Episode transcript
Published 5 April 2022. Transcript generated automatically from the episode audio; it may contain errors.
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Amber Stitt [00:00:04]:
Hello, and in today's Physician Edition episode, we're covering Issue and Participation Limits. How much coverage can you buy, either by looking at your income alone and also any other group insurance you might have? I hope you enjoy. Scott and I would like to discuss Issue and Participation Limits as well as how much Increase Option that maybe you should buy.
Scott Nelson-Archer [00:00:29]:
When you look at the caps of the amount of benefit these carriers will actually issue, you need to be a little bit careful, because sometimes, you know, you can kind of get wooed into making you feel good, and kind of plays to some people's ego about how much benefit that you can get.
Amber Stitt [00:00:44]:
Mm-hmm.
Scott Nelson-Archer [00:00:45]:
You know, I often hear people come to me and say, Gosh, you know, I was offered to buy a dual option plan that can give me $35,000 of income." Well, that's great. It takes $1,565,000 of income to qualify for $35,000. What do you think in your industry or your specialty that you're going to be capped at?
Amber Stitt [00:01:05]:
And do you want to buy that much?
Scott Nelson-Archer [00:01:07]:
Correct. You know, there's a need and a want. You know, here's the needs for the family: house, food, clothing, shelter, utilities, taxes, things of that nature. You know, and then certainly you want to make sure that you're buying what the possibilities might be for, but I can't tell you how many times I've had a primary care physician come in and say, "I want a cap of $25,000." Well, it's going to take $750,000 to qualify for that.
Amber Stitt [00:01:33]:
So, as an employee, typical employee contracts are going to have some free disability that is going to be in the way. It'll cause a barrier to how much you can buy anyway. So, we really want to look at your specialty, your compensation model, what type of practice you might be working within, because why pay for something that you'll never use.
Scott Nelson-Archer [00:01:53]:
Right. You don't want to overcomplicate it. And once again, if you're dealing with a dual-income contract, if you think about it, it's not writing 2 checks a month or 2 checks a year that's complicated. What would be complicated is filing 2 sets of claims and dealing with 2 sets of claim processes. So, if you can do it under one contract, it's typically better. And if you look at thresholds today, here in 2020 it takes about $250,000 to qualify for 10 grand, about $350,000 to qualify for 15 grand, about $450,000 to qualify for about 17, about $550,000 for 20, about $900,000 for 25, and all the way up to, as I already mentioned, $1.5 million to qualify for 35. So you need to kind of balance capacity versus income, along with need.
Amber Stitt [00:02:49]:
Often, sometimes when people look at those income levels, they're surprised because they're truly calculating 60% of their income. But a lot of times, the higher the income, you might be bouncing between 50% to 60% of income replacement. And so just be mindful of that, too. You might read about 60% rule, but usually over about $200,000, you'll see that that 60% gets pulled back down a little bit.
Scott Nelson-Archer [00:03:14]:
It does. And then of course, if you're talking about a 60% rule in regards to an employer plan, you kind of forget about benefit compressions that are over there that are going to reduce your benefits based upon Social Security, workman's comp, no-fault insurance, distributions from a 401k/employer plan, and things of that nature. You also want to make sure that whenever you're looking at those numbers that you're dealing with the after-tax spendable value.
Amber Stitt [00:03:41]:
So self-employment income can change that too, depending upon expenses?
Scott Nelson-Archer [00:03:45]:
Absolutely.
Amber Stitt [00:03:49]:
Thank you for joining us on today's episode of The Amber Stitt Show, Physician's Edition. For more information about this podcast, books, articles, and more, please visit me at: www.AmberStitt.com. For more information about physician insurance contracts, please listen to the entire Physician Edition podcast series or visit us at: www.MDDisabilityQuotes.com. Thank you for listening!
