Speaker 1 (00:02.146)
Welcome to the Physician Family Financial Advisors Podcast, where physician moms and dads turn today's worries about taxes, investing, and extra money into a comfortable feeling of financial security. I'm Ben Utley.
And I'm Nate Rennecke. Today's question is how much life insurance do doctors really need? So Ben, let's start with what is life insurance? It's kind of this product that a lot of people think they might need. They don't really like to go out shopping for it, but we all want to know what's the hubbub. So what is it?
Yeah, so what is life insurance? Life insurance is a form of insurance. There's a couple different forms of this insurance. And long story short, when you die, it pays out. Not to you, obviously, because you're not around to cash it in, but it pays out to your survivors, also known as your beneficiaries. There are two forms of life insurance. There's what's known as cash value or permanent life insurance.
And then there is pure insurance, which we call term insurance. So term works more like your auto insurance, where if you, if you're driving your car, you need to have insurance when you don't own a car anymore, you don't need insurance. And, term life insurance does not have any cash value the same way that car insurance does not have any cash value. what we call pure insurance. And, just for the record here, I have not recommended anything other than term and life insurance.
in two decades. So there is certainly a place for cash value or permanent life insurance in the world. I've seen it used by farmers, but I have not seen it used with good reason with physician families.
Speaker 2 (01:47.274)
Mm-hmm. Okay, so you said life insurance when when you die it pays out Yes, why would you need it to something to pay out when you died? Yeah
Yeah, that's good. So why would you need it? Well, so when you're a physician and you have a family, so you have a spouse or partner and you have children, then you have dependents and you may have made some promises to these dependents like, I'll send you to college. I'll provide a house for you. I will be here to provide income for you and I'll help you save for retirement. When you die, you can't make good on all those promises.
And you can work a deal with the insurance company that if you pass away that they'll provide money that can be used to pay for all of those things. So it's kind of a backup plan in case you don't make it all the way to be able to earn the money for those promises.
You know, something I've noticed as well in many physician households is that one spouse is spending so much time at work and earning a lot to where it actually makes a ton of sense for the other spouse, obviously, to just to potentially stay home and provide in other ways for the family that is lacking on the physician side. So usually it's even more necessary not only to replace what that physician could potentially make.
But more necessary because there may be a spouse that hasn't been in the workforce for a decade. They can just go back to work.
Speaker 1 (03:08.278)
Yeah. So I think what you're saying is if the physician dies, it might be hard for the spouse to go back to work.
Right. Even more so than any other family. Yeah. So that being said, it's going to pay out. the toughest question and really the question that if you have this question answered, it's a lot easier to go out and know what you're looking for is how much do you need?
Yeah, how much do you need? because I mean, ultimately, the cost of insurance is, you know, the price has to do with the amount that you get and how long you have it and which which type of product you wind up with. at the end of the day, to buy it and have any confidence in what you've got, there needs to be a process behind it that gets to the amount like how much how much do we actually
How much should we get? it be 10 million? Should it 1 million? Somewhere in between to be able to answer that question of how much you need. Now know that you've done this calculation with our clients before and you've probably done the calculation for your own how. So maybe you could just tell our listeners some things for them to consider as they're looking at buying life insurance. Some ways that they can begin to do the math and calculate the amount that they need.
Mm-hmm.
Speaker 2 (04:27.054)
Well, much like my budget, I'm pretty detailed with the life insurance. don't, you you could go out and you could, you could buy a big pile of it and be done. But for me, I prefer the more, the more detailed route and it's really not all that difficult to model your life insurance based on, on your specific situation rather than taking rules of thumb around this. So for me, I,
I want to make sure of a few things when I'm considering how much life insurance will my family need. One is your debts. So you have your house, maybe you have a big student loan and you want to make sure that those are covered. So with a mortgage, let's say you can go out and you can buy a policy directly for that kind of matches your mortgage. So imagine you have a
$700,000 mortgage, but it's being paid off, you could buy a $700,000 policy that matches maybe a 15-year mortgage. So you buy a 15-year $700,000 policy. Something like that. do the same thing with your student loan.
