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October 26, 2020

Category: Insurance, Medical Careers

IN A NUTSHELL:

  • Term life insurance crucial for health care workers
  • Ensures beneficiaries are not burdened by high debt
  • Offers perks of living benefits

Almost everyone is aware of how important life insurance is for you and your loved ones, but not everyone in the health care industry realizes the benefits and importance of term life insurance.

There are multiple reasons why health care providers, nurses, physicians, radiologists and others, should consider purchasing a private term life insurance policy.

A private term life insurance policy offers many benefits, several of which are specifically of interest to someone working in the health care industry.

What is Term Life Insurance?

Typically, term life insurance guarantees payment of a stated death benefit if the covered person dies during a specified term. Once the term expires, the policyholder can either renew the policy for another term, convert the policy to permanent coverage, or allow the policy to expire.

When you purchase a term life insurance policy, the insurance company determines the premiums based on the value of the policy as well as several factors including your age, gender, and overall health including current medications, tobacco use, and family medical history.

If you die during the term of the policy, the insurance company will pay the face value of the policy to your beneficiaries. In most cases, this payout is not taxable. The money may be used by the policy beneficiaries to cover healthcare and funeral expenses, credit cards or another consumer debt, as well as mortgage debt.

In the event a term life insurance policy expires before the policy holder’s death, there is no payout. There is an option to renew a term life insurance policy at the time of the expiration. However, the insurance premiums will be recalculated for the policy holder’s age at the time of renewal.

An important aspect of term life insurance which often flies under the radar is living benefits, also known as Accelerated Benefits Riders. There are a multitude of reasons why having a private term life insurance policy that offers living benefits is crucial for health care professionals.

Employer-Sponsored Life Insurance Drawbacks

Some people opt to obtain life insurance through their employer. However, if you retire, change jobs, or become self-employed, you may lose that coverage. In order to ensure you have enough life insurance after you retire, it is important to purchase your own term life insurance as soon as possible, even if you do already have group life insurance, since premiums will increase as you get older.

The bottom line is if you choose employer-provided coverage, your employer owns and controls the policy, not you. If your employer decides to cancel or reduce the benefit, you could be left without coverage or with not enough coverage to last as long as you need it to.

Unlike rates for an individual term life insurance policy, which do not increase as you get older within your selected term, the affordable rates that your employer initially charges can potentially increase every year.

More importantly, when you change jobs, you may need to replace any employer-provided life insurance that you relied upon. If you are allowed to take your policy with you, the premiums will likely skyrocket.

With your own life insurance policy, you are in control.

Benefits of Term Life Insurance for Health Care Providers

Those that work in the health care industry need to be particularly mindful about the importance of term life insurance for their family members and any beneficiaries, particularly if they are fresh to the industry.

This is due to the high amount of debt graduates of medical school carry with them, typically for the first 10 years of their career, if not longer. The median medical school debt, not including loans from premedical education, was also $200,000 in 2019. One study found this figure to be closer to $300,000 to include all education prior to medical school.

If anything were to happen to a health care provider before all of this debt is paid off, others must carry the burden. Debts typically become the responsibility of your estate after you die. Your estate is everything you own at the time of your death—which includes a term life insurance policy.

The executor of your estate uses your assets to pay off your debts, which might mean that your debts eat up assets that you had hoped to leave to heirs. Without a proper insurance policy to cover these expenses, your heirs may be left with nothing and in some cases, family members could be on the hook for your debt.

Aside from debt accrued by loans, there is also the potential of your heirs being left with the burden of a business risk. Many health care providers have moved into the realm of a private practice—which may involve one or multiple partners. Without a proper insurance policy to buy their way out of the partnership agreement, the family of a health care provider could end up being responsible for their financial portion of the business obligation. A proper term life insurance policy would ensure that family members do not have to carry this burden.

Last, but certainly not least, is the “living benefits” perk. These are also known as Accelerated Benefits Riders which are optional, no-additional cost riders that can allow you to access all or part of your death benefit, while living, if you experience a qualifying terminal, chronic, or critical illness, or a critical injury.

The definitions of qualifying conditions vary by the policy. Below is a standard seen in many term-life insurance policies:

Terminal Illness: Must result in death within 24 months

Critical Illness: Up to 16 different illnesses fall within this category

Chronic Illness: Insured is unable to perform two out of six Activities of Daily Living (ADL) or experiences severe cognitive impairment.

The amount you can access is dependent upon the qualifying condition and sometimes the state you live in. The payment can be received via a lump sum or installments. If a full acceleration is paid out, then the policy will terminate. The use of the accelerated benefit is mostly unrestricted apart from how ABR proceeds may be used in certain states in the event of a chronic illness.

Benefits might be used for, but are not limited to:

  • Household expenses
  • Adult Day Care
  • Home modifications
  • Regular bills
  • Nursing home care
  • Quality of life expenditures

While there are no additional premiums for Accelerated Benefits Riders, an administrative fee and an actuarial discount is taken out of the payment amount offered if a client chooses to accelerate their policy. The actuarial discount is dependent upon the life expectancy of the insured at the time of the election.

Term Life Insurance for Health Care Providers Through Intiva Health:

Wherever you are in your medical career–if it is medical school, residency, practicing or looking ahead to retirement–Intiva Health offers an exclusive portfolio of life insurance plans with benefits and rates tailored to physicians and medical professionals. Whether it’s about not leaving your debts behind or ensuring your family can maintain the standard of living to which they were accustomed, it’s clear there are plenty of reasons to look for the best term life insurance policy for your personal circumstances.

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