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Episode 73: All You Need To Know About Disability Insurance w. Larry Keller

Nov 23, 2020

This Episode

Interview w/ Larry Keller

You Will Learn

– Big mistakes physicians make when looking at disability insurance

– 3 types of ways financial advisors are compensated, and how that effects planning

– The biggest mistakes that Larry sees policy writers make

Resources & Links

Contact Larry: lkeller@physicianfinancialservices.com

 
Give Larry a call: Larry Keller: (516) 677-6211

This week, I’m talking to my friend, Larry Keller, about the critical importance of physician disability insurance. We talk about how a physician should be thinking about disability insurance in the context of their own financial plan. Additionally, we discuss some special considerations that you should keep in mind as you’re considering putting coverage in place as an anesthesiologist or pain management doctor.

<br></br><mark>Justin (00:00:03):</mark>
I’m talking to my friend, Larry Keller about physician disability insurance, specifically. How should a physician be thinking about disability insurance in the context of their financial plan? If you’re an anesthesiologist or pain management doc, what are some special considerations that you should keep in mind as you’re considering putting coverage in place as always. Thanks for

<br></br><mark>Justin (00:00:47):</mark>
Hello, everybody. Welcome to episode 73 of APM success. I’m very pleased to be joined by a special guest today. He’s a friend and colleague someone I’ve done some work with in the past. He’s also in the insurance business. So we’re going to have to run the content of today’s conversation past all of our friends and compliance. His name is Larry Keller joining me from New York. Larry has been in the industry for 29 years. I, I’m not allowed to use words to describe how amazing he is at his job due to compliance constraints, but I have very much benefited from his expertise over the years. He’s one of these guys that can just rip a policy apart and put it back together to put this in sort of like medical par Lance, if you’re in the, or, and you’re in a crazy case, and there was like 10 or 12 doctors in there all trying to do stuff to save a patient and everything’s going wrong. And then that one doctor walks in the room and you’re like, Oh my gosh, everything’s going to be okay. That’s the kind of guy that Larry is, but he’s the insurance equivalent. So Larry, thank you very much for joining us today.

Larry Keller (00:01:40):
Oh, very glad to be here. Now. I just have to live up to the reputation.

<br></br><mark>Justin (00:01:44):</mark>
So we’re going to talk about disability insurance. It’s amazing to me that I’ve gotten into the seventies of number of episodes for APM success. And we have never talked about disability. Cause I think disability insurance is one of the most important, if not the most important, which is my belief, the most important type of insurance that a physician can have. And frankly, it’s a place where people can make a lot of mistakes when putting insurance in place, whether they just don’t get it or don’t understand the important terms and things. So I want today’s content to be actionable and helpful. We’re not going to get too far into the weeds, but we want to give you dear listeners some context for important questions to ask important things, to be aware of in looking at physician disability. And then Larry is going to give us an update on some of the important changes happening right now in that corner of the industry. So Larry, just start us off. You know, you’ve worked with a lot of positions. You’ve seen a lot of mistakes, I’m sure. Are there any like crazy mistakes you’ve seen or maybe funny claims or things that just stick out in your memory as Holy cow, that doesn’t happen every day?

Larry Keller (00:02:43):
There’s two things that jump out that unfortunately do happen every day, right? So the first thing and most listeners, if they’ve heard anything about disability insurance, they’ve always been told to get an own occupation. Some people will use almost the term own occupation, own specialty definition of total disability. And I’ve had a lot of physicians say to me, well, you know, my policy is own specialty. It protects me as you know, let’s use plastic surgery, for example, as a micro surgeon. And I really quickly remind them that the definition of total disability is not solely limited to your specialty in order for that to happen. You actually have to be performing the duties of your specialty at the time of claim. And a lot of days we find people changing medical specialties or integrating other careers within their medical specialty. And as a result of that, the definition is always based on what were you doing immediately prior to your disability?

Larry Keller (00:03:46):
So if I was, you know, let’s say a plastic surgeon and I bought my policy and I was doing a reconstructive microsurgery and I’m disabled and I can no longer perform my duties as a reconstructive micro surgeon, even though I might be able to do general plastic and reconstructive surgery, but I cannot do the micro. I would meet the definition of total disability. The question then becomes if I did the fellowship, but now I’m in private practice and I’m really not doing microsurgery. Does my policy continue to define my occupation of that as a micro surgeon? And the answer to that is no. And if I was disabled and I can no longer perform my duties as a micro surgeon, does that trigger my definition of total disability and the insurance company is going to come in and they’re going to look at my billing codes and going to look at the way that I was practicing. And they’re basically going to see that I don’t do microsurgery. And they’re going to say, well, not only are you not totally disabled, you’re not even residually or partially disabled because you don’t have a loss of income. That’s meeting the minimum requirement for us to pay you a partial benefit. So number one is own occupation is what someone should have, but you don’t actually get to define your occupation. Your duties will actually define your occupation.

<br></br><mark>Justin (00:05:09):</mark>
And that’s actually a perfect example because anesthesiology and anesthesia slash pain management and anesthesia slash critical care is probably a perfect corollary where many of these same questions come up, you could be anesthesia, boarded and doing work in the ICU as a critical care physician. And if your own arch anesthesiology, disability, policy references, anesthesia and Ora anesthesia as your specialty, you might run into that same problem. Would that be fair to say?

Larry Keller (00:05:37):
Yeah, that’s a hundred percent fair to say. So let’s say you have someone and this is very common too. You know, they’re doing interventional pain management, but there’s also still doing surgical anesthesia. Then the question becomes as well, if you can’t do the interventional procedures, but you could still do operative anesthesia. Well, what percentage of your income did you lose? So not only is it important that we have a strong definition of total disability, but we also have a strong definition of residual or partial disability. So the first thing that I see physicians get wrong is they think they have an own occupation definition within their policy. But in fact, they actually do not. And as of recent years, we’ve seen the advent of some definitions that are really designed to sound like own occupation, but they’re not. So one company specifically, a couple of years ago, they introduced something called the medical occupation definition of total disability.