So you're not talking about buying life insurance from the mortgage company. You're talking about buying life insurance separately in an amount that would pay off your mortgage.
Right. And in terms of how to or how much to buy, it's really about your spending habits, your and your debt that you have. So you look at your debt, you buy something that matches your debt. Then you look at maybe child care. So imagine your physician spouse dies and you do work while you're going to need someone to watch the kids. And that's an expense that you're certainly going to need to pay for.
Speaker 1 (06:18.51)
What about where you have a homemaker? So you're a practicing physician and your homemaker dies. The person who was maybe raising your children passes away. Wouldn't you want to provide some money for being able to replace some of those services? Maybe having a full-time nanny plus or that kind of thing too? Would that be a consideration?
Yeah, I think so. mean, this is a, this is one of those situations you have to put, it's sort of like retirement. You put yourself in this, in, this new world in your mind and you imagine what your expenses would be that'd be different than they are today. And in that situation, you normally don't pay for childcare. And so you would need to think how much would I pay a full-time nanny so that I could continue to earn as a physician.
Yeah, cause that's not insubstantial. mean, at kind of at the low end, a full-time nanny might be, oh, that might be 40 or so thousand dollars a year in a major city. That might be 60 or $80,000 a year. And if you think, well, I might need one of those. You have very, very young children. You might need one for as little as five years or as long as 10 years, depending on how busy you are. mean, gosh, you know, 10 times 40, that's 400,000. 10 times 80 is 800,000. I mean, that's.
that starts to get to be real money and we haven't even talked about the taxes on those payrolls.
Right. Yeah. mean, between child care and potentially private K through 12 school, you're looking at, you know, million.
Speaker 1 (07:45.934)
Yeah, private school. We didn't talk about private school because that's something that's very important to some physicians, particularly in like bigger cities, maybe where the public schools are either dangerous or not acceptable for some reason and they want to send their kids to private school. I know that's a big ticket and especially if you have two or three kids.
Yeah, and in those situations, just to service your debt or eliminate your debt and to take care of the kids before they're out of the house, I mean, that could be a couple million dollars or more right there.
Right.
So you back into that math about what would we want to pay off? What pile of cash are we looking at that we need just to keep life sort of similar? And then you have to think about potentially, certainly if the earner, the spouse that's earning the majority of your income is the one to pass, you have to consider building an amount of money that will cover all of your lifetime goals. So things like college and
what we might call lifetime income, not just retirement. There's a period where you might have 20 years before you're planning to retire and you assumed you could build up a good retirement fund in those 20 years and that is all taken from you. you have to essentially have enough life insurance to live off of for the rest of your life. And I think the average physician family spends about $10,000 a month.
Speaker 2 (09:23.392)
on average and so that'd be a four million dollar policy which is just some math that we know is the kind of the four percent rule which we don't have to get into but if you spend ten thousand dollars a month for the rest of your life you will need four million bucks.
So wait, let me see if I got this straight. So life insurance for all the goals. And so one goal is sending my kids to college. Another goal is putting away some money for retirement. And another goal would be having some money between now and the time that my spouse would retire. So I mean, that's like the whole inch of audit, right? mean, we're basically, potentially, I mean, that could be several million dollars.
Yeah, right. And that's kind of a, whenever I talk about the amount, oftentimes I get the question, do I really need this much? And you probably don't need that much forever. But in the early years, when you have young children and you have no money built up, I've seven million sounds like a ton, but it's it really is just covering you for what you would have had a fully funded college fund.
you know, childcare, become debt free, and live off of the average amount spent by a physician family.
Well, that becomes a good question, which is not just how much do I need, but how long do I need this coverage? So I want to talk about that for a second. there's a kind of life insurance called permanent, permanent insurance. You might've seen it sold as variable universal life or cash value or whole life. And those products are really intended to be around until the day that you die. And, and if you don't die and you get your retirement, then, know, there might be an asset there. Okay.
