Life Insurance for Dentists

As a dentist, you need life insurance for the same reasons as others. If you have people who depend on you for their well-being, life insurance could help ensure their financial stability.

It creates a financial safety net, ensuring your family can live comfortably even when you’re no longer around. Let's cover this in more detail.

Key Takeaways: 

• Being a dentist doesn’t impact your insurability or premium rate
• Term life, whole life, and universal life insurance are popular options for dentists
• Life assurance premiums vary widely between insurers, so shop around to find the best deal

Why Dentists Need Life Insurance for Financial Security

Consider buying life assurance if you are a dentist and have dependents, like a spouse, children, or parents. If the unthinkable happens, life insurance can help:

• Replace your income: Life insurance can help your family manage living expenses and maintain their standard of living. Should you pass away, life insurance can help your family maintain their standard of living. It can also replace lost income, ensuring they can meet future financial obligations.
• Pay off your debts: Debts don’t simply disappear when you pass away. The proceeds from your life insurance policy can help pay off the balance on your mortgage, student loan, and other loans.
• Supplement group life insurance: Many dentists have access to group life insurance, which is often low-cost and doesn’t require a medical exam. However, the death benefit is typically limited to one or two times your salary, potentially leaving you underinsured. An individual life insurance plan can supplement workplace coverage to protect your family’s future.

What Life Insurance Options are Available to Dentists

Being a dentist doesn’t affect your insurability. You’ll have access to standard life insurance options like term life, whole life, and universal life insurance. The best choice depends on your needs, goals, and budget.

Term Life Insurance

Term life insurance offers coverage for a set period (e.g., 10, 20, or 30 years). Your beneficiary receives a tax-free lump sum if you pass away during the term. Once the term ends, coverage stops unless renewed.

Term life is often the best option due to its affordability. It’s ideal for covering temporary needs, such as supporting dependents or paying off debt (e.g., mortgage or student loans).

You may consider term life if:

• You need coverage for a set number of years.
• You want an affordable policy.

Whole Life Insurance

Whole Life Insurance provides lifelong coverage with a guaranteed payout, offering peace of mind and financial security. It also builds cash value on a tax-deferred basis, which can be used for emergencies, major purchases, mortgage payments, or retirement income.

The cash value grows at a set rate, determined by the insurer annually. Your policy’s beneficiary receives only the death benefit — not the cash value. It is for you to use during your lifetime.

However, whole life insurance is pricey. On average, it is five to ten times costlier than term life.

You may want to consider whole life insurance if:

• You want peace of mind knowing your family will eventually receive the insurance payout.
• You want a permanent life insurance plan that doubles as a cash asset.

Universal Life Insurance

A universal life insurance policy provides lifelong coverage with flexibility in premium payments, death benefits, and cash value accumulation. Unlike whole life insurance, it offers more control over life insurance coverage but requires more management and doesn’t provide the same guarantees.

Universal life insurance may be right for you if:

• You have a variable income.
• You need flexibility in your policy.
• You want the potential for higher returns than whole life insurance.

Corporate Owned Life Insurance

Corporate owned life insurance (COLI) is a life insurance policy owned by a dental practice, typically on a key employee (e.g., dentist or business owner). It provides financial protection to the business in the event of the insured person's death.

Key benefits of COLI include:

• Financial Protection: A lump sum payment helps cover business expenses, pay debts, fund a buy-sell agreement, or manage mortgage payments, ensuring continuity.
• Cash Value: COLI policies often accumulate cash value, providing funds for business growth or expenses.
• Tax Advantages: Cash value grows tax-free, and death benefits are also tax-free.

When considering COLI, assess the key employee’s age and health, the business’s financial goals, and required coverage. Consult with an insurance professional to determine if COLI is the right fit for your practice.

Group Life Insurance Through Workplace Benefits or Associations

Group life insurance, often offered through workplaces or professional associations, provides affordable financial protection for dental professionals and their families.

Benefits:

• Affordability: Premiums are typically lower since the risk is shared across a group.
• Simplified Underwriting: Often has fewer requirements, with guaranteed coverage for all eligible members, regardless of health.

Limitations:

• Coverage Caps: The policy may not provide sufficient protection due to coverage limits.
• Lack of Flexibility: Limited options for customizing coverage or adding riders.

