorrow's entire insurance need into today's financial circumstances. And this is where laddering can eventually help. Later in this series, we'll spend an entire episode on laddering life insurance, but here's the basic idea. Imagine someone eventually needs $3 million of coverage today, but not necessarily $3 million for the next 30 years. Instead of thinking about one giant policy for one giant period, coverage can sometimes be layered around different needs. For example, $1 million for 10 years, $1 million for 20 years, $1 million for 30 years. At the beginning, that's $3 million of total coverage.

Amber [00:10:45]:
After 10 years, the first layer ends. After 20 years, another ends. And the final $1 million continues through year 30. Why might that make sense? Because hopefully the financial need is declining, too. The mortgage balance may be lower. Investments may be larger. Children may be older. There may be fewer remaining years of income to replace.

Amber [00:11:07]:
That's the concept. We'll build it out much more carefully in the laddering episode. The number doesn't have to be perfect. This is something that can make life insurance planning feel much easier. We're trying to make a thoughtful financial decision based on the information available today. We're not pretending we can predict the next 30 years perfectly. Income changes. Families change.

Amber [00:11:30]:
Careers change. Homes change. Businesses change. Financial goals change. That's why I like thinking about life insurance as part of an evolving financial plan rather than a number we calculate once and never revisit. The question can simply be, "Based on what we know today, what financial risk are we trying to address?" That's a much more manageable conversation. Here's something interesting. LIMRA and Life Happens have been studying how consumers think about life insurance for years, and their 2025 research found that about 3 quarters of adults overestimate what life insurance actually costs.

Amber [00:12:08]:
And for younger, healthy adults, the difference is pretty dramatic. Those aged 30 and younger estimated the cost of a $250,000 20-year term policy at roughly 10 to 12 times what it actually costs. I see versions of this all the time. Many people assume, "I can't afford life insurance right now," before even looking at the numbers. And particularly with term insurance, sometimes they're surprised by how much protection can fit into their budget. Now, your actual premium depends on your age, health, coverage amount, term length, and underwriting. So I'm not telling you what your policy will cost. I'm telling you not to avoid the conversation.

Amber [00:12:48]:
You are always able to ask for quotes based on your health. Your family doesn't have to look like anyone else's. And when I say partner, or family, I mean that broadly. You may be married. You may not be. You may have children. You may never want children. Maybe you support your parents, a sibling, another family member.

Amber [00:13:08]:
Maybe you're building a business with someone. Maybe nobody currently depends on your income. That's relevant, too. Life insurance isn't about forcing everyone into the same family template. It's about identifying whether someone, or something, experiences a financial loss if you're gone. If the answer is no, your need may be very different from someone else's. That's okay. Here's where residents have a different problem.

Amber [00:13:33]:
Let's get into something an online calculator often doesn't explain. Let's say you calculate that your family would need $4 million. Can you simply apply for $4 million? Not necessarily. Life insurance companies don't only evaluate your medical history; they also evaluate whether the amount of coverage you're requesting is financially reasonable. For younger applicants, you may sometimes see guidelines based on a multiple of income. Something around 25 times income can be a rough reference point in certain circumstances. But I want to be very clear: that is not a universal rule. Guidelines vary by insurance company, age, income, purpose of coverage, and individual circumstances.

Amber [00:14:16]:
And this creates an interesting issue for residents. You may be earning a resident salary today, but everyone involved knows that's probably not your long-term income. So we need to separate what your future financial need may be from what can reasonably be supported today. Your resident salary may not tell the whole story. If you're approaching the end of training, there may be more context available. Maybe you've already signed an employment agreement showing your future attending income. That's relevant information. Maybe you have children, parents you support, a partner financially relying on your income, or other legitimate obligations.

Amber [00:14:55]:
Those details can help tell the financial story behind why you're requesting a certain amount of coverage. Does that mean an insurance company automatically approves whatever number you ask for? No, and I don't want to pretend it does, but it does mean we should accurately present your situation rather than assume your current resident paycheck tells the entire story. This is where working through the recommendation with someone who understands physician income trajectories can be helpful. There are really 3 numbers, so let's simplify everything we've covered. When someone asks me, "Amber, how much life insurance do I need?" I think about 3 numbers. Number 1: "The benchmark." What do credible calculators, established needs analysis methods, and physician-specific financial resources suggest? Start there. Use the data.

Amber [00:15:46]:
Number 2, "Your actual need." Now put your life around it. Who depends on you? What happens to the house? What was the plan? What would you want your partner or family to still be able to do? What assets and insurance do you already have? This is where the benchmark becomes personal. Here's another number that puts this into perspective. LendingTree did an analysis in 2023 and estimated that the basic additional cost of raising one child through age 18 was about $237,000. And that's before we start talking about all of the things that may be part of your family's plan: college, travel, extracurricular activities, private school, helping with a first car, or whatever you personally hope to provide. So when we're talking about life insurance for a young family, we're not just replacing a paycheck.