Larry Keller (00:06:36):
And what it says is if you’re an anesthesiologist and let’s just use general anesthesiologist at this point, you’re, we’re going to give you two choices. Option. Number one is if you’re disabled and you cannot perform the duties of an anesthesiologist and you discontinue gainful employment, so you choose not to work, we’re going to pay you your full disability insurance benefit. The other option is you can choose to work in your occupation or in another occupation. And if you earn dual income doing that, we are going to potentially reduce or eliminate your benefit. So it’s really nothing more than a loss of earnings policy. And if I choose not to work and I can no longer perform my duties as an anesthesiologist, full benefits are paid. If I choose to work in order to receive benefits, I have to have a loss of income of at least 20% compared to my pre-disability income.

Larry Keller (00:07:35):
And in order to get everything this specific company says, you have to have a loss of income of more than 80%. Now they did come out with a more recent version of this, and this is called the medical own occupation definition of total disability. But an ideal own occupation definition would say, if I’m an anesthesiologist and I cannot perform my duties as an anesthesiologist, it does not matter what else I do. It does not matter how much money I can make or do make in another occupation or medical specialty. And this is not what this policy says. This policy will look at. What was your monthly pre-disability income? Let’s just make it up. Let’s say it was $20,000 a month. What is my post disability income? Let’s say it’s $10,000 a month. Whether I’m working in anesthesia or I’m working in something entirely different. I know that I’ve got a 50% loss of income, but from a dollar perspective, I went from 20,000 a month to 10,000 a month.

Larry Keller (00:08:38):
This particular company will now pay you the lesser of the dollars that you lost for the month or your policies benefit. So if I lost $10,000 and my monthly benefit is $10,000 or less, that’s what I would receive. The issue I with this is the more successful you become in your new endeavor and your income is rising, which means your loss of monthly income is declining. Your policies benefit is being reduced and potentially will even be eliminated. So why would somebody buy this? I will tell you the truth. They didn’t listen to a podcast like yours. They didn’t spend a lot of time. They were introduced to someone. Maybe they met someone at the hospital. That person might represent a specific company. That’s what was shown to them. They didn’t know what questions to ask and they checked it off their list and they moved on.

Larry Keller (00:09:37):
At this point in time, there are only six companies that offer a true own occupation definition of total disability, to physicians, anesthesiologist, and pain management physicians of course included. So we’ve got Berkshire, which is a guardian company. We’ve got standard insurance company. We’ve got mass mutual Ameritas, principal and Ohio national. So we’ve got six. Now this can vary based on state. So for example, if you’re listening to this and you are an anesthesiologist in the state of California, principle does not offer their own occupation definition in that state. And this is called the regular occupation rider. If you buy your policy in any other state and you subsequently moved to California, you could take it with you like your luggage, but you cannot buy a policy in that state with this definition. So right away, if you’re in California, I myself would knock principal off the list. Ohio national does not sell policies in the state of New York. They also do not sell policies in the state of California. So six is your best case scenario. It might be less based on geographic location and medical specialty.

<br></br><mark>Justin (00:10:57):</mark>
And just to point out, the devil really is in the details. Obviously, an insurance policy is nothing but a big long contract with unfortunately, a lot of misdirection and purification in some cases. And what you just described, which is medical own occupation definition put forth by some company is technically different than an own occupation. So, you know, physicians have this buzzword in their brain and they know, Oh, own occupation is what I need. I know it’s in my contract because I’ve got medical own arc, but it’s not the same. So I think if there’s anything we can take away from this, a couple of things, number one, you’ve got to really trust the person you’re working with. Number two, don’t take anything at face value, especially the definition of this term, because it’s very, very important. Arguably next to maybe the payout amount, the, the most important variable defining the terms of the policy.

Larry Keller (00:11:45):
Oh, absolutely. No. The next thing that I see all too common, and we’re going to talk about this in a lot more detail is the premium rates. So if you’ve ever looked at this, we’ve noticed, and we know that the rates for females are traditionally much higher than they are for males. And you might have

Larry Keller (00:12:05):
A choice as

Larry Keller (00:12:08):
Twins that were separated at birth, and one became an anesthesiologist and the other one became pain management physician. And they’re the same age. They make exactly the same money. They bought policies from the same company, but you know, one’s male and one’s female, they’re fraternal, not identical twins. And we find that the female is paying a lot more, typically 50 to 60% more than their male counterparts. So the first thing that might go through your mind as well, why is this? Well, we know that females go out on plane at a much higher rate. They’ve got pregnancy and complications of pregnancy. They’ve got a higher rate of auto-immune

Larry Keller (00:12:46):
Disorders. They’ve got

Larry Keller (00:12:47):
A higher rate of claims related to mental slash nervous and or substance abuse disorders as do anesthesiologist and pain management physicians in general, which we’ll talk about. So as a result of that, the insurance companies in the past had always priced their policies on a gender distinct basis where the males paid a male rate, the females paid a female rate. And like we said, the females paid a much higher rate. Now over the last decade, many of the insurance companies, although they’re getting out of this slowly, but surely had offered, what’s known as a gender neutral or a unisex rate structure. And this is really nothing more than a hybrid rate between the male and the female. And what you would find is if I told you, Hey, Justin, you’re going to get a discount of 20% and it’s going to be off of a unisex rate. You’re not going to get a full 20%. You’re maybe going to net out

Larry Keller (00:13:44):
12%

Larry Keller (00:13:45):
Out of 20 a female. The math is completely different. It’s not going to be 20%. It’s going to be more like 40 or 50% depending upon, you know, age and benefit amount. So you look at that and you say, well, if I am a female and I am given a choice of a policy that has a female rate with a discount or a unisex rate with a discount, I really want to make sure if available, I am getting a policy with a unisex rate and discount, unless there are other factors that are being taken into consideration in the policy that I want to purchase. But as a general rule, if the policy that you’re looking at checks all the boxes in terms of what you want to have, and a unisex rate is available, you will save a tremendous amount of money. And we’ll demonstrate this later over your career. I have reviewed policies by insurance companies where they offer both a unisex rate and a discount and a female rate with either a discount or no discount. And surprisingly enough

Larry Keller (00:14:50):
Policy holder, the same company

Larry Keller (00:14:52):
Might be overpaying unnecessarily simply because their agent didn’t know of or have access to a discount that they literally could have purchased their policy under.

<br></br><mark>Justin (00:15:07):</mark>
And just to give us maybe a concrete example, can you maybe have one carrier, give us an example of like a male unisex and female rate and sort of stratify those premiums for us so we can understand how that, that cost difference works. Sure.