Speaker 1 (11:13.23)
But the cost of those policies is enormous. It's multiples of what it costs to get good old-fashioned term life insurance, which is part of why we don't recommend it. But I think that when I look at families, the real need is typically a 15 or 20-year need. And so if you have a five-year-old child and that kid's going to go off to college when they're 18, you really only have 13 years that you need to ensure that college risk.
Right? If you are 20 years away from retirement, then you really only have 20 years that you need to ensure that risk because if you die between now and then there would be money provided for retirement. But if you don't die, you should be saving in which case you would have money when you get to retirement. So I think the term really matters and these term life insurance policies are sold in 10, 15, 20, 25 sometimes and 30 year terms. And of course, the further out you go with those terms,
the longer the insurance company is on the hook, so the premiums go up. And I believe that the premium for the same million dollar policy, if it's 20 year term versus 30 year term, can be almost twice as much. So matching the term of the policy to the term of the risk is gonna save a person premiums.
Yeah, and it just ensures that you're not over insured all the time for the rest, you know for for 30 years so That that is the part where I get really detailed on in my life Some people would prefer to pay the extra to not do the math. It's really not all that difficult to do the math Think about what you would need to send your children to college. How old are they? You buy a policy for that thinking about your your mortgage. How many years is have left? buy policy for that and then
You have essentially childcare and income. And the income you can stagger as well. You don't want to have 100 policies floating around. But if you had one or two, it's sort of imagine you did everything right and you got your saving for a 20-year career, you could buy two policies, one longer than the other.
Speaker 2 (13:31.628)
because if you make it halfway, you've saved half as much. But the question that comes to mind is, or kind of what this is alluding to is the fact that some people don't actually need life insurance. How often do you see that, Ben?
I, I probably see it in about one in five or one in four cases, but most of the clients that I serve are, are advanced in their years. they're edging toward the end of their career or maybe they're self-employed and there's a substantial amount of savings there such that, you know, when you think about, okay, college, they've saved everything they need for college. So that's not a risk. Their house has paid off. That's not a risk.
Maybe their spouses earning an income and maybe a practicing physician. So, you know, the risk of them not having an income is zero. You know, so really it's more about retirement. If there's a lot of retirement money saved, then, you know, they might be done. And there are quite a few times when I see physicians in their 50s who come in and they do have life insurance that they simply don't need anymore. Like we run the math, we do this calculation that we're thinking about. We look at it twice and we're like, you know,
I don't see the need for it here. And I put that very carefully because, you know, in my line of work, even though I'm a licensed insurance consultant, I don't tell people to surrender their policies. You know, I don't tell people to turn off their life insurance because I know the moment I do that, that they're going to go out and get hit cream by a car and that spouse is going to be looking at me saying, you told them to do what? You know, so I don't tell people to let go of their policies, but you can certainly do the math and then,
know, the client can decide for themselves what they want to do. The other thing that I see is if it's term life, by the time people are 15 or 20 years into their term life policy, that premium is usually really darn small. I mean, relative to their budget. And we have this conversation, usually we're like, yeah, you could do without it. Um, but most of the clients will say, you know, it's just really not that expensive. I'm just going to let it run its course.
Speaker 2 (15:36.47)
Which is the beauty of term. Yeah. You know, when you really need it, it's worth paying that premium that feels, I don't know, it's not all that high, but it feels big. And then when you don't need it as much, the premium feels small. this is not to make any blanket statements, but sometimes we will get caught up in buying life insurance that is just overkill for them or think whole life and on all that or permanent insurance.
I think the reason that physicians get caught up in it is they see value in it. They're willing to pay more. So maybe they even understand that it's expensive. But what you have to understand is that journey that you just described. Almost, you know, the vast majority of physicians who are making it into their 50s and late 50s, that's at the time that you start to not need it. Yeah.
if you're doing everything right. Now this assumes that you're making good decisions along the way and saving and investing. But if you are doing those things, the value to a physician specifically for permanent insurance just dwindles. Whereas for the average person, maybe they're thinking that that time in their life is when they would definitely need the money, but for physicians it's just not the case.
