Insuring the Only Asset You Own

Part of The Training Years. For about a decade the only real asset you own is your future income, and there is a product built to protect it. There's also an industry that knows residents are the most profitable people it will ever sell to. This page explains how the products work, what they cost you, and what most physicians end up doing. It does not tell you to buy anything.

The short version

Disability insurance protects you. It replaces income if you can no longer do your work. It is cheapest and easiest to qualify for during residency, and the coverage your program provides is narrower than a policy you own. Most physicians who buy one buy it during training, for reasons the riders section explains.

Life insurance protects other people. It does nothing for you and everything for anyone who depends on your income. Where people do buy it, term is the plain version and the products that bundle an investment with it cost several times more.

Neither of these is something this page will tell you to buy. They cost real money in years when you have little, some readers decline them on principle, and a decision about how to carry risk belongs to the person carrying it. What follows is how they work, what they are worth, and where the sales pressure is.

Health insurance is mostly decided for you by your program. What isn't decided for you is what it costs to add a spouse or a child, and that number belongs in the comparison before you rank.

There's a fourth thing on this page and it's the one to read if you borrowed privately: a private loan doesn't necessarily die when you do.

Why this comes up now and not later

Work through what you own at twenty-eight. Not a house. Not a portfolio. Probably a car and a laptop and a negative net worth in six figures.

What you own is the ability to earn several million dollars over a career, and you have already paid for it in years and in borrowed money. Every other financial decision on this site sits on top of that one asset, and it's the only one that can be taken from you in an afternoon.

That is the risk disability insurance is built around: an outcome you can't control that takes the asset everything else rests on. Whether you transfer that risk to an insurer, carry it yourself, or cover it some other way is a judgment about your own life, and people who have thought hard about it land in different places.

Disability, and the four words that decide whether a policy is worth anything

The words are own-occupation, specialty-specific.

A policy with that language pays if you can no longer perform the material duties of your specialty, even if you go and do something else for money.1 A surgeon with a hand tremor can't operate. She can read, teach, consult, do utilization review. Under an own-occupation specialty-specific policy she collects the full benefit and earns whatever the new work pays. Under an "any occupation" policy she collects nothing, because she is manifestly capable of gainful employment.

That distinction is the entire product. Everything else on a policy is a detail.

Your program's group coverage is not this. Most sponsoring institutions provide some disability coverage, and it is genuinely better than nothing. It's also typically a group policy, which means it can carry an "any occupation" definition, it stops when you leave the institution, and its benefits are commonly reduced by whatever else you collect from another group policy.2 A private policy you own isn't offset by anything and travels with you to every job you will ever have.

The tax point that gets missed. If you pay the premiums yourself with money you have already been taxed on, the benefit arrives tax-free. If your employer pays them with pre-tax dollars, the benefit is taxable income.2 A $10,000 monthly benefit is $10,000 in one case and something closer to $7,000 in the other, which changes what "60% of income" actually means.

The riders that matter, and the ones that do not

Future increase option. This is why the timing question exists at all. It lets you raise your coverage as your income rises without being underwritten again, which means no new medical questions and no new exam.2 Everything you develop between now and forty is a pre-existing condition to a policy you buy at forty and isn't one to a policy you bought at twenty-eight. That asymmetry is the whole argument for deciding during training rather than putting it off, and it is the piece to understand even if you decide against the product.

Residual or partial disability. Pays proportionally when you can work but not at full capacity, which is the far more common claim.2 A policy without it is close to all-or-nothing.

Cost-of-living adjustment. A fixed benefit paid for thirty years isn't the benefit you thought you bought.

Non-cancellable and guaranteed renewable. The insurer can't change your premium or your terms.

Riders exist that are mostly margin for whoever sells them. You're allowed to ask, on any line item, what claim does this pay that the base policy would not, and to decline anything that gets an unclear answer.

How much

The convention is around 60% of income, and there is a reason it stops there rather than at 100%: an insurer that replaced your entire income would be paying you not to go back.2 Coverage on a resident's stipend is a small policy, so where people do buy during training the reason is the future increase option rather than the benefit itself.

