Life Insurance for Medical Residents

Starting your career as a physician is  exciting, but there’s more to it than practicing medicine.

It’s smart to plan your finances, and taking out life insurance important when it comes to financial planning. It allows you to face life’s uncertainties with confidence, knowing that you have taken steps to protect your family’s future. 

Here’s what you need to know about life insurance for medical residents. 

Types of Life insurance for medical residents

There are two main types of life insurance for medical residents: term life and whole life. 

Term Life Insurance

Term life insurance provides coverage for a fixed period, called the policy term. The most popular length for a term life plan is 20 years. However, when you apply for coverage, you can choose the policy term that works best for you, whether it is 1 year, 5 years, or 30 years. 

Ideally, the length of the policy should match your biggest financial obligation. For example, if you want life insurance to cover your mortgage, your policy should last at least until the end of the mortgage payment period. 

Once the policy completes its term, coverage ends automatically, unless you renew it. Generally, you can renew term life insurance without a new medical exam. 

Whole Life Insurance

Whole life insurance has no expiry date. The life insurance cover lasts for as long as you live (or for as long as you want it). Permanent life insurance coverage aside, whole life plans build cash value over time. 

The policy cash value grows at a predetermined rate on a tax-deferred basis, meaning the question of tax doesn’t come up till you access the money. As a policyholder, you can tap into the cash value at any time and use the money for any purpose.  

Whole life insurance is the most common type of permanent life insurance and typically costs up to 10 times more than term life. Despite the higher cost, it can be a good option for high-income earners looking to diversify their investment portfolio. It is also worth considering if you want peace of mind that your loved ones will receive a payout no matter when you die.  

How much life insurance do resident doctors need?

There’s no one-size-fits-all answer to this question. How much coverage you’ll need depends on your individual circumstances. That said, life insurance experts recommend having coverage that’s at least 10 times your annual salary. However, this generic advice doesn’t factor in your family’s needs, nor does it account for your savings. 

A more accurate method is to add your mortgage, debts, monthly bills, and other expenses and work out how much money a year your family will need after they lose your income. Then, multiply this figure by the number of years your loved ones would require financial support to determine the amount that would be sufficient for them. 

You can also use our life insurance calculator to get a customized estimate. 

• Enter a few personal details, like your name, age, gender, and smoking status
• Enter a few financial details, like your annual income
• And that’s it — we’ll give you an estimate tailored to your situation

Once you know the amount of life insurance cover you need, one of our representatives will help you secure the right policy for you at the lowest price possible. 

When should medical residents take out life insurance?

There’s no optimal age for buying life insurance. You may want to look at it when you make a major financial commitment or have people who depend on you financially. 

Most people consider life insurance when they reach a significant milestone, such as: 

• Beginning of residency: Life insurance premiums go up as you age. Buying a policy as you start residency would mean paying less in monthly premiums and potentially less over the course of the policy. 
• Starting a family: The arrival of a new family member means additional financial responsibilities. Life insurance can help ensure the cost of raising children is covered, keeping your family afloat if you’re not around to take care of them. 
• Buying a home: Should something happen to you, proceeds from your policy can help your surviving spouse repay the mortgage.

Why do medical residents need life insurance?

There are a few reasons why medical residents may need the protection life insurance offers. 

• Income protection: Your family may depend on your income as a medical resident. Life insurance can act as a financial safety net in the event of your untimely death, providing a tax-free, lump-sum to your surviving spouse or partner. 
• Student debt: If your student loan is co-signed, the co-signer may be responsible for paying the debt after you die. By naming the co-signer as the beneficiary of your life insurance policy, you can help them pay back the loan. 
• Cover mortgage: Even if your spouse earns enough money for the family to live on, you may need life insurance to cover big debts, such as a mortgage. You may also need life insurance if you don’t have kids but share a mortgage with your spouse or partner. If you pass away before the loan is paid off, life insurance proceeds can help your spouse to keep up the costs of owning and running the home. 

Do medical residents need life insurance if you have it through work?

Your residency program may have life insurance cover as part of the compensation package, but the coverage is likely to be not more than 1-2 times your annual salary. Ask yourself: Will that amount be enough to keep your family afloat after you’re gone? 

If the answer is no, you may want to consider buying an individual policy to fill in the gap between your required coverage and your existing coverage. 

Common misbeliefs about life insurance for medical residents

Thinking about life insurance? You might have come across some myths during your research. Here’s the real scoop on what’s what so you can make an informed decision about coverage. 

Myth 1: Life insurance is costly. It’ll be hard for me to manage it along with my student loan payments. 

The cost of life insurance varies from person to person, depending on several factors, like age, gender, health issues, etc. Until you’ve received a personalized quote, how can you be sure that you won’t be able to afford it?

If you’re worried about the cost, consider term life insurance. Premiums for term life insurance in Canada starts at $8-$10 a month. Also, don’t forget to shop around. Different insurance carriers may charge different premiums for the same coverage amount and type of life insurance. 

Myth 2: Young people don’t need life insurance

Life insurance tends to be less expensive for young applicants with no health concerns. Therefore, buying coverage earlier in life can save you money in the long run. 

If you have a family or are planning to get married, life insurance is important, regardless of your age. 

Myth 3: I have coverage through my medical residency, so I don’t need an individual policy

Workplace life insurance typically provides limited coverage. In most cases, the death benefit is not greater than one or two times your yearly income. If you have dependents, supplementing group coverage with an individual policy is a smart idea. 

Myth 4:  I don’t have dependents, so I don’t need it

While having dependents is an important reason for buying life insurance, it is by no means the only one. You’re a good candidate for life insurance if you have a private education loan. It ensures that the burden of repaying the debt won’t fall on your family or the co-applicant. 

Myth 5: I will need a medical exam to get life insurance

Several providers in Canada offer no-medical life insurance. You can easily qualify for such a policy if you are under a certain age and have no serious pre-existing condition. 

_Conclusion

Taking out life insurance cover can help you financially support your family when you die. Life insurance usually costs less the younger you are, so buying coverage as you start residency makes a lot of sense. At Dundas Life, we can walk you through your options and help you secure the right policy at the best possible price. 

FAQs

Is life insurance payout taxable? 

Generally, the death benefit is not taxable, but there are a few scenarios in which it may be taxed.

• You have named your estate as the beneficiary
• Your beneficiary decides to receive the payout in installments
• The primary beneficiary predeceases you or is untraceable and there’s no secondary beneficiary

How much life insurance cover can I have? 

Most insurers offer coverage up to 25 times your annual income, though this can vary based on factors such as your age and health. 

Can I buy life insurance while in residency? 

Of course, you can. Taking out life insurance when you’re young can help you lock-in low rates. Some insurers even offer discounts to medical residents.