When considering group life insurance, evaluate your health, financial goals, coverage needs, and premium costs. Consulting with an insurance professional like Dundas Life can help you decide if it’s the right choice.

What are the common life insurance riders available for dentists?

Riders are optional benefits that provide additional coverage and protection against risks—usually at an additional cost. Their main benefit is that they allow you to customize your policy to meet your unique needs. 

Some of the common life insurance riders are: 

• Waiver of premium rider: This rider ensures that your life insurance plan continues even if you cannot pay premiums due to a critical illness, physical impairment, or serious injury. 
• Conversion rider: With term life plans, policyholders can convert their policy to permanent life insurance, usually within a specific period (like during the first five years of coverage) or at the end of the policy term. 
• Accelerated death benefit rider: In certain situations, it lets you access part of the sum assured while still alive. 
• Accidental death and dismemberment (AD&D) rider: It gives access to an additional cash benefit on top of the sum assured if you die or are seriously injured due to an accident. 
• Return of premium rider: This rider is offered only with term life insurance and allows you to receive the premiums you paid, in full or in part, if you outlive the policy term. 

How Much Does Life Insurance Cost for Dentists?

Dentists generally don’t face higher life insurance premiums compared to other professions. Your premiums depend on age, health, medical history, and policy type.

Premiums increase with age due to higher risk, and poor health or habits (e.g., smoking) can also raise costs. Permanent insurance policies are typically more expensive than term life insurance.

For example, a 30-year-old dentist in good health who doesn’t smoke may pay around $46 per month for a 20-year-term policy with a $1 million payout. The same coverage with whole life insurance could cost up to $900 per month.

It’s always wise to shop around, as insurers assess risk differently and may offer varying rates.

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How much life insurance coverage do I need?

The amount of life insurance you need depends on your financial situation, priorities, and obligations. Here are some common methods to estimate coverage:

• 10 Times Your Annual Income: A simple guideline, but it doesn’t account for savings, debt, or existing coverage like group life insurance.
• Income + College Expenses: For those with children, factor in college tuition and your income, though this rule doesn’t consider unique family needs.
• The DIME Formula: This method adds up debt, income replacement for a set number of years, mortgage balance, and education costs for children. It offers a more detailed approach but still may not fully capture your situation.

Life Insurance and Business Planning

Life insurance, especially term policies, plays a crucial role in business planning and financial planning by providing financial stability in case of a key employee or owner’s death. Here are key applications:

• Funding Buy-Sell Agreements: Term life insurance provides funds to purchase a deceased owner’s shares, ensuring smooth business continuity.
• Key Person Insurance: Protects against financial losses from losing a vital employee or owner, covering recruitment, training, and operational impacts.
• Loan Collateral: The death benefit can secure loans for growth, expenses, or debt repayment, offering financial flexibility.

When choosing life insurance, consider the age and health of key personnel, business goals, financial structure, financial planning, and required coverage.

Conclusion

Life insurance for dentists is no different than life insurance for others. It protects the financial future of those you love from life’s uncertainties. Depending on your financial goals, term life and permanent life insurance could be an option. 

If you’re unsure which type of life insurance for dentists best meets your needs, Dundas Life can help. Our advisors will take the time to understand your unique situation and provide insurance recommendations tailored to your needs and circumstances. We will also help you find the right coverage at the best price. Schedule your call with us today.

Frequently Asked Questions

What are my options if I’m denied coverage? 

If you don’t qualify for traditional life insurance (such as whole life and term life) due to poor health or other reasons, consider applying for simplified or guaranteed-issue life insurance. 

Simplified issue life insurance has easier eligibility, making it accessible even with health issues. Guaranteed issue should be a last resort due to high costs and limited benefits, though it’s available to nearly everyone who meets the age requirement.

What are the benefits of life insurance for dentists?

Life insurance can provide financial help to your family during a difficult time. While it can’t replace you, it can replace part of your income and ensure your loved ones can live comfortably when you can no longer provide for them. 

How do you get the best life insurance premium rates? 

Since life insurance premiums vary by insurer, compare price quotes of as many providers as possible — something an independent insurance broker can help you with.