TEGO Insurance: Is TEGO Medical Indemnity Legit?

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There are six insurance companies in Australia that provide medical indemnity cover. TEGO insurance is the newcomer to the party.

Doctors, dentists, nurses and allied health professionals are required by law to have medical indemnity insurance. 

Many of us signed up to whichever organization offered a freebie during medical school.

Is there a difference between cover and do you have the best cover at the best price?

What is the deal with the new player, TEGO who has been drastically under quoting other MDOs?

Australian Medical Indemnity Insurance Providers

How Much Does Medical Indemnity Cover Cost?

Costs vary dramatically.  Insurance is often offered free to students.  They recognize many professionals will remain loyal throughout our career.

The largest factors in the price of indemnity premium  include

  • Employer indemnified or not
  • Specialty risk (procedural specialties higher risk)
  • Your previous history of claims

Doctors training in public hospitals are employer indemnified.  Premiums for these are likely to be a few hundred dollars per year. 

If you start private practice, general practice or locum work, this work is not employer indemnified.  Premiums will increase significantly. 

Indemnity premiums for self employed individuals are based on annual billings and specialty. 

Higher risk and very highly paid procedural specialists, e.g. O&G, can incur eye watering annual premiums of tens of thousands! 

Luckily, for those starting out in private practice, huge discounts of up to 80% are often offered to get you on board. 

Of course, this means premiums can sky rocket after the first 4-5 years. 

If you are in this situation, it is worth getting a quotes for the first 5 years to compare

Premium Subsidy Support Scheme

Premiums of tens of thousands of dollars can be unmanageable, despite high billings.  Premiums are based on gross billings.  Yet gross billings don’t always reflect net income, as some specialties have high overhead costs.

The government provide the Premium Support Subsidy scheme, subsidizing premiums for eligible doctors including:

  • Procedural GPs in a rural area
  • Private practice clinicians whose premium > 7.5% gross private income

Check whether your eligible for the Premium support subsidy scheme

Run Off Cover Scheme

Confusingly, there is government run off cover, and your insurance companies run off cover.

Government run off cover is free insurance cover, based on the last insurance contract. 

It is designed to allow retiring doctors to continue cover for previous private practice work without paying insane premiums.

You are also eligible for run off cover if you are taking maternity leave and stopping private practice.   

But if you leave private practice for reasons other than maternity, permanent disability, retirement aged over 65 years, or permanently leaving the country, you will need to purchase run off cover from your insurer. 

Insurance company run off cover may be available for those working in public healthcare, taking parental leave or retiring. 

This may reduce your premium significantly, but still keep active cover in case of claims made after you have ceased work. 

Important Exclusions You Won’t be Covered For

– Not Telling Your Insurer As Soon As Possible

Insurers can refuse to cover a claim if you fail to inform them as soon as you’re aware there may be an issue.

If there is a chance of an adverse outcome or patient legal action, it’s worth giving them a call.  They will quickly reassure you if there is no claim, but it is noted on file just in case. 

It will also make calling your indemnity company less of a terrifying prospect if the worst happens, and you do have an adverse event one day. 

The vast majority of doctors report their insurers acting compassionately and supportively when they have called. 

– Illegal Activities, Sexual Harassments and Assault

We are all horrified when we hear a doctor has abused their position of power and harmed patients, or colleagues.  If you do something indefensible, once it is proven, you are on your own. No insurance is going to cover this sort of behaviour. 

Watch out for the sex offender doctor who is now a property advisor

– If You Do Not Have an Active Policy At The Time of the CLAIM (not incident leading to claim)

Medical indemnity insurance in Australia is “Claims-made”.  This means that insurance will cover your claim if your policy is current at the time of the claim.  

That is why run off cover is essential.  A claim can be made years after medical treatment.  You may have no idea there is an issue until after retirement.  Even if the claim has no basis, there could be huge costs involved in fighting it. 

Retroactive cover is also important for this reason.  If you are changing insurers, check your retroactive date. 

– Telehealth when Your Patient is Overseas

Some of the insurers will cover overseas practice if you are completing a short term fellowship and have discussed it with your MDO prior.  Otherwise, treating patients overseas is generally not covered. 