Larry Keller (00:15:21):
And we’ll go into this in a lot more detail, but you know, one company, probably the most well-known company that’s been doing unisex rates for attending physicians for the last several years this happens to be principal. They stopped offering unisex rates to residents and fellows specifically back in March of 2017. And they actually just made an announcement that as of January 1st of 2021, they are no longer going to be offering policies with unisex rates. And that’s really the shot heard round the world, you know, for all intents and purposes, they were really the last company doing this. So let’s just take an example of a anesthesiologist. And there are 35 years old, you know, they’re in my home state of New York and they’re buying a $15,000 a month benefit. That basically would mean if they had no other coverage, they’re earning $360,000 or more.

Larry Keller (00:16:21):
They are going to do a 90 day waiting period. We’ll talk about what that is. They’re going to have benefits payable until age 65. And then they’re going to add, what’s called a residual disability and recovery benefit. We’ll talk about that. A cost of living adjustment rider, and then they’re going to have increase options on there to allow them to purchase up to a total of $20,000 a month in their future. As their income continues to rise while the annual premium for this for a female would be roughly $11,794 a year. You know, literally almost a thousand dollars a month. Once we throw a unisex rate and a discount onto this, the premium drops to 6,004 Oh five or a difference of roughly $5,389. I mean, it is a monster it’s difference and we’ll do the math on this later. And we’ll talk about how substantial this can actually be over someone’s career.

Larry Keller (00:17:18):
So the two biggest mistakes for those of you that were kind of dozing off, or it might be in your car or at the gym. And I know I’m not the most exciting guy to be listening to. If you’re working out. Number one is you have to have an own occupation definition of total disability. This is the only definition that’s going to allow you to be deemed disabled. If you cannot perform the duties of your occupation, what you were doing immediately prior to your disability, even if you choose to work in another occupation or another medical specialty. Number two is if you’re a female, ideally you do want to have a policy with a gender neutral or a unisex rate structure. This will save you thousands of dollars over your career. The other mistake that I see kind of falls along the line with number one, okay.

Larry Keller (00:18:09):
I didn’t buy an ideal policy. I’ve realized the error of my ways, and I want to change this. Can I do it generally? The answer is yes, unless your health has changed as well. And let’s say you bought a policy. You now have a back issue. You’ve got a disc herniation at L four L five. If you were to apply for new insurance during a medically underwritten review, the underwriter who looks at your risk says, okay, Larry, we’re ready to issue your policy, but we are not going to be able to cover any disease disorder, treatment or complications related to your lumbosacral spine. It’s discs, ligaments, muscles, or nerve roots with the exception of laceration or fracture, but your existing policy does not have this. So now you’re really torn. Do I go with a better policy with a better definition of total disability and potentially a better cost, but my lumbosacral spine is not going to be covered or do I just keep what I have, even though it’s not ideal, my lower back is covered.

Larry Keller (00:19:22):
And I would submit, I would keep the policy without the exclusion rider, because if I was a car I’ve already been in an accident. And if I pull into a body shop and ask them to fix it, but say, Hey, wait, before you fix it, let me go sign up for my auto insurance policy. It’s really not going to happen. And unfortunately, in the disability insurance world, we look at what’s called probability underwriting. You know, what are the odds of someone filing a claim or have the odds increase because someone has this pre-existing condition. And if the answer is, yes, we are going to take adverse action. And we’re going to protect ourselves against that. Well, if I have a policy that is not going to limit this, I’m probably going to hold on to that. And as a result, you know, now that mistake or that lack of education at the time of purchase really only compounds itself.

<br></br><mark>Justin (00:20:25):</mark>
One of the challenges with medical education is that there’s so little talk of money and it’s kind of treated like a dirty word. And that’s true in all different contexts, whether it’s student loans or income, or, you know, a different like compensation structures or mechanisms in a practice and physicians are significantly like way behind when they’re becoming attendings, as you know, so maybe just take a minute and describe some of the challenges inherent with the compensation of financial advisors and or insurance people and what it means to be interacting with a fee only advisor in that context and how that helps.

Larry Keller (00:21:03):
Yeah. And you know, there’s different models in the way financial advisors are compensated. You know, none of them are inherently ban. None of them are inherently good. They all have certain conflicts associated with them. I think at the end of the day, the better insurance and financial advisors will look to manage those conflicts. And I think that you have to be transparent with your clients. So from a financial planning standpoint, you really see three types of ways financial advisors are compensated. So the first one is going to be a fee only advisor. These individuals do not sell products. They are basically selling you their time and their mind. And you’re paying for a service. You are going to receive ideally the service that you deserve. And at that point, you can decide how you want to move forward with your financial plan or not move forward at all.

Larry Keller (00:21:57):
You got the advice that you paid for the second one, we’re going to call as a, a fee-based advisor and a fee-based advisor essentially says, I’m going to charge you for advice, but I might also sell you financial products and I’m going to be compensated for both of those. And again, there’s nothing inherently bad about that. It’s just a matter of, do you understand how the advisor is being compensated and how that might come into play in terms of their recommendations? And then the third one, we get a terrible reputation. By the way, is the commissioned advisor. And people will often say the person that’s getting paid based on a sale of a product. They only have one incentive is to sell you the product. And if they don’t sell you anything, they’re not going to be compensated. And that might be true for someone that’s very new in the industry.

Larry Keller (00:22:50):
And they don’t have a lot of people that they’re meeting with. And maybe they had three appointments for the week. And the first two didn’t go so well. And now they’re down to their last person, but you know, if you’re dealing someone that’s been around, that’s experienced and they’re past the hardest part of the industry, which is finding people to meet with on a favorable basis, they really are very happy to educate and give out information. In fact, I tell people all the time, I really don’t want to be your first phone call. I’d rather be your last phone call. I’m happy to talk about the products in general and help you find something that’s going to ideally meet your individual needs, goals and budget. But at the end of the day, we’re really nothing more than a sounding board. And when I review things with clients, I give them the pros.