Amber [00:16:43]:
We're asking what it would actually take to continue raising that child in the way you had planned if one parent's income suddenly disappeared. Number 3, "What can be financially supported?" Now we introduce the insurance company's financial underwriting. What amount can reasonably be justified based on your age, income, employment situation, purpose for the coverage, and other circumstances? Those 3 numbers may land in roughly the same place, but don't assume they will. And we still haven't talked about your health. Here's where life insurance gets even more interesting. We figured out what you might need. We've considered what may be financially supported. And we still don't know what will an insurance company actually offer you, because now we introduce medical underwriting.

Amber [00:17:33]:
Your health history matters. Medications may matter. Past diagnoses may matter. Follow-up and stability may matter. Family history and other underwriting factors can matter. That's why I like to understand someone's health history early. And, when appropriate, consider pre-screening before deciding how to proceed. Because an online calculator can tell you that you need $3 million.

Amber [00:17:58]:
An online quote engine can show you an attractive price for $3 million. Neither one necessarily knows what underwriting will actually offer you. And that topic is another episode in this series because it deserves its own conversation. For now, remember: Need, financial justification, and medical underwriting are 3 different questions. But don't let the perfect number stop you. I don't want residents getting stuck here. Let's say your needs analysis suggests $3 million, but based on your current circumstances, putting the entire amount in place today isn't realistic, or financially supported. That doesn't mean, "Well, I guess I'll do nothing."

Amber [00:18:41]:
Maybe the right answer today is an initial layer of coverage. Depending on the individual circumstances, maybe that's $500,000. Maybe $1 million. Maybe $1.5 million. Maybe something completely different. Then you revisit the need as your career and financial life evolve. Remember what we said in "RR S2 Ep 1": your first insurance decision doesn't need to be your final financial plan. You can build in stages.

Amber [00:19:07]:
But there's a trade-off. Coverage you apply for later generally means you're applying based on your age and health at that later point. So we're not automatically saying, buy everything now. And we're not saying, wait until you're an attending. What we are saying is, understand the need. Understand what you can reasonably do today. Then build from there. If you're looking for one magic formula for how much life insurance every physician should buy, I don't have one.

Amber [00:19:34]:
Benchmarks are useful. Income multiples are useful. Calculators are useful. Historical data is useful. But none of those tools know what you promised your partner. They don't know what you want for your children. They don't know what you're building. They don't know what assets you already have.

Amber [00:19:51]:
And they don't know your medical underwriting. Use the tools, but don't outsource the decision to them. That's the distinction. Okay, so let's make this actionable. Here's your Responsible Resident prescription for "RR S2 Ep 2". Number 1: Start with the data. Use credible calculators, established needs analysis methods, and physician-specific financial education. Benchmarks give you somewhere to begin, just don't confuse a benchmark with a recommendation.

Amber [00:20:18]:
Number 2: Put your real life around the number. Ask, "Who depends on me? What happens to the house? What was the plan? What would I still want my partner or family to be able to do? What resources do I already have?" Give the number a purpose. Number 3, build the recommendation around you. Consider your current income, future employment, existing assets, existing insurance, your financial obligations, the people depending upon you, and eventually, your medical underwriting. The goal isn't to find the perfect number online; it's to arrive at a thoughtful number you can explain and support. So that's your responsible resident prescription. Start with the data. Put your real life around the numbers.

Amber [00:21:05]:
Then build the recommendation around you. In our next episode, we're getting into one of the most opinionated debates in life insurance: term versus permanent life insurance. What are you actually trying to solve? And here's my position before we even start: term versus permanent is the wrong first question. For many residents and early-career physicians, term insurance will likely do much of the heavy lifting. Permanent insurance can have a place, too. I personally own both. But permanent insurance is a commitment. It has to be designed appropriately, and it needs to fit alongside the rest of your financial plan.

Amber [00:21:41]:
Whole life. Guaranteed universal life. Indexed universal life. Variable universal life. These aren't all the same thing. And if every financial problem somehow leads an advisor to the same insurance product, I think you should ask more questions. We're going to talk about all of that next. Because the question isn't, "Which product is better?" The question is, "What job do I need this insurance to do?" I'll see you next time on The Responsible Resident podcast.

Amber [00:22:10]:
If this episode helped you think a little more clearly about your next step, that's the goal. You don't need to have everything figured out, but you do need to take ownership and take a meaningful step forward today. Thanks for listening to The Responsible Resident. As a reminder, this podcast is for general educational purposes only. It is not legal, tax, or individualized financial advice, and coverage options will vary based on your personal situation.