I have not been involved in telehealth myself, but know many doctors have due to COVID.  If your patient is dialing in from their holiday overseas (because you’re their favourite doctor), you may not be covered if there is an issue. 

TEGO Insurance- The New Kid on the Block

Many doctors have found significantly cheaper premiums with TEGO insurance. 

TEGO tell us this is because premiums are based on your personal risk as a doctor, not just your broad professional category. 

So if you are a low risk doctor, you may be able to lower your indemnity cost with TEGO insurance.  Doctors with a history of claims may find they are unable to get a quote from TEGO, or it is very expensive.

TEGO insurance is owned by Berkshire Hathaway, so has huge financial backing. 

It has no “in house” lawyers unlike most MDOs. 

Instead, TEGO contract lawyers as required. This keeps costs down, but has led to some concerns that it may motivate to settle a case quickly rather than defend your good name. 

The concern is not evidence based so far, most doctors insured by TEGO insurance seem happy with the product.

TEGO is likely to quote you very low for the first year, but premiums may increase once they have your business.  This may still be cheaper than other insurers. 

They offer a “Policy matching” policy clearly intended to steal businesses from the other MDOs.  Many are nervous to put their insurance with such a new player.  Matching your original insurers policy offers reassurance that the cover is just as adequate. 

Finally, Business for Doctors has a relationship with TEGO through which a further 5% discount can be achieved. 

Aussie Doc has no relationship with BFD, TEGO and no experience with TEGO’s insurance products. 

If price is your primary concern with indemnity cover, and you are low risk, get a quote from TEGO and read the PDS.

Comparing TEGO Insurance With The Competitors

  AVANT Medical Indemnity TEGO Insurance MDAN Medical Indemnity MIPS Insurance MIGA Medical Indemnity
Policy Matching Yes
Legal advice 24 hr 24hr 08:30-20:00 24 hr by healthcare professional 24 hr
Indemnity cover $20 million with multiple sub-limits Unlimited Individual $20 million total – $10 million per claim Unlimited but multiple sub-limits
Good Samaritan cover Y Y Not mentioned in PDS Y Y
Volunteer medical work Y Y Y Y
Clinical trials cover Y except trials involving pregnant women, gene therapy, use of stem cells or children < 16 years   Y Y Y
Cover for international cover Y (T&Cs)   Y (T&Cs)
Medicare or health care fund audit Y Y Y Y
Coronial inquiries Y Y Y Y
Telehealth services Y Y Y Y Won’t cover “inappropriate telehealth”
Needlestick Cover $250K Y – Variable $25K $100K
Tax Audit $50K Y              

 

I have summarized from what I can find on each company’s PDS.  No responsibility is taken for accuracy or that it is up to date when you read this.  It’s just to give you an idea.  It’s important that you read the policy’s PDS carefully yourself.

Ask Your Colleagues

There may be  details that make one policy advantageous over another in your chosen specialty. Asking colleagues for their recommendations may identify  issues important for your career. 

Who Will You Speak to?

If you need to call your medical indemnity insurance, I would imagine you are going to be in a very stressful situation. 

It is important that you receive appropriate support. 

Would you rather initially talk to a doctor or lawyer? 

I would rather talk to a colleague who understands the medical situation and can hopefully reassure me!

I hope this has been helpful in the overwhelming decision to choose a medical indemnity provider.  Get some quotes and read the PDS’ now you have a rough outline of what to expect. If you’re on a roll and want to cut costs on your other insurances, check out Insurance: Which Policies and When to Cancel and the Health insurance analysis.  

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

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No More Procrastination: Build Passive Income Now

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Is Passive Income Real?

“Passive income” has become a buzzword recently.  The appeal of making money while your sleep certainly sounds appealing!  And perhaps
too go to be true?

If you think about it, though, everyone eventually lives off
passive income.  It’s called retirement.  Wherever income in full retirement comes from, no work is done (at the time). 

Before retirement, any passive income helps to build financial resilience.  In the unfortunate event of long term illness, extra income will prolong emergency funds.  As passive income streams increase, reliance on (and therefore premiums) income protection and life insurance fall.  

Diversifying your income streams also makes sense if your income is not 100% secure.

Is Passive Income Taxed?

Income paid from your superannuation fund is generally tax free.  A good reason to aim to have much of your investments inside super by the time of retirement!