Larry Keller (00:23:42):
I give them the cons. If they’re like me, after they talk to someone like me, they’re going to go right to the internet. And they’re going to say, can I try to find something where, what this person told me was inaccurate? And boy, once I find that, now I have a reason to never speak to that person again. But if they do that and they can’t find anything that goes against what they were told, in fact, everything that they find reinforces what they were told. Now they know they’re probably dealing with someone that they want to be dealing with and whether it’s insurance or whether it’s financial advising or whether it’s medicine for that matter. A lot of it’s going to come down to personality. Do I see myself interacting with this person over a long period of time? Do I like this person? And do I think this person can identify with the needs that I have as an anesthesiologist or pain management physician? And if the answer is, yes, I like this person. I understand how they’re compensated. I’m okay with how they’re compensated. Ideally, I think that I’m going to be in a good relationship with this person, then, you know, you’ve done it, right. And if you’re really concerned or you’re unsure, speak to multiple people, you know, whether it’s financial advising or whether it’s insurance, that way you have something to compare to, without that, you don’t know, you know, it’s almost like that saying you don’t know how good it was until it’s gone. Right?

<br></br><mark>Justin (00:25:10):</mark>
Yeah. And so whenever I work with my clients and with Larry, the way that the transaction works is I say, okay, it looks like we need something here. I know that my client is moving to XYZ state, this practice. I know that Larry is a guy who’s well-versed in all of the different policies available in all different practices and all different residencies. And so he’s going to go through his little Rolodex and he’s going to say, okay, this practice in this city, this number of physicians, we’ve got X number of doctors already on this carrier. I can get a discount and this is going to be the most competitive pricing. And he’s going to be able to draw from his you know, the proprietary spreadsheet that he has, where it keeps track of all the stuff. And then he’ll sell this policy to my client and Larry will get the commission.

<br></br><mark>Justin (00:25:54):</mark>
This is all perfectly normal. And just the way it flows. And the fact is you can’t get disability insurance without paying a commission to somebody. This is another thing that there’s like a dirty word association with, Oh, somebody is getting a commission. They’re getting rich off of me. Like you literally can’t get disability unless somebody gets a commission. And furthermore, the irony, you know, if you go to fact check something that Larry tells you, which I always say, listen, do all your research, do the due diligence. It’s very important. You’re probably going to get a white coat, investor.com. You’re probably going to do like physician disability insurance. What you’re going to find is the top like seven articles on white coat about physician disability. Insurance are authored by Larry Keller, the guy who is speaking to us right now. So definitely an authority in the space and somebody who I’m pleased to be speaking with right now. Larry, as you think about this shift in what principal has said about unisex rates, starting January 1st, 2021, that huge discount you described that female physician, who’s 35, who wants $15,000 of coverage, goes from paying almost a thousand a month to the unisex rate was coming in at roughly half of that. What should we be doing? What should female physicians be aware of? Or how can they prepare in order to, you know, either get in under the wire or make sure that they’re protected the way they need to be?

Larry Keller (00:27:05):
Yeah. So to get in under the wire, you know, residents and fellows, like we said, principals stopped offering unisex rates back in March of 2017. Now residents and fellows can find unisex pricing in a couple of ways. The first way is specific to the hospital in which they’re doing their training. You know, there are insurance companies like Ameritas, a standard insurance company, Ohio national that have unisex pricing. And there is no medical underwriting required. There’s some gatekeeper questions, but that’s really about it. So if someone has medical issues, this might be a great way to go. Not only to get the own occupation definition, not only to get unisex rates, but also to protect themselves against a preexisting condition. Typically, what you’re going to find is on a guaranteed standard issue plan, not all of them, but some of them are going to have a pre-existing condition limitation.

Larry Keller (00:28:01):
And typically it’s going to read something to the effect of, well, Justin, look, if you’ve taken a prescription medication or you’ve seen a physician, or if you were prudent person, you should have seen a physician. And it was within three months prior to applying for this insurance. And now you become disabled within the first year of owning it as a result of one of those conditions. We’re not going to pay that that’s going to fall under the pre-existing condition limitation, but after you own the policy for 12 months, even those preexisting conditions are covered. So let’s say I did have a back problem. I had a lumbosacral issue and I had the ability to buy a policy with a unisex rate, a fully underwritten or with a unisex rate, through a guaranteed standard issue plan. And I knew if I went fully underwritten, I was going to get an exclusion rider on my back and it could potentially be reconsidered in the future, you know, with then current medical information.

Larry Keller (00:29:00):
And they would review medical records and ask me medical questions. But I knew after 12 months, my back Ryder was essentially going to self-destruct after a year, I’d be all over the guaranteed standard issue plan. So those are endorsed. They are limited to specific agents at specific hospitals. Thankfully I know where the majority of them are. If I run into a female resident or a fellow, even someone that graduated it’s within three months after they graduated, they might still qualify for this. And I don’t have the ability to do this for them. I’m just going to refer them to the agent that actually has the ability to do that so they can get what it is that they need. The other place, you know, that you find really important is know who you’re dealing with. I mean, and the truth of the matter is other than guaranteed standard issue plans, other than policies that are exclusive to certain agents at certain hospitals, with certain companies, rates for insurance, literally are set.

Larry Keller (00:30:10):
They’re approved by each state’s insurance department. One agent cannot come in and beat another agent. It’s not like buying a car. And you say, you’re going to walk out of the dealership and the guy comes running after you and says, no, no, no, no. I got to talk to my manager. I’ll be right back. It really doesn’t work like that. The only way one agent can beat out another one is to either know of, or have access to a discount plan that another one doesn’t know of or does not have access to. So I always looked at it and say, if I had a choice of buying a policy from someone that is a newly minted insurance agent or one that’s been around a really long time, and the experience of getting my product might be the same. I’d rather go with the person that knows the ins and the outs.

Larry Keller (00:30:57):
That’s seen this a million times rather than somebody that’s looking at it for the first time. Now, same thing with a financial planner. If I know I’m working with a financial planner and all they deal with is anesthesiologist and pain management physicians. And Hey, their spouse happens to be one. I would assume that person’s going to know a lot more and have a lot more experience with that occupation or a medical specialty than someone that doesn’t. And ideally that’s going to lead them to a potentially better result, right? So now we look at it and we say, okay, I know about own occupation. I know about unisex rates. What else should I have in my policy,

<br></br><mark>Justin (00:31:41):</mark>
Larry, before we dive into that, let me just circle back on GSI, because I think this is important to understand, and I want to make sure that everybody in our audience gets this so guaranteed standard issue. That means that you can get a disability policy without any medical underwriting required. If you go to a certain institution, this is linked between one carrier and one institution in many cases. So for example, we’ll just make up an example in my backyard here, we’ve got university of Pennsylvania. You can be in the anesthesiology program at university of Pennsylvania, and this would be available to any resident at Penn. There may be one carrier or maybe more than one, but just because one has, it doesn’t mean that any others do. So we’ll just pick up, make a random example. Principal principal has a program linked to university of Pennsylvania and their residency program that says, if you are a resident PGY one through whatever, and you are, you’ve never been medically declined in the past for coverage, then you can apply. And it doesn’t matter. You could be, you could be like that really dinged up car that has a lot of pre-existing issues. And if you can go 12 months without any of those issues manifesting in disability, then you you’re guaranteed to be able to get that coverage at a low fixed price or a predetermined price that doesn’t require you to go through the traditional medical underwriting process.

