Insurance is meant to protect you from a major financial loss. You insure your home so that you don’t have to pay all the damages if it’s destroyed by a fire. You use disability insurance to ensure you have income in the event you can’t work due to injury or illness.

Life insurance is a bit different than other types of coverage because it’s not meant to protect the person being insured. It’s designed instead to protect those who may depend on that person’s income by providing a benefit in the event that person passes away.

There are a few types of life insurance. The most common and most affordable is term life insurance. Buying term life insurance is typically recommended for physicians, especially those in residency or just starting, over other types of life insurance. That’s because you can obtain a much higher death benefit, necessary to replace a medical professional’s high income, at a much more affordable rate.

While you can typically get group life insurance through your employer or through a professional association, that coverage is typically not portable, meaning you lose it if you change jobs or are no longer an association member.

The basics of term life insurance

In exchange for your monthly, quarterly, or annual premium payment, the insurance company agrees to insure your life for a specified term as long as you pay your premium. The most common terms are 10, 20 and 30 years. The shorter the term, the less you will pay in premium.

If you pass away within the term of your policy, the insurance company will pay your named beneficiary(s) a death benefit. That death benefit is agreed upon at the time you apply for the policy. The higher the death benefit, the more premium you will pay for coverage.

If the term expires before your death, your coverage will terminate and you will have to decide whether to renew your life insurance. Doing so means you will have to go through underwriting and will likely have to pay a higher premium because you’ll be older and may have health conditions that present more risk to the insurance company.

Whether you’re a resident, just starting your practice, or have been in the medical profession for years, you may wonder if you need life insurance and when is the best time to buy.

How much life insurance should I get?

Here a few of the factors you should consider as you determine the need for life insurance and how much to purchase:

Do you financially support a spouse, children or other family members?
If you have family who would be financially devastated by your untimely passing, then you definitely need a term life insurance policy. The policy’s death benefit can effectively replace several years of income lost because of your death. This money can cover basic living expenses, pay off a mortgage and other debts, and be saved to eventually help fund your children’s college education.

Is there money available to cover your funeral and other settlement costs?
Even if you are single, you may want to consider a term policy that pays a smaller death benefit, often referred to as final expense term insurance.
This type of policy pays enough of a death benefit to cover the expenses that arise from your passing, such as your funeral arrangements and settling your estate. Otherwise, you may be passing along the burden of paying those expenses to your parents or other family members.

Are you planning to help support your aging parents?
Many medical professionals plan to use some of their wealth to care for their parents once they reach a certain age. If you’re no longer around to provide that support, will your parents have the resources to pay for long-term care or other needs? A term life insurance policy can help ensure that financial support is available?

Do you have debt other than federal student loans?
Your federal student loans and even some private student debt will likely be discharged once you pass away. However, many of your remaining debts, such as some private student loans, your mortgage, car payments and credit card balances, will need to be repaid by your remaining estate.

This is done through a process called probate. Your estate’s executor will be responsible for paying off your debts using whatever cash you have on hand and selling non-liquid assets. Property you still owe money on could be repossessed by the lender if there’s not enough in your estate to pay off the remaining balance. Therefore, ff you desire to leave assets to certain people, then it’s best to have life insurance proceeds to cover those debts.

Also, if you have a joint owner, such as a spouse, of any of your collateralized property, that surviving owner will need to continue making payments or risk having the property repossessed.

It’s always more affordable to buy young

As with disability insurance, term life insurance is always more affordable the younger you are when you apply. So even if you don’t have an immediate need for insurance, it may still be worth considering a policy now knowing the need may arise down the road. Also keep in mind that you can cancel your term policy at any time and replace it with different coverage if the need arises.

Ready to dive deeper? Keep reading with:
The Ultimate Guide to Physician Life Insurance in 2019