RBC Disability Insurance Medical Student Offer: A Breakdown
As future physicians, we have a huge opportunity for financial success in our lives. But with that, comes an equal opportunity for loss. The most probably cause for this loss is your health. That is where the conversation begins for disability insurance.
What happens if after all the effort and debt put into our training as medical students, and you suddenly cannot work anymore. The question would quickly become, how do you make your mortgage payments? Put food on the table for your family? These are the considerations you have to think about as you start to ponder the question. Do I need disability insurance? It may seem unneeded now, but the majority of practicing physicians pay monthly for this protection.
What is Disability Insurance?
Disability insurance is an income replacement benefit. If you cannot preform the essential duties of your job, you will receive a monthly benefit to replace that income. In return for this safety net, you pay a monthly fee to ensure that you have the protection if you experience any changes in your health preventing you from working.
It does not cover a list of diagnoses, as we’d all begin to expect. Instead, all you need to do is prove to the insurance company that you cannot complete the duties of your job. Examples include mental health, broken bones, etc.
What if you’re healthy, young, and don’t have a family history of disease? Disability Insurance is known for being difficult to obtain. It requires lab work, urine tests and personal questions pertaining to your travel and hobbies. So it’s actually best (and cheaper) to acquire it while you’re young and healthy. When you need it the most, you probably won’t be able to get it, or at the price you can now.
A career in medicine is one the most frequent for disability claims. We are self employed, therefore, we don’t the protection that other individuals get from their employers. We have to put together a way to protect ourselves independently. Thus, the data is slightly skewed towards our profession. Let’s be honest, we understand the immense stress that our type of work has, having protection of your income can be one less thing to worry about.
RBC vs. Doctors of BC Coverage
As medical students in BC, the question is always between Doctors of BC and RBC. You have to approach this from the perspective of a 30-year career. This can be difficult sometimes when the cheapest option as a student is possibly not the best option. Let’s take a look at the difference between them.
It’s important to understand that DoBC is an “association” coverage. This means that DoBC owns the policy/contract, not you. A few crucial points about association coverage are highlighted below.
The policy is reliant upon you paying membership fees to DoBC. If you choose or have to move your career to another province, this coverage doesn’t follow with you unless you continue to pay the annual DoBC membership fee.
The monthly cost and contract details are not guaranteed. Again, DoBC owns this contract, therefore, they can change the definitions and features without consulting you. This puts you at risk of being blindsided from what you believe to have originally agreed too.
DoBC has a policy that your “rate” or monthly payment, automatically increases every 5 years. From my understanding, this is how they rationalize offering free coverage to students. Pay more later to have it free to begin with. Deep into your career, the cost of your policy will potentially outweigh the benefit/value that it offers. At that point, you’re no longer young and switching to independent coverage will be difficult and expensive.
The reason DoBC is slightly cheaper than independent coverage is because the plans are subsidized by the government. This is not guaranteed. The government could decided to remove this and again, you’d have no say in the decision.
Case Study: Ontario Medical Association (OMA)
The Ontario Medical Association (OMA) has a similar plan to DoBC but has existed for much longer. In fact, DoBC was the last provincial association to offer disability insurance to your physicians. Over the past few years, physicians in Ontario have begun to transition to purchasing independent coverage instead of using the OMA coverage. This created an issue for the insurance company backing OMA. It was filled by older physicians, who were making claims, and lacked the young healthy physicians, who don’t make claims.
Suddenly, the insurance company wasn’t making as much money. So what happen? First, an increase in rates by 22% in 2021. Second, SunLife (the insurance company behind OMA) decided to no longer offer this insurance and was taken over by Canada Premier. Lastly, within 1 year of service, Canada Premier backed out and in 2023, Manulife has taken over as the insurer. What this tell us is insurance companies are having a hard time justifying their partnership with the OMA. Which in return, puts physicians with insurance through the OMA at risk of unexpected changes.
The tip of the iceberg? Manulife also provides coverage for DoBC. If they need to fund the declining profits of OMA, it could come from through changes in the DoBC contracts.
Key Aspects of the RBC Medical Student Offer
Non-Cancellable Policy
Once accepted as a client, you have the safety of your policy never change. The price and features negotiated will only ever change if YOU choose. This is the highest level of safety.