So Nate, I know we didn't talk about this before we got on the air, but I'm thinking we could make up a case, know, just make up a family and run through some math and figure out about how much life insurance they would need. What do you think about that? Sure. Okay, so how about we have a single physician family? So we have a non-working spouse and a couple kids and a doc in their mid thirties, you think?
Okay.
Speaker 1 (17:23.176)
And you can make up the mortgage because you usually do the mortgage math and run that part of the show. So let's just run down and how old do we want our kids to be? How about like twins age six? Okay, let's do that.
Sure.
to twins age three.
There's a reason. age six and twins age three, they're gonna need a psychiatrist.
Two kids, age three.
Speaker 1 (17:50.19)
15 years of college. I feel you. so let's run down the list that's in our estate planning guide. Excuse me, our life insurance planning guide.
Sure. So the first thing in our guide that we have is the mortgage payoff. And usually at this point, you've just gotten a mortgage. Brand new mortgage. And it depends. In this scenario, we're going to say that you've purchased a house that you can live in for a while. It's not your first time small house.
Yeah, it's not your entry-level house. It's your kind of going to be there until your kids are out of high school house. So let's locate this family in Chicago. We have a lot of clients in Illinois for some random reason. Let's put them in Chicago. so how much is our mortgage?
Probably 800.
Okay, so we got 800k for the mortgage. hope you're going to keep notes because I'm... Yeah, I can't type at the same time. Okay, so we got 800k for the mortgage. What's next?
Speaker 2 (18:43.744)
I got it.
Speaker 2 (18:49.678)
And normally that mortgage at this point in life is not a 15 year mortgage. It's more like a 30 year mortgage.
Well, okay, I don't want to blow everybody's doors by like laying out all the terms I just want to like I just want to give them a ballpark for like How much sure person be target just the how much part?
Got it. Okay. Next is student loan payoff. Okay. Usually that is around the average is I don't want to make anyone feel bad that has more than this, but the average is usually around 250.
Okay, hold on a second, because if I'm that doc and I'm the one whose life we're insuring and that's my student loan, my student loan is probably going to go away, right? So we're thinking about my spouse's student loans because I don't want to leave my spouse with student loans. Mine are going to go and I die, but I don't want them to be saddled servicing their student loan debt, right?
yep you got
Speaker 1 (19:42.894)
Okay, cool. So let's say that I got my degree in psychology, know, I'm the ad spouse and I've got, you know, $50,000 in student loan debt. Yep. Or, yeah, so that's, we're up to 850 now, right? Okay, cool.
Right. there's a, you assumed that they, that I think the audience would know that that 250 would be forgiven. So that's something that's important when you're looking at what the money that you need, you're looking at these loans. If you stayed federal, your student loans are forgiven on death. So that's a, that's good. Then we have two kids to send to college.
Okay. Okay. I'm I'm in Chicago land. I probably send my kids to private school. I might have gotten, one of us got our degree at a private school. let's, let's just go full board private, not Ivy league. Let's just go like solid private. Maybe what do you think? 50, 60?
It's 55 right now. So, 55, let's call it all in for college today. If they were off to school today, it's 450,000.
Hold on a sec, break down the math for me, because I've got two kids, two kids, four years times $55,000 a year. that's... Two kids, that's... $55 times two is $110, times four is $440. Okay. So for sake of math, let's call it $450. We'll give them $10,000 to... beer money, right? I'll make the math easy. So what are we up to now?
Speaker 2 (21:14.231)
There you go.
Speaker 2 (21:18.072)
So that's 450.
and 850 right? 1.3 I think. Okay cool 1.3 million so far and all I've done is just kind of paid off debts, taken care of college and a mortgage.
that would be.
point three.
Speaker 2 (21:32.418)
So far. off debts and kept some promises to your kids basically.
Yeah, 1.3. Okay, cool.
Do we let's see in this scenario if someone's got any student loans they may be working so to continue working you have to have some child care So you have at least
yeah.
Speaker 1 (21:53.902)
Well, wait a minute, the childcare. don't think I want my spouse to have to work and do all that stuff. let's skip childcare, but we'll, provide them with a lifetime income.
