September 26, 2019
4 min read

Protect what you already have

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Sanjeev Bhatia, MD 
Sanjeev Bhatia
David B. Mandell, MD 
David B. Mandell

by Sanjeev Bhatia, MD; and David B. Mandell, JD, MBA

Many young physicians, fellows and residents look at their financial situation and do not think of themselves as owning any significant assets, never mind being wealthy. This may be understandable, as most young doctors have low income during their training years and, even when having higher incomes once they are in practice, may be saddled with significant debt from student loans.

Nonetheless, the simple fact is that millennial physicians all have a valuable asset they must recognize and protect, which is their ability to practice medicine in their specialty and the potential future income this will generate.

In this article, we focus on protecting this valuable asset. In medical training, young physicians hear the adage, “First, do no harm.” Our analogy is, when it comes to having a long-term financial life, “First, protect what you have.”

The asset: Present value of future income

In the financial world, there is a concept of “present value of future cash streams,” which is ubiquitous, applying to valuation of stocks, bonds, loans and other income sources. Essentially, assuming some interest rate, one can calculate a present value of a stream of future cash flows. Applying that concept to a young physician’s lifetime income stream, it quickly becomes apparent that many millennial doctors are “present value” millionaires and should plan accordingly.

For example, let’s assume a physician is offered a starting salary of $200,000, including benefits. If this physician plans on practicing for 30 years, the present value of this annual income is $3,676,069, even if that physician never makes more than $200,000 per year, including inflation. Most people would think an asset this valuable is worth protecting.

Disability: A risk to physician’s ‘present value’

Disability income insurance is conceptually straightforward: If the insured physician becomes disabled, the policy will pay the disabled doctor. For millennials (and doctors into their 50s, typically), this protection is critical because they have not accumulated the savings to support themselves and their families in case they cannot work in their individual medical specialties.

When considering purchasing individual disability income insurance, physicians must determine what their true need is, not how much coverage they can get. Unfortunately, many residents, fellows and young doctors over-insure themselves inadvertently.


If your expenses are $3,000/month, but an insurance agent says you can get $5,000/month of coverage, you are over-insuring yourself if you purchase a policy with that coverage. Although having more coverage than what is needed is not always wrong, it is more important to control expenses to build the proper budget.

Physicians will want to make sure they are purchasing the right type of coverage. The definition of disability should be occupation-specific. That way a physician who is unable to practice medicine can receive benefits even if he or she is able to work in another field.

Another important part of the disability insurance contract is a residual or partial disability rider, which provides coverage if the physician suffers a partial disability or illness but can still work part-time in his or her occupation. Typically, there must be an income loss of 20% or more for this rider to take effect. In the event of a long-term disability, having a cost-of-living rider as protection against inflation is also important.

Millennial physicians should also beware of group disability insurance available through their employers. Often, group insurance is not occupation-specific, has short benefit periods, does not have a partial or inflation protection rider and can be canceled at any time. While that is not the case with all such policies and employers, group insurance is generally inadequate for a young physician and should be supplemented with personal coverage.

Protect future income from death, focus on dependents

Millennial physicians with financial dependents — typically, children or spouses, but sometimes other family members — should also focus on protecting their future income value against death.

Much like disability income insurance, you first must determine your death benefit need to make sure you are being cost-efficient. What expenses would need to be covered in the event of your death? A mortgage, education funding for children, spousal income support, car loans and other debts are among the expenses that may need to be covered.


Young doctors, fellows and residents who need to purchase life insurance should probably consider term insurance as their best option. Term insurance is inexpensive and provides a death benefit for a period of time (10, 20 or 30 years). It is just one type of life insurance and it is generally best for a young physician with a specific coverage need.

Permanent life insurance, called “cash value insurance,” with products like “whole life,” “universal life” and others, can be attractive to millennials looking for a tax efficient means of saving that provides growth and distributions that are tax-free. For these reasons, permanent insurance is often selected, even by young physicians, as a wealth accumulation and protection tool.

At the outset of their medical careers, physicians in training are told, “First, do no harm.” This article applies that concept to the financial life of millennial physicians and focuses on the asset of future income.

Disclosures: Bhatia and Mandell report no relevant financial disclosures.