Is Life Insurance Through Work Enough for Physicians?

Amber Stitt [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. Today, I want to talk about something I see all the time. I'll ask a physician whether they have life insurance and they'll say, "Yes, I have it through work." Great! My next question is, "What exactly do you have?" That's usually where the conversation gets a little quieter. Often, it is $50,000 of group term life through the employer. Maybe it's 1X salary.

Amber Stitt [00:00:39]:
Maybe it's 2X salary. Or, maybe you elected additional coverage during open enrollment. You know it's somewhere on your benefits statement, but that's about it. Employer-provided life insurance can absolutely be valuable. The mistake is assuming that because you have life insurance through work, your life insurance planning is finished. Let's start with the amount of coverage. Employer plans commonly provide a base amount of life insurance, sometimes expressed as a multiple of your salary, or as a fixed dollar amount. Some employers also allow you to purchase supplemental coverage.

Amber Stitt [00:01:11]:
But remember what we discussed earlier in this series, your life insurance need isn't necessarily determined by your current salary. Think about a resident, or fellow. Your salary during training may look very different from your income a few years from now. Meanwhile, your family may be planning around a mortgage, children, education, debt, retirement, or the future income you are expected to contribute. So the first question isn't, "Do I have employer life insurance?" The question is, "How much coverage do I actually have, and how does that compare with what my family would need in my absence?" Then we need to ask, "Who owns the coverage?" This is where employer coverage and personally owned coverage begin to look different. Your employer coverage exists because of your relationship with that employer. A personally owned life insurance policy is something you've purchased independently. You own the contract.

Amber Stitt [00:02:05]:
That's an important distinction for physicians because careers change. You finish residency. You complete fellowship. You move across the country. You change hospital systems. You join a private practice. You become a partner. And maybe someday you start your own practice.

Amber Stitt [00:02:21]:
Your career can move faster than your insurance planning. So, what happens to your coverage when you leave an employer? This is one of the first things I want physicians to investigate. What happens to your employer life insurance when your employment ends? Don't assume. Some group plans may have conversion, or portability provisions, subject to the terms of the plan. But those options can work differently from simply owning an individual policy from the beginning. You need to read the actual plan documents and understand what choices, if any, are available when you leave. Because, "I have life insurance through work," can quickly become, "I had life insurance through my old job." So, what about supplemental coverage through work? This is where the conversation gets more nuanced.

Amber Stitt [00:03:06]:
During open enrollment, you may have the opportunity to buy additional group life insurance. Sometimes it looks very attractive. It's convenient. The premium comes out of your paycheck. Depending on the plan, there may be an amount available with limited health questions, or without full individual underwriting. That can absolutely have value, but I still want you to understand what you're buying. Is the coverage portable? Does the cost change as you age? How much coverage can you actually obtain? What happens if you leave? And are there provisions that allow you to continue or convert the coverage? Convenience and ownership are not the same thing. In contrast, personally owned coverage creates a different kind of control.

Amber Stitt [00:03:48]:
With an individually owned life insurance policy, assuming you continue meeting the contractual requirements and paying the required premium, the policy isn't dependent on staying with a particular employer. You can move from residency to fellowship, change hospitals, join a practice, and move to other states. Your policy generally goes with you according to the terms of your contract. For physicians expecting multiple career transitions, that portability can be an important part of the planning. Do you have to choose one or the other? No, and I think this is where people sometimes make the conversation unnecessarily complicated. This doesn't have to be employer coverage versus individual coverage. It can be employer coverage plus individual coverage. Maybe your employer provides a useful foundation.

Amber Stitt [00:04:35]:
Great! Account for that when evaluating your overall life insurance need. Then determine whether personally owned coverage has a role in filling the remaining need. The goal isn't to collect as many policies as possible. The goal is to understand what each piece is doing. 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."

Amber Stitt [00:05:10]:
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. You can download the FREE Medical Professionals Blueprint at: StittStrategies.com/Blueprint. Let's not forget what we talked about during our last episode. Remember, we talked about beneficiary designations and why they deserve more attention than they usually get. Your group life insurance counts, too.

Amber Stitt [00:05:50]:
In fact, employer coverage may be one of the easiest policies to forget about. Think about when you probably completed that beneficiary designation. Maybe it was during residency orientation. Maybe it was your first week at a new hospital and you were completing what felt like 100 different benefit forms. You named someone as the beneficiary, clicked submit, and moved on. Then life happened. You got married, divorced, remarried, had children, completed your trust or estate planning. Or maybe the person you named years ago simply isn't the person you would choose today.

Amber Stitt [00:06:25]:
Outdated beneficiary designations have created real disputes involving employer-sponsored benefits, including cases involving former spouses. And that's the important lesson. Don't assume the insurance company knows what you would want today. What you intend and what your paperwork says can be 2 different things. Updating the beneficiary on your personally owned life insurance doesn't necessarily update your employer coverage either. Each needs its own review. That's why I like using open enrollment as a trigger. You're already reviewing your benefits.

Amber Stitt [00:06:57]:
You're already logged into the system. Take another couple of minutes and check the life insurance beneficiary designation. Who is your primary beneficiary? Who, or what, is your contingent beneficiary? And does that still reflect the plan you have today? As a professional on the physician career path, imagine you're finishing fellowship. Your hospital provides life insurance that is equal to 2 times your salary. You're married, have a young child, and you're about to begin an attending position with a significant increase in income. You look at your benefits and think, I already have life insurance. But now, as a responsible parent and spouse, let's ask ourselves better questions. How much coverage is actually there? Is that enough for the financial plan you've built with your spouse? What happens to the coverage when fellowship ends? Do you have any personally owned coverage that goes with you? And while you're looking at the policy, who did you name as the beneficiary when you started fellowship? Suddenly, we're no longer checking a box on an employee benefits statement.

Amber Stitt [00:07:58]:
We're doing life insurance planning. So here is your Responsible Resident prescription for this episode. This one is simple. Pull up your employee benefits portal, or benefits booklet, and find your life insurance coverage. Then answer 4 questions. Number 1, how much employer-provided life insurance do I actually have? Number 2, what supplemental coverage have I elected and what does it cost? Number 3, what happens to that coverage when I leave this employer? And number 4, who are my primary and contingent beneficiaries today? And going forward, create this one good habit: Open enrollment means beneficiary review. You may discover that your employer coverage provides a meaningful part of your overall protection.

Amber Stitt [00:08:46]:
You may discover a gap. Or, you may simply discover that you need more information. All 3 are useful outcomes because employer life insurance isn't necessarily good or bad. It's a benefit. The important question is whether you're treating it as one piece of your overall planning, or accidentally relying on it as the entire plan. Until next time, keep asking better questions before you need the answers. 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.

Amber Stitt [00:09:25]:
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.