Okay. So if you're living in a city like Chicago, I would, I would say you're going to be slightly above average compared to the physicians we serve. So 10,000 we'll call it $12,000 a month to well, no, cause you don't have a mortgage. Yeah.
don't have a mortgage. at some point I won't need such a big ass house, but yeah. Maybe like 10 or eight.
Yeah, so maybe. Huh, 10 OK, yeah, we'll go with 10 Chicago's Chicago's expensive. OK, so. The the really easy way to do this is that I mentioned the the 4 % rule and without getting too much into the math, that is a really simple way of taking the entire amount of money you have. Multiplied by 4%.
And that's about how much you can live off of without ever... And you really never need to die. You could live on it forever.
Speaker 1 (23:06.366)
I think in our calculation, usually use a 3 % withdrawal rule. We are conservative with it. So I just did the math on this before our session here. And it looks like if you just take the monthly amount that you need to multiply by 400, that covers income today, that covers income and retirement. So, and that assumes about a 3 % withdrawal rate. So.
Basically what that means is if you had this amount of money and you invested it appropriately, that you could pretty much take $10,000 a month out of it, more or less forever with a low chance of running out of money and still have the ability to kind of fight inflation with it. So 10 grand times 400 is 4 mil, right? So we're now up to 5.3 mil.
Yep. And that's pretty much the extent of it. That would be the amount you would need in your early 30s. When I'm thinking about this, I'm thinking about that mortgage is going down. The student loans is going down. Your children are getting older. Your college fund is going up. Your retirement savings is going up. So every few years, this could be adjusted. But if you bought
retirement savings is going up too.
Speaker 2 (24:20.43)
In this case, if you bought roughly a one and a half million dollar policy and a four million dollar policy, one for let's call it 10 or 15 years, and one for 20.
You can be done.
Yeah, you'd be pretty close or even just 20. If our kids are three, isn't that sweet, Nate? We have kids now. You could get a 20 and cover it. They'd be covered all the way through college and you'd be buttoned up. Sweet. See, that was actually pretty easy, right?
So.
Right, this is an, I really think this is an average situation. So in an average situation, you need over five million bucks in life insurance.
Speaker 1 (25:08.398)
Yeah, and I would say that if the number is coming out somewhere less than 3 million or more than 7 million, that that would be like an edge case. And it would be, it would be unusual to see that. That's kind of my, my gut check on these numbers, like less than three or more than seven. There really should be a very good reason for, for it to be outside those bounds.
So we get the question, quite literally get the question, so isn't a million dollars enough? Because a million seems like so much.
Oh, I have a story. have a story. Okay. Okay. So one of our clients who's a doc referred the widowed spouse of a physician to us and that spouse had $1 million in life insurance and there's a little bit of retirement money. There's some equity in the house, but by the time we did the math, there was not enough money to pay off both houses.
Go ahead.
Speaker 1 (26:01.742)
And so we're looking at having to sell one of the houses and it was kind of a family vacation home that had a lot of sentimental value to the family and to the children as a kind of a point of stability. So we didn't want to let that go. And then we had college to pay for that was coming right up because these kids were in their, in their late teens, but it wasn't enough to be able to provide for all of college as well. And then worse, the spouse was a professional, but had kind of been out of practice.
and didn't have a business and didn't have a job. And so it was going to be a matter of years before they could spend their practice up and get it going. And so really covering the cost of living in the meantime was a huge problem. I mean, it was, it was very uncomfortable to try to work the math on how are we going to make ends meet on this $1 million? I mean, it was really just a little bit more planning and just a little bit more premium money would have made life so much easier for that surviving spouse.
but it was uncomfortable to the point of almost cringy. And that's totally avoidable. It's absolutely avoidable.
For for not that much money. mean, two or three million, it's just inconsequential. And I remember this case now that you brought it up. And I remember the the widow was highly trained. mean, a very professional career. It's just that she was out of her job for just a few years. And so she had to start from scratch. It's almost like she had a decent emergency fund. But that's not it shouldn't feel like you have a fully funded emergency fund. And that's it.
Yeah, for not that much to get.