Own Occupation Coverage
If you loose your ability to preform the specific tasks of your work. Take for example, a surgeon, who requires their hands to make precise movements. If a freak accident occurs and they no longer have the ability to preform surgery, they are guaranteed coverage. That means insurance payments and a new income from another career that you can preform within your current limitations.
Total, Partial and Residual Coverage
Total Coverage → You’re unable to work in any shape or form. You are paid 100% of your coverage.
Partial Coverage → Based on the time value of your work. If you normally work 5 days a week, but now based on your disability can only work 2.5 days a week. You will get paid out 50% of your coverage.
Residual Coverage → Based on the monetary value of your work. If you normally make $8,000 a week working your regular hours, but your disability forces you to slow down. Suddenly you’re only making $4,000 a week. Your will get paid $4,000 to ensure you’re receiving your regular income. This prevents insurance company from claiming that you’re still working full time and withholding coverage.
Note: Most association coverage, like Doctors of BC, only has partial coverage, which limits the flexibility of your protection. Make sure to ask your insurance professional before signing any contracts about these details.
Additional Riders/Features
I’ve always thought as a student, “I have no income, realistically I have 10x more debt than income.” By purchasing disability insurance now, you’re securing a plan that never changes. Now, with the Future Income Option, you can start at the cheapest/lowest coverage and increase it while you advance in income and career.
No Underwriting
RBC is the only company on the market that requires 6 extremely simply questions to be accepted for coverage. 99.9% of people pass these questions with no issues. Again, the benefit of answering them when you’re young and healthy versus later in career. As well, the number of questions being limited compared to extensive questioning, physical exam, blood and urine tests that is normally required.
Discount Opportunities
Right now, a 25% discount is offered for your entire life career. But this is changing to 10% on October 1st, 2023. In addition, your first year of coverage is free, which helps with the costs associated with the contact until you start making an income. Every time you increase your coverage, the 25% discount will remain with you, creating huge savings.
How much do you really save?
In general, 1st year residents will purchase limited coverage to lock in the discount and limit monthly payments (after the free 1st year). You may wonder, what happens to the free $2,000 coverage you’ve opted into from Doctors of BC? Well, you’re in luck. The trick is to purchase $2,500 of coverage through RBC to round up to $4,500. The numbers below are based on averages, you can expect to have costs within a reasonable deviation from these.
Men (dark green)
25% Discount → $68.61/month for $4,500 of coverage
10% Discount → $82.41/month for $4,500 of coverage
DoBC Top Up → $44.67/month for $4,500 combined coverage (DoBC & RBC)
Lifetime savings of $20,353.80 with the 25% discount
Women (light green)
25% Discount → $112.98/month for $4,500 of coverage
10% Discount → $135.71/month for $4,500 of coverage
DoBC Top Up → $73.57/month for $4,500 combined coverage (DoBC & RBC)
Lifetime savings of $43,937.44 with the 25% discount
A few notes to touch on regarding the combined coverage of DoBC and RBC. All the points highlighted previous regarding DoBC’s association coverage are still a potential risk. The benefit of having the small portion of independent (RBC) insurance is you will have the flexibility to covert to completely RBC coverage if required/desired and to access the medical student offer. To be eligible to make this split, you must have opted into the DoBC coverage previously.
How to Sign Up?
I’ve recently had the pleasure of hosting Kristen Fazio, from Professionals’ Insurance Center, on a Zoom call for UBC Class of 2024 on the topic of disability Insurance. I owe her the credit for the details I’ve highlighted in this article. I found her approach in this area to be clear, concise and approachable from the perspective of a medical student. She prides herself on going beyond the act of “selling” insurance, but continuing the relationship into areas of personal financial planning.
If anything you read above interests you, and you’re wanting to take the next step towards purchasing independent disability insurance before the Oct. 1st, 2023 deadline. She has suggested that you reach out before September 22nd, 2023.
She is happy to answer any questions you have regarding the points I’ve made above. Either, fill out the form and I’ll make the introduction! Or you can message her yourself at the email below.
Kristen Fazio, Professionals’ Insurance Center
kfazio@professionalsinsurance.net
416-968-7526