As a physician, you may have insurance needs that are greater than those of other Canadians. After all, your ability to earn an income is one of your most valuable assets.
Whether it’s life insurance, living benefits or practice-related insurance, you can reduce the risk of financial stress and the impact on you and your family by getting the coverage you need, long before you need it.
Here are three types of insurance to consider.
If you have a spouse, children or other dependants, the main role of life insurance is to ensure their standard of living would be maintained if you were to die. This type of insurance can do things like provide a source of income for your family, cover your funeral expenses, pay off your outstanding debts (such as a mortgage or line of credit) and pay for your children’s post-secondary education.
The two most common types of life insurance are term and permanent.
Term life insurance
Term life provides life insurance coverage for a specific period (e.g., five, 10 or 20 years). Because it’s limited in this way, it’s generally the most affordable type of life insurance. If you die during the period of coverage, your beneficiary receives tax-free death benefit proceeds.
Permanent life insurance
Permanent life insurance is different from term life in two ways: it provides coverage for your whole lifetime; and it often has a form of cash value or savings that build in the plan. That investment component in your policy grows free of annual taxation, which can help you build a larger net worth than you could in a taxable account.
A permanent life insurance policy can be especially valuable for incorporated physicians in a couple of ways. It can help you diversify your corporation’s assets; and it can help you maximize your estate for your heirs by reducing tax at the time of your death.
There are two main types of permanent insurance:
- Participating whole life insurance has built-in savings generated by the insurance company’s profits. The insurance company manages the investment component.
- Universal life insurance has a separate investment component that you manage (with the help of your financial advisor).
As the name suggests, these types of policies pay benefits while you are still alive.
Disability insurance is designed to replace part of your earnings (typically 60% to 70%) should you suffer an accident or illness that prevents you from working. If, like most physicians, you are self-employed with no paid sick leave, it’s a good idea to have alternative financial resources to replace the lost income.
Disability insurance contracts can be complex, so be sure to get expert advice.
Critical illness insurance
This type of insurance provides a lump-sum benefit payment (tax-free) if you are diagnosed with one of many serious illnesses, including cancer, heart attack or stroke — even if you are still able to work.
It provides money that you might put toward taking extra time off or enhancing the care you receive.
Long-term care insurance
You might think of this kind of insurance as something for the elderly. But accidents and unexpected health events can happen at any age. Even a minor health problem can make it difficult to perform certain day-to-day activities without help from a friend or family member.
If you become unable to perform some of the activities of daily living (for example, bathing, dressing and feeding), long-term care insurance benefits can support the cost of this care for you, whether in a facility or through at-home services.
If you have your own practice, here are some other types of coverage to think about.
Imagine being unable to work for several months and still having to pay your practice overhead. This type of insurance can complement your disability insurance and is often negotiated at the same time. If you’re self-employed and responsible for overhead expenses, overhead insurance helps to pay for rent, salaries and ongoing practice expenses if you become disabled.
Think of this as “home insurance” for your office. Medical office insurance provides coverage for fire, theft and loss of contents; it also covers personal injury and liability. Remember to insure for the total cost of re-establishing all your data after a fire, theft, etc.: materials, staff time, and computer and communication systems.
Most Canadian physicians are protected by the Canadian Medical Protective Association (CMPA) for medical liability. In addition, every medical association or federation now shares a reimbursement agreement with its respective provincial and territorial government.
If you’re working as a medical administrator and providing non-clinical professional services that are not protected by the CMPA, you should look into additional professional liability protection.
Protect your financial plan
As a physician, you no doubt work hard and, hopefully, have built a solid financial plan. Insurance can help you protect your plan.
You can’t predict the unknown, whether it be financial losses or health problems. But a qualified insurance professional can help you protect yourself by assessing your needs and ensuring you have the right coverage for all stages of your life.
Talk to your MD Advisor* to discuss your specific situation. MD Advisors work together with the insurance advisors from provincial and territorial medical associations to provide advice and solutions for physicians.
* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.
Insurance products are distributed by MD Insurance Agency Limited. All MD employees dealing with clients regarding insurance products hold life licences.
The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice, nor is it intended to replace the advice of independent tax, accounting or legal professionals.