Speaker 1 (27:36.014)
Well, and I could see a case like that where there is a double physician family. One of them is practicing and the other one gave up their career or kind of put their career on hold to raise children. And you know, if the, if the practicing spouse loses their job or excuse me, dies, then the other one, you know, might be thinking about going back into medicine, but you know how hard that is. All of our listeners know how hard it is once your credentials are dry to go back into the field and not to mention the stress, you know, so, and all that's preventable with a little bit of.
a little bit of life insurance. So, all right. So you've, you've, you've sold me, Nate, you sold me on this, this life insurance. So sell me a policy.
Yeah, well, we can't and we don't.
Yeah, we're not licensed for that folks. We have no license for that. We don't sell products. We don't sell life insurance. So if we don't sell it, these people trust us, how do they get it?
So we have a couple different places that we really trust, but at the end of the day, this is similar to any other thing where you find some trustworthy people who have to be salesmen, but are saleswomen, and they really do a good job because they work with physicians specifically many times, so they know what you need and they know what you don't need. Do you want me to give the names of the people we recommend?
Speaker 1 (28:56.31)
No, I think we'll, I think we'll hold onto that. I do want to talk about the process of like a buying it. So, what you want to do is you want to find an agent who can sell pretty much any kind of policy, not just the policy that has the name brand of the company that the agent works for, but you know, any kind of policy. And, so start with that agent and get quotes for several different things, but also know that when you, when you quote unquote shop for life insurance, if you're buying a
an ABC branded policy from a reputable agent and you get a quote and you go, you go get a similar quote or the exact same quote from another agent. still the ABC company in the same amounts. The quote should be the same. It should be identical because life insurance rates are regulated at the state level. So all the insurance companies have to float their products by the insurance commissioners who approve or disapprove their rates. And so if you're
If you're buying that, you know, $5 million policy from the ABC life insurance company, it doesn't matter where you're buying that policy. The, the finish rate, which is to say the premium that you actually pay will be the same no matter where you get it. There's no discounts or special deals. So it behooves you just to pick the agent that you like, the one that you think is going to return your phone calls and be Johnny on the spot when your survivors need them. rather than just simply shopping around. mean, there's certainly online quote engines.
But as you approach this, you have to be careful because the quote and the actual agreed upon premium are two different things. so someone could assume, sure, that you don't smoke, but they could assume that you're in the preferred risk class, which is to say, you know, you're a runner and you've got excellent scores on your blood work. Well, it may be that you don't get that, but they're going to show you a rate that's in that rate class so that it will be the lowest premium.
And this is something that we see very commonly out of the engines and we see this out of more aggressive salespeople. So if you're dealing with a insurance underwriter or a company in the sales process and they ask you a bunch of detailed questions, it behooves you to answer those questions so that they can more carefully fit the product to you, get you in the right class and make sure that the premium that they're quoting you is going to be pretty close to the finished premium. Whoa, I didn't know I knew all that stuff,
Speaker 2 (31:12.589)
Yep.
Speaker 2 (31:16.194)
Yeah, no, I think that's good. And a lot of times people just, it's the financial industry that scares them out of this, but they're wondering, can I get a better deal? And the answer you just described is if you shopped the right way, probably not.
Yeah, probably not.
I recently got a million dollar policy and I wonder if it would be interesting to tell the listeners how much I paid. Do think that's okay?
Yeah, I think that's fine. So you need to describe your kind of a little bit about your health and your, your physical stature and that kind of stuff, your age to kind of put it in perspective. And also the fact that you're, you're a guy and women's premiums for life insurance are lower than men, materially. So, this is a little known fact in the insurance world, but disability premiums for women are higher because their disability rates tend to be higher.
But life insurance rates for women are lower because they tend to live longer than men do. fire away.