Do you need life insurance at all?

The question is: if I died tonight, would somebody's life get financially worse?

If the answer is no, you don't need life insurance. Not a small policy, not a starter policy, not one because it's cheap while you're young. Nobody's relying on your income and there's nothing to replace.

If the answer is yes, and for a good number of readers here it's yes years before it's yes for their classmates, then the product is level term. A fixed amount for a fixed number of years for a fixed premium. Twenty or thirty years, enough to carry a household to the far side of your training and your children's education.

You will be offered whole life, universal life, and variable universal life, all of which combine insurance with an investment account, all of which cost several times what term costs for the same death benefit, and all of which pay a much larger commission. There are narrow situations where permanent insurance is the right instrument. A resident supporting a family isn't one of them.

The part that is specific to this site

Federal student loans are discharged when the borrower dies.3 Your family won't inherit them. That's a real protection, and it's one of the reasons the federal system is worth staying inside, which Loans, in Plain English makes at length.

Private student loans carry no such requirement. A private lender isn't obliged to discharge on death, and where there is a cosigner the balance can land on them.3 So the reader most likely to have a private loan is exactly the reader from If You Have No Cosigner: the one who could only get that loan because a parent or a partner signed for it.

If that's you, this stops being a general-interest question. Read your promissory note and find the death and disability language, because that clause decides whether your death leaves a balance with the person who signed for you. Where it does not discharge, the common answer is a term policy for roughly the private balance. Other answers exist: paying that tranche down first, refinancing it into something that does discharge, or asking the cosigner to be released once you qualify alone. What matters is knowing which clause you signed, so the decision is yours and not a surprise left to somebody else.

Federal loans also discharge on total and permanent disability, though the standard is strict and the process is its own undertaking.4

Health insurance, which your program mostly chooses

Residency comes with employer health insurance. What varies, and varies a lot, is the employee share of the premium, the deductible, and what it costs to add anyone else.

Adding a spouse or a child is where the number moves. A plan that costs you very little for yourself can cost several hundred dollars a month for a family, and that comes out of the take-home number in A Resident's Paycheck rather than out of the stipend on the contract.

Three questions, asked of the program coordinator, in writing, before you rank:

  1. What is the monthly employee premium for the resident, and for a resident plus family?
  2. When does coverage start? There can be a gap between your last day of school coverage and your first day of program coverage, and that gap falls inside the summer described in Fourth Year, and the Summer With No Income.
  3. Is there parental leave, and is it paid? Ask whichever way applies to you. The answers differ enormously between programs and are rarely on the website.

Naming the sales pressure is most of the defense

Somewhere in your third or fourth year, the emails start. Advisors who "work exclusively with physicians." A free lunch talk. A classmate who just got licensed and wants to help.

Some of these people are competent and honest. The structural fact underneath all of them is that disability and life insurance are sold on commission, that commission is a percentage of the premium, and permanent life insurance pays a multiple of what term pays. Nobody has to be dishonest for that to bend the advice.

If you do go looking, three habits cover most of it.

Buy from someone who represents several companies rather than one. Only a handful of carriers write true own-occupation specialty-specific policies for physicians, and which one is best for you depends on your specialty, your state, your health, and your sex.1

Separate insurance from investing. Buy insurance that insures. Invest somewhere else. A product that does both does neither at a good price.

Get the definition in writing. Ask for the policy language on own-occupation, in the actual contract rather than the brochure, and read that one paragraph yourself. It's four sentences and it's the whole product.

This page names no companies and no advisors, for the same reason Reading a First Contract names no law firms. The moment a page like this starts recommending vendors, you can no longer tell whether it's advice.

What this page cannot tell you

It can't tell you what you'll be quoted, because that depends on your age, your specialty, your health, your state, and your sex, and premiums for women run materially higher on the same coverage.2 It can't tell you whether your program's group policy is good, because they differ. And it can't tell you whether you need life insurance, because that's a question about who is standing behind you rather than a question about money.

