Hey Money Mobilizers,
Today I’m changing things up a bit.
I’ve been receiving lots of great questions from Money Mobilizer readers like you from all over the country. Connecting with and helping physical therapists, occupational therapists and students from areas near and far is one of the aspects I enjoy most about Money Mobilizer.
But I’ve come to realize that many of you have the same, or at least very similar, questions. So, in an effort to help more of you at once, I decided to share answers I’ve given to some of the more commonly asked questions here with you today.
Let’s get started.
“Hi David, I just graduated from PT school last May. I just landed my first PT job working as an employee in the acute care setting at a hospital. My employer already provides me with disability insurance, so should I also purchase my own private disability insurance policy? I’m in student loan debt up to my eyeballs, so I don’t want to spend any money I don’t have to.”
This is a great question, and one I get so often.
Having a disability insurance policy from your employer can be a good thing.
Well, for one, it’s free!
You also don’t need to have your medical history reviewed to get the policy, so if your medical history is extensive enough to hinder your ability to purchase a private disability insurance policy then you’ll be glad you at least have a disability insurance policy from your employer.
There are several major downsides to an employer’s policy, though.
The most important downside you need to be aware of is the definition of “own-occupation” used in the employer’s policy. In short, if you were to become disabled, the employer’s policy may dictate that you must still work at a different occupation that the insurance company who provided that policy deems reasonably suited for you based on your education, training, and experience. And the insurance company will NOT provide you with your benefit. In comparison, if you purchase a private disability insurance policy the right way (see my Learn More Here section below), you will be able to work at a job you might really enjoy AND still collect your FULL benefit.
Even if you found yourself in a situation where you were able to collect your benefit from your employer’s disability policy, the benefit you would collect would be taxed so it would be an even smaller amount than you had hoped to collect. A benefit collected from a private policy, on the other hand, is not taxed.
The disability policy you have from your employer is also owned by your employer, not you. That means the employer can make changes to the policy whenever they feel like it, including cancelling it altogether. If they do cancel it and you never bought your own private policy and you became disabled, you won’t have any benefit to live on. If you have a private disability insurance policy though, this is highly unlikely.
And since the disability policy is owned by your employer, if you were to leave that job and go to a job that didn’t provide you with a disability policy, then you’ll find yourself wanting to purchase your own private policy. But by the time, a number of years may have gone by and the older you are, the more expensive it will be to buy a private policy.
That’s why I strongly recommend every PT and OT buy a private policy right after getting your PT or OT license. It likely will never be cheaper to get.
Learn More Here:
- Why Allied Health Professionals Should Consider Purchasing Long-Term Disability Insurance
- How Physical Therapists Should Purchase Long-Term Disability Insurance
- How Occupational Therapists Should Purchase Long-Term Disability Insurance
“Hey David, thanks for all you do. I had no idea about any of this financial stuff until I started reading your Money Mobilizer content. Up until now, I tried to do the responsible thing and I got a financial advisor. He’s telling me to get a whole life insurance policy because I have 2 young kids so I need to make sure they are taken care of if something happened to me. But the whole life insurance policy looks pretty expensive and I’m an OT only making about $80,000 each year. Should I get it?”
The short answer is I highly doubt you need whole life insurance.
First off, I’m glad that you are considering purchasing life insurance since you do have loved ones (your two children) counting on your income. Anyone who has others depending on your income for their livelihood should have life insurance unless you are extremely wealthy to the point that, if you passed away right now all of the money you leave behind to them would be enough to take care of them. I don’t know about you, but that’s not me which is why I have my own term life insurance policies.
There are a few less common instances where purchasing a whole life insurance policy might make some sense, but the large majority of physical therapists and occupational therapists would be much better off just purchasing term life insurance instead.
Whole life insurance is much more expensive because it combines insurance with investing. I can’t recommend such a set-up to you when the costs you pay, not just to purchase the policy but other more hidden costs, eat away at any potential gains that you might make with your investments.
Whole life insurance is also a type of insurance policy that will last your entire life. My hope is that you manage your money wisely so that, when you are much older, you won’t need to depend on having a life insurance policy payout to pass on to your children. While it may sound nice to be able to give them that large payout at first thought, you would have paid many years to keep that whole life insurance policy active so that payout becomes a much smaller number than you’d hope for.
Instead, without knowing more about you, odds are that you will most likely be better off just purchasing a term life insurance policy. If you’re concerned about not having the investing portion of the policy that a whole life insurance policy would offer, then take the money you would have spent on getting a whole life insurance policy and invest it on your own, outside of an insurance policy. It will much cheaper that way.
So you’re probably wondering why your financial advisor is guiding you towards purchasing a whole life insurance policy? It’s likely because they will make substantially more money on you purchasing a whole life insurance policy rather than a term life insurance policy.
I hate to break it to you but my last piece of advice is to get a new financial advisor – one that you can trust more.
Learn More Here:
- Should Physical Therapists And Occupational Therapists Purchase Life Insurance?
- An Intro To Whole Life Insurance
- An Intro To Term Life Insurance
- 7 Steps For Physical Therapists/Occupational Therapists Purchasing Term Life Insurance
Professional Liability Insurance
“Hi David, I hope all is well. I know I’ve already asked you some questions over the last few months about retirement accounts, but I want to switch gears to liability insurance if that’s okay. I was working as a PT employee at a hospital-based outpatient clinic, but I left that job and now contract with home health companies who provide me with patients. My state’s practice act does not allow me to have an LLC, so I started my own S-Corp. I’ve had my own professional liability insurance even when I was an employee, but it’s due for renewal soon. Should I keep that same policy or get a different one?”
I wonder if you live in California! That’s where I live and our practice act does not allow us to have LLCs either.
Anyway, I’m glad you had professional liability insurance even when you were an employee – I recommend all of us do.
Now that you are operating as a corporation, some insurance companies will see you differently and others may not.
It sounds like you may not have any employees. If that’s the case, some insurance companies will treat you as an individual. Other insurance companies will not care and still treat you as a business because you are operating as a corporation.
I highly recommend shopping around to see which companies will offer you not only the best rates but also the best coverage. You should definitely read the last article I listed under the Learn More Here section below as I’ve outlined quotes from many of the major insurance companies so you can easily compare prices and differences in coverage.
Learn More Here:
- Do Physical Therapists And Occupational Therapists Need Their Own Professional Liability Insurance?
- What Should Physical Therapists And Occupational Therapists Look For When Purchasing Professional Liability Insurance?
- Choosing The Best PT/OT Malpractice Insurance For You
I hope you found this information helpful!
Do you have a question you’d like to ask me?
Feel free to either email me at [email protected] or drop it in the comments section below!