Speaker 2 (32:11.726)
All right. So I believe I was just standard health and in life insurance, there's, you know, preferred standard substandard. So I think just across the board is pretty much a standard health situation, non-smoker, all the typical things for a standard, you know, rating. Okay. So not preferred, not, not substandard. Early thirties. And I did pay
which sometimes this isn't necessarily the best thing, I did pay, I went the cheapest payment route, which was to pay at the beginning of the year. So rather than paying monthly, paid, and I think I just checked a box, but that's not all that important. You don't save that much money. And if you do a month to month, that's why.
something to say about that when you're done. go ahead. But that is known as the mode of your premium and so you're you're paying an annual modal premium as opposed to like a monthly quarterly semi-annual modal premium yeah. Mm-hmm. Go ahead and we'll finish your story and then we'll talk about
Yeah, yeah. So I bought I bought a policy that represented a minimal college fund and my mortgage and it was roughly a million bucks. Okay, so I thought a million dollars and I and I bought it I think a 20 year term. Okay. And that cost me a grand total of 30 bucks a month.
You're kidding me. Well, we're just talking with the sound engineer before the call about the cost of lattes. That's like five coffee drinks.
Speaker 2 (33:41.964)
I know, it's really not all that much. I intend on, you know, and I actually bought it when I had my second child a couple of years ago. So it was just like, okay, well, two kids going to college, that's, that needs something. So I just bought another million dollar policy and.
That's kind of nothing really. mean, even if you went the full 5 million at 150 a month on a physician's budget is really kind of next to nothing. mean, gosh, you know, for an extra a hundred dollars a month, you can avoid the horror story that I dealt with. Right. Exactly. Okay. Now I want to talk about the modality of premiums. Modality of premiums.
Okay, so should you pay your premiums monthly or annually? Well, they'll quote you both of these probably. All right. And what you'll find is if you take that monthly premium, you multiply it by 12, it's usually about 5 % higher than the annual premium. And you think, Ooh, I should definitely pay my stuff annually. But, but I personally pay mine monthly. And the reason I do that is I like to have smooth cash flows. The other thing I'm thinking is, you know, if I'm laid up in the hospital and I'm, I'm on my death bed because I'm sick somehow.
The last thing I want my wife to do is have to worry about whether or the annual premium is coming due at the moment that I'm expiring. I want that to be automated and go on. Okay. So that's like the, the emotional angle of this. Then there's the financial angle. If I've got my money tied up in a life insurance policy upfront, then that means that I've got money that is, that's in the insurance company's hands. Whereas if I pay mine monthly, then that means I get to have a little bit more money investible or earning interest for me.
And that's how I prefer it. I've got two really solid reasons to pay my premiums on a monthly basis.
Speaker 2 (35:16.886)
And on that financial note, some people may say, well, it's not that much. It's $30 a month. There's not a lot of opportunity costs lost there to be investing. But I know you, and I know that you do this with everything. So it's an accumulation of having money to invest every single month in smooth cash flows across your entire budget. And that does add up if you have a few hundred dollars every month available to be invested.
I know that about you. think when it was it was just one of those I felt like a physician too. It just one of those situations where it was some discount and I think I just chose the lowest rate and I thought I remembered back to we've had this conversation before and how I probably should just pay it monthly. It's not I mean what do I say five dollars? Yeah, it's just kind of silly. Yeah, so just doing it monthly it is is probably preferable.
Yeah, so I think we have finished all of our all of our common questions, right? Can I kind of begin to wrap this up? Okay, fantastic. So if you're listening to the show and you're like,
Yeah.
Speaker 1 (36:20.162)
Gosh, I'd like to get a copy of that life insurance guide that Ben keeps referring to. Write us. You can write us at podcast at physicianfamily.com. Say, hey, I listened to the show. I've been a, I've been a big fan. I've been listening to you for years and years, even though we've been on the air for about a year. And I would love to get a copy of your life insurance guide that contains not only the stuff that we talked about here today, but the, we believe are some of the best life insurance agents to be using. And we do not receive any compensation from those life insurance.
agents or from anybody else. one of the cool things about our firm. So if you'd like that guide and you like some well vetted life insurance agents, feel free to reach out to us podcast at physicianfamily.com and we will zip that out to you. So that's our show for today. I encourage you to go to our website, physicianfamily.com and subscribe to our newsletter. In that newsletter, you will get a little link that you can click on to listen to the rest of our shows. And you'll also get the news of the week. Sometimes it's
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