It also can't tell you whether to buy any of it, and that is deliberate. Insurance is a way of transferring risk to somebody else for a fee, and there are readers who decline it because the premium is unaffordable in the years it is offered, because they would rather self-insure, or because their faith or their principles hold that this kind of contract is not one they want to enter. All of those are considered positions held by people who understand the tradeoff. A page that told you what to buy would be substituting its judgment for yours on a decision that is about your life and not about arithmetic.

What it can tell you is which four words decide whether a disability policy pays, which rider is the argument for deciding early, what these products cost, where the sales pressure comes from, and which loan doesn't go away when you do. What most physicians do with that is buy a policy during training. What you do with it is yours.

What belongs to other pages

What actually reaches your account during training is A Resident's Paycheck. What a loan becomes and which repayment system you are in is The Personal Finance Crash Course. The malpractice coverage your employer buys, and the one clause in it that can cost more than a year's savings, is Reading a First Contract.

What to find out, whichever way you decide

  1. If you are considering a policy, get it priced in your final year of training, with the own-occupation definition and a future increase option, and ask two independent brokers rather than one. A quote costs nothing and is the only way to know what the decision is actually worth.
  2. Find out what your program's group disability policy actually says, specifically whether it's own-occupation and whether it offsets.
  3. Answer the life-insurance question honestly. Does anyone depend on your income. If no, skip it and revisit when that changes.
  4. If any of your student debt is private, read the death and disability clause tonight. If it does not discharge, decide deliberately how that balance gets covered rather than leaving it to whoever cosigned.
  5. Ask the three health-coverage questions in writing of every program you are seriously considering.

References

Policy definitions, riders, pricing, and tax treatment differ by carrier, by state, and by individual, and program benefits differ by institution and change annually. Nothing here is a recommendation of any product, carrier, or advisor, and no page can substitute for reading your own policy language. This is educational information, not financial advice. Last reviewed: 2026-08-09

Footnotes

  1. Own-occupation, specialty-specific disability coverage pays benefits when the insured cannot perform the material duties of their own medical specialty, even if they are gainfully employed in another occupation; an "any occupation" definition does not. Only a small number of carriers write true own-occupation specialty-specific policies for physicians. AMA Insurance on own-specialty definitions: https://amainsure.com/advice-resources/our-thinking/definition-of-own-specialty-disability-insurance/ · American Medical Association guidance for residents on assessing disability coverage: https://www.ama-assn.org/medical-residents/medical-residency-personal-finance/3-key-factors-assess-physician-disability ↩ ↩2

  2. Coverage conventionally replaces about 60% of income; benefits from a policy whose premiums were paid with after-tax personal dollars are received tax-free, while employer-paid benefits funded with pre-tax dollars are taxable; group policies offset against other group policies but not against a personally owned policy; the future increase option allows coverage to rise with income without new underwriting; residual and partial disability riders pay proportionally on reduced capacity; premiums for women can run substantially higher for the same coverage. A Practical Guide to Physician Disability Insurance, American Academy of Family Physicians, FPM: https://www.aafp.org/fpm/2021/0900/p10 ↩ ↩2 ↩3 ↩4 ↩5 ↩6

  3. Federal student loans, including Parent PLUS, are discharged on the death of the borrower on presentation of proof of death to the servicer. Private lenders are under no equivalent obligation, and where a private loan has a cosigner the balance can remain the cosigner's responsibility after the borrower's death. Consumer Financial Protection Bureau: https://www.consumerfinance.gov/ask-cfpb/what-happens-to-my-student-loans-if-i-die-or-become-disabled-en-595/ · Federal Student Aid death discharge: https://fsapartners.ed.gov/knowledge-center/library/electronic-announcements/2021-02-22/streamlined-loan-death-discharges-options-ea-id-loans-21-04 ↩ ↩2

  4. Total and Permanent Disability discharge of federal student loans. The Department defines total and permanent disability as an inability to engage in any substantial gainful activity by reason of a medically determinable impairment expected to result in death, or that has lasted or can be expected to last at least 60 continuous months. Federal Student Aid: https://studentaid.gov/articles/tpd/ ↩