Larry Keller (00:33:02):
Yes. And it’s funny if you look at it, Penn, there actually happened to be two guaranteed standard issue plans. One of them is well known carrier. It does not have unisex rates, but there is no medical underwriting. In fact, this one does not even have a pre-existing condition limitation. Now with this particular company, if you apply to this company specifically medically first and were declined, then the guaranteed standard issue plan is off the table. But it’s only if you apply to this specific company, there’s another one at your hospital and it’s kind of a split. So there is a guaranteed standard issue plan there with unisex rates, with a discount. This particular one is not true own occupation. So it would say if you can’t perform your duties as an anesthesiology resident, and you’re not working, we’ll pay you your full benefit.

Larry Keller (00:33:56):
If you are disabled and you choose to work and you make money doing something again, will proportionally reduce or eliminate your benefit. There is no co-writer on this one, but there is an increase option. A so great example, let’s say I was a female anesthesia resident and I was a type one diabetic. You know, I’m really uninsurable. I could now go to either of those companies or potentially both and combine them to now be able to get to a higher level than one would allow on their own. And under one of them I’m insured right away. Even if I have a diabetic complication and then the other one after I own it for a year, that’s going to be covered as well. There is one company out there that says, if you applied to an insurance company for traditional medical underwriting and you were declined by any of the companies, we will no longer offer you the guaranteed standard issue plan.

Larry Keller (00:34:59):
So I would really submit that anybody that has medical issues or they think that they might have medical issues that could lead to a potential problem during the underwriting process, that they reach out to an agent and they have that agent do a preliminary investigation with the underwriter as to how that medical condition might be viewed in the event of an application. Now they’ll come back and they’ll tell you, I’m giving you this information based on what you are depicting to me. This is subject to medical record review and a prescription drug check, but at least you’ll know, okay, if everything is exactly, as you told me, and I told the underwriter, this is what they’re saying. The policy is going to look like. And if they tell you the odds are very good, you’re going to be declined. I probably would not apply. Especially if you’re a resident, you might do a fellowship because now you might have another chance to find a guaranteed standard issue plan.

Larry Keller (00:36:02):
If the hospital you’re in for residency does not currently have one. And I, and I know an individual as do you, that happens to be an anesthesiologist. And this is one of the reasons he launched his blog on financial planning, because he was turned down medically for a fully underwritten disability insurance policy. And shortly thereafter, when he began his residency, he no longer qualified for a guaranteed standard issue plan that was available to them. And unfortunately to this day, he does not qualify for an individual disability insurance policy. So a lot of it just comes down to doing your homework. And at the end of the day, there’s not a lot of companies that have own occupation. There’s not a lot of guaranteed standard issue plans. It does not take a lot in terms of either phone calls or quick Google searches to see what might be available. So

<br></br><mark>Justin (00:37:01):</mark>
Let’s keep it moving. Let’s talk about some of the, I think you’re going to get into some of the writers.

Larry Keller (00:37:06):
Yes. So what we’re going to find is, you know, definition of disability or definition of total disability, you know, really, to me, that is the crux of a physician’s disability insurance policy. That’s going to determine whether you meet the definition of total disability or not, and how your policy is going to pay you. Well, not every disability, total disability. In fact, the majority of claims are residual or partial. So if you think about it, simplistically own occupation protects you as an anesthesiologist or own occupation protects you as an interventional pain management physician. Well, what happens if your doctor says, Justin, you know, you don’t look great, but you don’t look horrible either. Like you could still go in, you can still do interventional pain, but you know, you got to work fewer days per week. You have to work fewer hours per day. You have to do fewer procedures.

Larry Keller (00:38:01):
There are certain procedures that you can’t do anymore, and this causes a loss of income, but you’re still practicing within your medical specialty, doing what you were doing before. You’re just doing less of it. So to take away the all or nothing, we’re now going to add, what’s called a residual or a partial disability benefit that introduces the income loss component. And this says, we get it. You’re not totally disabled. You’re still doing the same job. You’re just doing less of it. You’re earning less money. And this causes a loss we’re to pay you benefits proportionate to your loss of income. So you can almost think of it like the military. You know, if you are deemed 30% disabled, you’ve lost 30% of your income compared to your pre-disability income. We’re going to give you 30% of your total or a hundred percent disability insurance benefit.

Larry Keller (00:38:54):
But the insurance companies have two triggers. It’s either going to be a 15% loss of income requirement or a 20%. I don’t have a strong feeling one way or the other. I mean, conceptually I’d rather have to lose less than lose more, but most people that’s not going to be their determining factor as to what policy they purchase. They’re typically going to tell you for an initial period of residual or partial disability, we guarantee we’re not going to give you less than half of your benefit for the first six or the first 12 months of a partial disability. If you lose more than 75% in any given month, you’re likely going to get your full disability benefit. You’re not going to be deemed totally disabled, but you’ve lost so much. We are going to pay you your full benefit,

<br></br><mark>Justin (00:39:40):</mark>
Larry, in your experience, I’m curious, do you have a sense for like, of all the claims filed for all the disability policies? First of all, how frequent is it that somebody is going to file a claim for either partial or full disability? And then do you have a, just a rough idea of like, Oh X percent of the time it’s a partial versus X percent of the time. It’s a, it’s a full disability claim.

Larry Keller (00:40:00):
It’s not really a significant number of claims. I mean, way back in the day, I remember reading something of maybe three per every thousand physicians that we’re going to actually file a claim, but there’s one thing about statistics. And I run into this a lot, you know, with physicians, they’re always trying to play the odds, right? Whether it’s in medicine, taking a certain treatment or taking a certain path of treatment for a patient, and then they’re looking at this stuff for themselves. And at the end of the day, insurance is all about transferring the risk away from themselves to the third party. And, you know, really what is your risk tolerance? So you look at it and I always tell people if it happens to you, the statistic is a hundred percent and nothing else matters. So if you look at it and you say, okay, you know, policy X is potentially better because if I become disabled, it will allow me to reside overseas.

