Why You Need Disability Insurance (and I Need Shoulder Pads)

The best part of being (and probably the greatest personal motivation to become) financially successful was the opportunity to pay my partners to work my share of the night shifts. The second-best part was the opportunity to pay my partners to work my share of the evening shifts a few years later. I now only work day shifts at the hospital, and almost all my WCI work is done during bankers' hours. That has freed up my evenings to allow me to have a “normal” life, something that was out of reach to this emergency physician for the first 15 years of my career. I now spend a lot of those evenings with family and volunteering, but a fair amount of winter evenings are used for ice hockey. I play on two men's league teams and coach my son's team.

There are some similarities between ice hockey and personal finance. For example, having a top-notch goalie is like having very safe fixed income in your portfolio. It allows you to take risks with the rest of the game (portfolio) that you otherwise couldn't afford to take. I'm a big fan of taking your risk on the equity side, but I don't have to worry about illiquid investments, big-time volatility, or even serious risk of permanent loss because I've got a great “goalie” in the form of very safe fixed income investments—like the TSP G fund, I Bonds, TIPS, and a high quality, well managed municipal bond fund.

Another analogy can be drawn with protective gear. Ice hockey is played while wearing what is essentially body armor. I've been playing ice hockey for over 40 years and, from time to time, have had to replace some of that armor. In fact, I now only have one piece of protective equipment left from my high school days, a set of really beefy shoulder pads. They almost look like football-style pads, and my teammates sometimes give me a hard time about this piece of antique gear.

Not only do these pads protect my shoulders but also my scapulas, clavicles, humeri, and almost my entire rib cage. This style of pads was really only popular for a couple of years back in the early 1990s, so when I whip them out of my bag, I get a lot of questions about them. The trend these days, especially in a no-checking men's league game, is to wear skimpy little shoulder pads or no shoulder pads at all to allow the player to be lighter, faster, and less inhibited. But I have persisted in wearing mine due to inertia and a desire for “full” protection—the same reason I wear a full facemask.

That decision has recently paid off in spades. Twice in the month before I wrote this piece, I had serious collisions. The first one involved a puck directly between another player and me. We were both skating directly toward that puck and each other at full speed. I have no recollection of which of us got to the puck first, but immediately afterward, there was a massive, loud, shocking collision. The ice rink went silent. With gear, we're probably both over 225 pounds, and we were both skating at about 15 mph, so this was the equivalent of running into a brick wall at 30 mph. We both ended up lying on the ice. It took me a long time to get up as the wind had been knocked out of me, and my rib cage hurt in the front and the back. I waddled over to my team bench and sat down, only to have the referee skate over and give me a penalty. “Whatever,” I thought as I skated across the ice to the penalty box and sat down in there, trying to catch my breath. At that point, I noticed the other player was STILL on the ice. He eventually recovered and was back in the game, but I was sore for weeks afterward.

About the time I recovered from that, I caught an edge at the end of a breakaway (no, I didn't score) and slammed sideways into the boards behind the goal. Once more, these big beefy shoulder pads protected my shoulder and ribs. That time, I didn't even have to leave the ice.

More information here:

Go Buy Disability Insurance!

The Physician’s Guide to the Best Disability Insurance Companies

Why Insurance Needs to Be Part of Your Financial Plan

Now, for the analogy. Protective gear is like the insurance in your financial plan. You don't expect you're going to need it. You hardly ever do. But when you do need it, you REALLY need it, and nothing else will do. You can't just say, “I'll skate better,” (self-insure) or, “It's a non-check league,” (bad things are unlikely to happen) or, “Nobody else is wearing it” (going bare). Having good gear is like having a top-notch disability insurance policy.

Interestingly enough, the same day as that second collision, I had a discussion about disability insurance with two co-workers in the ED, both of whom have relatively low income by the standards of this blog. The first co-worker had a husband who got cancer and could no longer work. There was no personal or employer-provided disability insurance, so he applied for SSDI. It took an entire year to qualify, and even after qualifying, SSDI only paid for seven months of that year retroactively. The co-worker told me about this while thanking me for telling her to save some money after she noticed her 401(k) balance recently, but they did have to dip into their non-401(k) savings pretty significantly while waiting for that SSDI to come through.

The second co-worker came dancing back in to the ED after six months away. He had been in a terrible car accident resulting in intracranial hemorrhages with a somewhat complicated course. In his case, there had been an employer-provided short-term disability policy. He did get surprised that his disability benefit was reduced because he also qualified for a benefit from his auto policy. While the accident was not his fault, the drunk driver who hit him had only the state-required minimum amount of insurance and no assets. This sort of reduction is very common in group disability policies, but it mostly doesn't exist in high-quality individual policies.

In both of these cases, disability insurance helped soften the blow. But also in both cases, the insurance was of the skimpy, soft shoulder pad variety. A solid individual disability insurance policy would have paid much sooner in the first case and much better in the second case.

People get disabled all the time. Docs are not an exception. I saw an interesting chart recently in a Guardian pamphlet. It was the likelihood that one person in a partnership would be disabled at some point in their career. Here's the chart:

This chart is designed to show medical partners the likelihood that one of them gets disabled, but I think the chart on the left (two people) can just as easily be applied to a marriage or other domestic partnership. Basically, there is a 17%-26% chance that either you or your spouse/partner is going to have a disability. That's not a low number. If there were a 1 out of 4 chance that I got hurt going skiing, I wouldn't go skiing at all. That's not an option when it comes to going through life, though. Since you cannot avoid this major risk, you need a plan to deal with it.

Here are the only four reasonably good plans I know of to deal with disability risk:

Insure against it Have your high-income spouse be your disability insurance, and pray you don't both get disabled Have very wealthy parents who will take care of you financially if you become disabled, and pray they actually do it Be financially independent

For most early- to mid-career docs, option #1 is the best one. If you don't yet have disability insurance or if you're worried you've got the “skimpy shoulder pad” type of disability insurance, you should meet with one of our recommended agents for an educational, no-pressure discussion of your options.

I'm actually appalled at how few physicians buy disability insurance every year. With 30,000+ docs coming out of school each year, I'd expect at least half of them to need disability insurance, but my best estimate is that only about 1/3 of those who need it are actually buying it. Don't be part of that 2/3 who thinks you'll never catch an edge and slide into the boards at high speed.

What do you think? Why are so many docs going without disability insurance? What's your solution for this risk? 

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