f you are considering buying life insurance but aren't sure where to begin, you're not alone. Many physicians know they need some type of coverage, but choosing a coverage type and amount can be overwhelming if you aren't familiar with insurance industry terms and jargon. At its most basic level, life insurance provides a payment after you die, called a death benefit, for the policy amount you choose up front. You pay premiums periodically to keep the policy in force just as you do for auto, homeowners or health insurance. If you die while the policy is active, the policy pays the death benefit to your named beneficiary(ies). Why Doctors Need Life Insurance There are almost as many reasons to buy life insurance as there are companies selling it. Some of the most common reasons doctors buy life insurance coverage include the following: Provide funds for your loved ones' living expenses. Your income will stop at your death; life insurance can be an inexpensive way to ensure that if you die prematurely, your spouse, children or other dependents will have the funds they need to continue their current lifestyle for a period of time without worrying about how to pay for things. Provide liquidity to pay off outstanding debt. You intend to live long enough to pay off your mortgage, private student loans and other debt. Life insurance can provide some comfort knowing that if you die prematurely, your loved ones won't be saddled with that debt. Tax planning. If your estate will be subject to state or federal estate taxes, life insurance is an inexpensive way to create liquidity to pay those tax obligations after your death. Physician partnership/practice needs. If you are in a partnership or have ownership stakes in a practice with other physicians, consider using life insurance to fund business continuation in the event one of you dies prematurely. Insure your spouse. Even if your spouse doesn't work outside the home, it's important to consider the potential financial impact of his/her premature death. Consider expenses like childcare, employment, housekeeping, meal preparation and other tasks your spouse handles today. Life insurance can provide funds to manage those costs in the event of your spouse's death. While there are many other uses for life insurance, these are some of the most common. Choosing Coverage Life insurance for doctors and other professionals comes in different "flavors." Term life insurance policies are the least expensive and are a great option for most physicians who expect their need for life insurance to decrease over time. While insurance companies and agents also offer "permanent" policies, they can be expensive and you may end up paying for coverage you don't need in 30 years. Term policies are designed for a set period of time. That term can be 20-25 years or more, one-year renewable term, or anything in between. As a rule of thumb, buying term insurance when you are young and healthy for the longest term possible is a good strategy. The premiums should be low, but you will have the peace of mind knowing that you are covered for the duration of the policy term even if your health changes for the worse. Likewise, buying more coverage now than you think you need today is also advisable. If your goal is to allow your spouse and children to continue their current standard of living if you die prematurely, a $200,000 policy probably won't cut it if you die next year. Don't forget to factor in the cost of inflation when determining how much insurance you need; a $2 million policy today will not be worth $2 million in 20 years, or even in five years. Finally, you should re-assess your life insurance needs every few years, or as your financial or living situation changes. Insurance needs change over time, so you will want to adjust coverage up or down as needed so you have coverage in place to do what you want it to do. How to Buy Life Insurance You have a lot of options when it comes to purchasing life insurance. You could take a do-it-yourself approach and shop online, but a better course of action may be to work with an independent insurance agent licensed in your state of residence. An independent agent will be able to help by providing quotes and information about various providers and their policies, and can explain policy terms, endorsements and coverage options. Choose a reputable insurance company with competitive premiums. You may also want to consider buying more than one policy in different amounts and for different periods of time. This gives you a little more flexibility to design coverage for your needs, although you may pay more over time for the same amount of coverage. Talk to a financial advisor/insurance agent who has experience with financial planning for doctors to discuss your own insurance needs and come up with a plan to protect what is most important to you. Source