Larry Keller (00:40:58):
And I never have to come back to the United States. Well, you know, if my spouse is not a us citizen and my spouse’s family is overseas, and if I became disabled, that’s the direction I’m going to take. I would probably buy the policy. That’s going to allow me to do that if I don’t know to ask that question. And I don’t know that there’s a difference from one policy to another, that might apply to me. You know, you’re probably not going to find out until after the fact or worse would be after the claim has taken place. And now the insurance company is saying, just to let you know, we only pay benefits overseas for a maximum of 12 months. If you want to continue to receive benefits, you have to come back to the United States. Now, interestingly enough, you know, a lot of physicians that I deal with happen to be visa holders and a very common, it would be like a J one or an H1B visa holder.

Larry Keller (00:41:55):
And traditionally, if you are a visa holder, the insurance company would put on an exclusion rider and same way we talked about the lumbosacral spine. They would say, well, if you’re a visa holder and you’re disabled and you lose your visa and you have to return to your country of origin, we’re not going to pay you either at all. Or if we are, we’re going to pay you for a very limited period of time. And the problem with that is I’m almost buying something on the hopes that nothing’s going to happen until I become a permanent resident or a us citizen. And we just don’t know what’s going to happen. So, for example, again, when I get into the weeds, I get into the weeds and I found there is one insurance company that for 42 States, and these are, what’s known as compact States, which is all but California, Connecticut, DC, Delaware, Florida, Montana, North Dakota, New York, and South Dakota, as a visa holder, you can actually buy a policy from them.

Larry Keller (00:43:01):
And as long as your disability begins in the United States, or if you were abroad, just traveling and you had plans to return within 30 days, you will actually continue to receive benefits from that policy. Even if you lost your visa and you have to return to your country of origin, I cannot stress how important that is compared to a policy that would say, well, we’re sorry, doctor, you know, you lost your visa, you’re disabled. And we’re going to either not pay you at all, or we’re going to pay you for a year and then we’re done with you. So the devil is exactly in the details and that’s where experience matters. And I put this akin to, would you rather have the radiologist that’s 50 feet away. That’s never seen your film before, or would you rather have a tele radiologist that happens to be in an igloo in Alaska that has seen this thousands of times, I myself would go for the tele radiologist, but you know, it all depends upon comfort level, but these are some of the differences that you’ll find.

Larry Keller (00:44:12):
So if we go back to the residual, a partial, more claims are residual or partial than total. Individual disability policies are not going to specify to receive benefits. You must be totally disabled for first, before you receive partial benefits. If we look at something like the American medical association plan, which is underwritten by New York life, their plan specifically States, you have to be totally disabled for at least the waiting period. Before you can receive partial benefits. That is a huge hurdle to make it over. I mean, at the end of the day, ideally, what physicians should be looking for is the policy that pays them the most money under the most circumstances with the fewest number of restrictions at the best price that meets their individual needs, goals and budget. So own occupation, super important, residual or disability benefits are super important. Other things that we’re going to look for as a recovery benefit.

Larry Keller (00:45:15):
So let’s say you’re an interventional pain management physician or your general anesthesia, and you’re getting paid based on units. And you’ve been totally disabled. You’ve been out of work for a year. You’re now returned to work the hospital or the practice. They’re so glad to see you and you go back and your doctor says, Justin, you have no limitations at all. You could do everything you used to do same number of hours or more, but what happens? The pediatric surgeons, they’re probably not going to be asking for you the cardiac surgeons. They might not be asking for your either. And we know those are the big unit value cases. So if you’re getting paid based on productivity and you’re getting paid based on units, and now you’re doing a lot of general stuff, but you’re not doing those high unit value cases that you did before.

Larry Keller (00:46:07):
What happened? You’re going to have a loss of income. If it’s more than 15 or 20%, you are going to qualify for recovery benefits and recovery basically means you’re not sick anymore. You’re able to do everything you used to do. Same number of hours or more. All you have is a financial sickness. The reason you have the financial sickness is because of your physical illness is what caused your disability. And if there’s a demonstrable relationship between those two, we’re going to keep paying you again. You have to be careful. There is one company that has a benefit. They call it a transition benefit. And unlike the other carriers where you continue to receive benefits potentially up until the age of 65, this one stops paying benefits. After 12 months, if you’re doing everything you used to do for the same number of hours or more, and all you have is a loss of income, even if there is a demonstrable relationship to your prior disability.

Larry Keller (00:47:08):
So if you are on treat what you kill, we’ll use the politically correct term. If we want to use the regular one, you know, eat what you kill. It’s really important that your policy is going to protect you. And typically this is not an extra rider it’s built into the residual or partial benefit in California. Principal has a different product and there you actually have to buy the recovery benefit and they give you two options, but it’s not going to be to the age of 65 or a longer like the carriers have outside of California. Then we’ve got our Cola rider or the cost of living adjustment rider. This really is just designed to increase our benefit after disability has lasted for a year. And if I was Shakespeare, this would be my question to Cola or not to Cola. Good rule of thumb is if you’re young and you’ve got a lot of working years ahead of you, you really want to have a Cola rider on your policy because it can potentially more than double your benefit by the same token, if you’re looking at the premium is, and you’re like, well, I really need 15,000, but I think I’m going to buy 13.

Larry Keller (00:48:15):
Instead. You might just go for the full 15 leave the Cola rider off. And Justin, because you’re a financial planner, we’ll throw this in. You know, you could do a time value of money calculation, and you could say, well, okay, if I bought 13,000 a month and it was going up by 3%, each year compounded as an assumption when, when the $13,000 benefit crossover the 15, and then you would have the discussion with your client, Hey, it’s going to take seven years of disability. What do you think? Should we go with the larger benefit without the Cola rider? Or did we go with the smaller one with it? And that’s the value that someone like me and someone like you brings to the table last, but certainly not least is going to be an increase option. So if you’re a young physician or you’re a resident or a fellow, you’ve got great things ahead of you, or at least that’s what we’re told financially, right?

Larry Keller (00:49:09):
So what happens if my income is rising, but at the time my income is rising. My health is actually declining. I’ll call this a huge mistake. This is when people say I’m going to start looking for disability insurance. And if they have a GSI plan available to them, they’re okay. If they don’t, we’re going to run into the insurance companies saying, well, this is such a recent condition. We’re unable to offer you insurance. At this point, we’ll have to wait six months, a year, two years, three years, whatever it might be, or we’re happy to give you a policy, but if it’s all possible, we’re going to exclude or limit any payments that we can make due to a specific body part or a specific medical condition. So I remember years ago I did a study. Okay. It was a study of one in my office.

Larry Keller (00:50:01):
And I said, well, what if I bought my policy? And I was a 26 year old PGY one, and I bought my insurance policy and I paid my premiums from age 26 to eight 65. And then I said, well, what if I waited 10 years later? And I bought it when I was a big time attending at age 36, I paid from age 36 to eight 65. What happens? Well, the first thing that happens is we know you’re uninsured for a decade. So God forbid something happens. You didn’t receive any benefits that you could have had you bought insurance. Number two is you’ve got a decade of potential health changes that may not be covered under your disability insurance policy, if you’re still insurable, but not insurable the way

Larry Keller (00:50:47):
You were at age 26.

Larry Keller (00:50:50):
And if you were to take the premiums and take them all the way out, up until age 65, you are going to find that our 36 year-old actually pays more in total premium,

Larry Keller (00:51:01):
Then our 26 year old.

Larry Keller (00:51:03):
So then you look at it and you say, gee, if I could be insured for 10 years more, and I’m going to pay in less than I would had, I waited 10 years to buy it.

Larry Keller (00:51:14):
Why wouldn’t I buy it? And the only answer would be, I believe I cannot afford it. So here’s another trick. Okay?

Larry Keller (00:51:23):
His disability insurance does not have to be expensive. So I use this all the time. I’m going to call this the lease with the option to buy plan. So let’s say you’re a married

Larry Keller (00:51:34):
Anesthesiology resident. You’ve got two kids. You’re

Larry Keller (00:51:38):
Spouse stays home with the kids because you’re working. You’re earning a resident income. You really cannot afford much. Certain companies will say, because you’re a resonant, we’ll let you buy as little as a thousand dollars a month. And the increase option that they use is not Multiple. It’s not a multiple

Larry Keller (00:51:58):
Of the initial benefit level. And typically two to three times, your starting benefit is what you’re allowed to have in terms of an increase option. So if I bought a thousand and I’m getting a three times multiplier, you know, one plus three, I know I’m going to get to 4,000 after 4,000, I have to go through medical underwriting. Again, 4,000 only protects an income of about $80,000.

Larry Keller (00:52:21):
Well, if I’m an anesthesia resident in his place like New York or Pennsylvania, I’m probably not that far off from that even now. So what if I could buy a policy for a thousand dollars a month with a premium somewhere between a 30 and $50 a month 30, if you’re a male closer to 50, if you’re a female and you don’t have unisex rates, I don’t need to do an example on your test. Now I don’t need to do an example in your test in the future. And I can increase my coverage all the way up to $20,000 a month. Never answering another medical question Again, isn’t that really worth it? Now I’ve jammed my foot in the door. I’ve locked it

Larry Keller (00:53:03):
Into my contract. I have own occupation. I have the ability to go up to 20,000 a month, regardless of what happens to my health in the future. You know, yes, this type of increase option has some administrative requirements associated with it. You have to check in once every three years, if you’re eligible for more coverage and the insurance company makes an offer to you, you have to buy at least percent of that amount. But if you’re still going to be a resident in year three or year six, at that point, you’re really not going to qualify for much more. So what’s the goal. Jam my foot in the door. If I can afford it, buy more. Because my biggest asset is my ability to get up and do what I do every day. Not so much as a resident, but it’s the pot of gold.

Larry Keller (00:53:49):
At the end of the rainbow, it’s getting through my training, having paid for medical school, having done my training and put my time in, that’s going to allow me to get to this big income in the future that with Justin, it’s going to lead me to paying down my debt, buying my home, saving for retirement, saving for my kids’ college education. And then I get to the point that I’m financially independent. And at that point I no longer need disability insurance. And now I could potentially drop it all together, but people forget this, and this is going to sound salesy, but it’s true. People forget that their money is not what buys the insurance, their money is what pays the premium to keep the policy in force. Their health is actually what buys the insurance. And once your health is gone, the odds of you getting the insurance at all, or at least the way that you want, it is not the same as when you’re still healthy.

<br></br><mark>Justin (00:54:54):</mark>
Great summary. Larry, I’m curious, are there any writers that whenever you’re doing a policy analysis and someone’s like, Hey, Larry, look at this for me and let me know if it looks competitive or if I should replace it. And you see a couple of these writers on there and you’re just kind of roll your eyes. You’re like, Oh man, they fell for that one. Or like, this is a throw away. They’re just burning money for no reason.

Larry Keller (00:55:12):
Yeah. I mean, I would say that probably the biggest one in there is not even so much the writers it’s. I bought an association plan believing I had own occupation, coverage and equivalent coverage to what’s offered by an individual plan when clearly I don’t. So let’s talk about the American medical association for a minute because their marketing is very good. I get it every quarter, I’m on their list and somehow I get a solicitation for it. So an individual policy should be non-cancelable and guaranteed renewable. The insurance company can’t take it away. They can’t change the premium rates. You can get rid of them. They can’t get rid of you. You can make changes. They can’t well, an association plan. You live by the association and you die by the association. So the association could stop sponsoring that insurance company or the insurance company could say, we’re no longer going to sponsor that association.

Larry Keller (00:56:10):
The rates typically go up every time, your age ends in a zero or a five, but once a year, the rates can go up when the master policy renews. And this is a key term because you do own a policy. You get a certificate. That evidence is that you’re part of this larger master policy. But in my example, like the American medical association is the policy holder. It’s not own occupation. And unless you know what to look for, it could be tough. So it might say something to the effect of, you know, this has an own occupation definition. Most policies do not offer this and it says, we’ll even protect you in your specialty. But then you look at the definition. It says, in order to be deemed totally disabled, you have to be unable to perform the material and substantial duties of your medical specialty.

Larry Keller (00:57:00):
As you were doing it immediately prior to your disability and you are not gainfully employed. That’s a big difference too. I can’t do the material and substantial duties of my occupation, period. They will talk about you must be totally disabled first before you receive partial disability benefits, the increase option on there is very weak. It says that you, you have to increase your coverage at the lesser of owning the policy for three years or age 40. Well, if you’re buying this policy and you’re a PGY one, you’re not even going to be done with your training to be able to use the increase option because it’s the lesser of the two. Some of them have a Cola rider. Some may not have the Cola rider, but at the end of the day, you know, they’re just not very comprehensive. There is a market for it.

Larry Keller (00:57:53):
Clearly guys that are afraid of financial planners, like you insurance guys like me, they got something from an association it’s easy enough for them to apply online and they don’t think twice about it, but then they start doing their homework and they’re like, Oh, you know, maybe there is more to it than this. So as we wrap up, let’s go back and let’s look at principals change. So principal made this announcement and they said as of January 1st, 2021, we’re no longer going to be offering unisex rate policies to those that are in the medical marketplace. So that’s going to be physicians, dentists, optometrists, veterinarians. But if you are buying where principal has an existing discount plan for attendings, because remember they don’t do it for residents anymore, or you’re a graduating resident, not doing a fellowship or you’re a graduating fellow and you have a signed employment contract.

Larry Keller (00:58:51):
Now, even though you’re not going to start working until let’s say July of 2021, if you’re going to be working in a place that has a principal discount with unisex rates using a copy of your employment contracts, even though technically you’re still a resident or fellow for a couple of months, you can actually buy the policy with the unisex rate based on where you’re going, not where you are just to show you how big this discount is. We, the premium on our 35 year old female in New York, you know, went from 11 seven 94 to 64 Oh five. You know, that is a savings of roughly $5,389 a year now because Justin and I are financial planners. What we do is we do a time value or a future value calculation. And if we took $5,389, and this is at age 35, and we grow this out. So every year I’d be adding $5,389 to my equation. And I did this until my individual was now aged 65, 30 years growing at 6% compounded. So that’s my investment return. It doesn’t mean a real investment. It’s a hypothetical investment return at 6%. This would actually grow to be roughly $482,500. An enormous amount of money over that 30 year holding period.

<br></br><mark>Justin (01:00:24):</mark>
No kidding. Yeah. You think about how hard you have to work to have 492 K in your bank account. It’s a lot of time you’ve got to put in and to be able to, you know, take advantage of something like this while the window is open for anybody. So female attendings out there who don’t have anything in place currently, who, you know, it probably makes sense to look at something like this policy potentially to see if getting a unisex rate while this is still available for another month and a half. As of the time of the release of this podcast and November, 2020 definitely could be worth looking into.

Larry Keller (01:00:55):
Yeah. And even if you have an existing policy and your policy does not have unisex rates and unisex rates are easily found in large academic institutions, large practices, several anesthesia practices that are nationwide come to mind. I’m also going to add that unisex rates will continue to be available in the Commonwealth of Massachusetts with some companies. There was a law that went into effect in January, basically stating that you cannot discriminate among gender or race. And as a result of that, the companies kind of went along with that. So there’s two of them or three of them now that have unisex rates in the Commonwealth of Massachusetts. There’s three other ones that do not yet have unisex rates in the Commonwealth of Massachusetts. If they were to revise their product. And now they look to get new products approved, then they would actually have to apply.

Larry Keller (01:02:00):
And then there’s one other state that it is mandated just like Massachusetts. They cannot discriminate that state actually happens to be Montana. So if you’re in Montana or Massachusetts, unisex rates will continue to be available. Otherwise, if you’re an attending, you know, principal, really for the most part, the last option, if you’re a resident and fellow, we said, principal has not done this unless you’re graduating resident or fellow. If you’re a resident, you’re not doing a fellowship. If you’re a graduating fellow, you’ve got a signed contract, you’re going to replace that’s principal has a unisex rate, a discount using that. You can certainly take advantage of the unisex rate and discount. If it exists at the place of employment, you will be going. Other than that, I would say, if you have any questions at all, any comments, you know, you love Justin’s podcast. Like it, you don’t like Justin’s podcast.

Larry Keller (01:02:57):
You think he could do something better? Tell him about that. That’s really what this is all about. It’s for you guys. It’s not necessarily for us. You can easily reach me by email it’s L Keller L K E L L E r@physicianfinancialservices.com. You can certainly call me (516) 677-6211. And do not think that a call or an email is going to turn into, Hey, you have to buy something. Or you’re afraid that if you reach out, you have any kind of an obligation because you don’t, it’s really all about educating yourself. It’s getting a better understanding of how these policies work and any financial education that you have early in your career, because this is something that’s really not talked about readily in residency and fellowship programs makes an enormous difference over your career. So Justin, thanks so much for having me.

<br></br><mark>Justin (01:03:56):</mark>
It’s been a pleasure. Thanks for sharing your expertise with us because this week we’re talking to Larry, who is an insurance professional. We have a special disclaimer to share with you. At the end of this episode, this podcast is for informational purposes, only guest speakers and their firms are not affiliated or endorsed by PAs guardian or physician financial services. And opinions stated are their own guardian. Its subsidiaries agents and employees do not provide tax legal or accounting advice consult your tax legal or accounting professional regarding your individual situation. Hypothetical examples are not intended to suggest a particular course of action or represent the performance of any particular financial product or security. All scenarios mentioned here in are purely fictional and have been created solely for training purposes. Any resemblance to existing situations, persons or fictional characters is coincidentally. The information presented should not be used as the basis for any specific investment advice.

<br></br><mark>Justin (01:04:48):</mark>
All contract guarantees mentioned are based on the payment of required premiums and the claims paying ability of the issuer Lawrence Keller is a registered representative and financial advisor of park Avenue, securities LLC also known as PAs OSJ, three 55 Lexington Avenue, ninth floor, New York, New York, one zero zero one seven. Phone two one two five four, one 8,800 securities products and advisory services offered through PAs member FINRA. SIPC financial representative of the guardian life insurance company of New York. New York. Pas is a wholly owned subsidiary of guardian physician. Financial services is not an affiliate or subsidiary of PAs or guardian Arizona license insurance, number one Oh five seven two two nine, California insurance license number zero C three seven three four zero 20 2011 2190 expires 1122. And if you got through all that and you’re still listening, it’s probably because you’re like on a treadmill. And if you pause this, you’re going to fall off or something. So I’ll take this opportunity to tell you if you want to leave us an awesome review in iTunes, we would really appreciate it as always. Thanks.

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