Other passive income is taxed at your marginal rate, except capital gains tax which is discounted 50% from your marginal rate if the investment is held for more than 12 months. 

“Capital gains” are the increase in value of an asset between purchase and selling.  An asset brought for $300,000 and sold for $500,000 has a taxable capital gain of $200,000.

Rental income, or share dividends is taxed at your full marginal tax rate. 

The first $18,200 income is tax free per person.  Meaning, if retired, both partners can earn this tax free in investment income.  A total of $36,400 for a couple tax free is a pretty good start to your passive income stream outside superannuation.  

Passive Income for Doctors and High-Income Earners

If you have a long-term stay at home partner, they can earn $18,200 annually without paying tax.  It will take quite a while to reach this with investments.  For those households that have two tax paying adults, and who are accumulating assets for future needs, it is best if possible to defer income where possible until one or both are in lower tax brackets. 

With real estate, this is part of the reason why doctors are a fan of capital growth (negatively geared) property.  Given the tax advantages and efficiency in compounding wealth completely untaxed for many years, this may be the most efficient way to build a high net worth. 

When investing in shares, “dividend investing” is very popular with lower income earners, largely due to franking credits.  It doesn’t make a lot of sense for higher income investors.  The total return of the investment is most important (rent/ dividends + capital gain).  For those on a higher tax bracket, they want to minimise income for several years.  After retirement, it doesn’t make a lot of difference if you are withdrawing dividends or capital gains (although if being taxed capital gains will be cheaper). It is still a withdrawal if you are not reinvesting dividends. 

International shares tend to produce fewer dividends than Australian indices.  And many of us are severely “Overweight” in Australian assets when taking into consideration superannuation and properties.  The Australian stock market makes up only 2% of the global market.  In the extremely concentrated Australian market, some prefer LICs such as AFIC and Whitefield for their unusual offering of dividend substituting – thereby deferring tax until withdrawal.

 

Even if you are currently an intern on a reasonably low income, when building investments consider the long term how much you will get paid. 

 

Passive Income vs Residual Income

Investors have saved and invested throughout their lives, workers have paid taxes that will eventually support them with a state pension if required.  So I’m not sure truly passive income exists outside of winning lotto or marrying a high earning spouse.  Most income streams described as passive are in fact forms of residual income – ongoing income long after the work to create it is completed.

In order to create passive income streams, you require lots of upfront work, a large amount  of time (for compounding growth) OR a large lump sum to start with. 

You will also need enough knowledge to find good sources of passive income with an appropriate level of risk for you. 

Sources of Passive Income

– Residential Property Investment

This is the probably the most obvious source of passive income.  Buy a house, rent it out and receive the rent minus tax as additional income.

Higher yield properties offer the potential to provide small amounts of passive income immediately, and come at a lower price point. 

Higher income earners may be able to take advantage of better long term returns and more reliable tenants by delaying income with good quality capital growth properties.  

The biggest difficulties with buying real estate is the huge financial barriers to entry.  You realistically need 10-20% deposit plus buying costs (~6%).  This can be in savings in equity (value of home – mortgage remaining). 

Real estate results in a poorly diversified portfolio for many years due to the size of each purchase. 

For those for which this is not realistic currently, crowdfunded real estate investing is available through BrickX or REITs. 

REITs are listed property investment funds, with less transparency and due to their liquidity tend to act similar to stocks with high volatility. 

BrickX offers more transparency, allowing you to purchase bricks of houses you are able to see pictures of.  Fees are higher, liquidity and volatility lower.   

– Investing in the StockMarket

Investing the share market has never been easier, with barriers to entry as low as $5 with some roboadvisers.

Many consider the stockmarket “Too risky”.  Realistically though, investing in broad index funds in Australia and worldwide is a LOT less risky than putting all your cash in a single property.  Especially if that property is chosen without a lot of research.

An afternoon of research  is probably enough to make a sensible plan and pick a reasonable index fund to invest in.    

Your index fund will provide dividends two to four times a year and will initially be tiny.  You will need to reinvest dividends for many years to allow compounding to grow your income to worthwhile size.

Single stock picking takes a lot more knowledge, time and research.  The upside of potentially unlimited returns tempts many to give it a shot. 

Evidence tells us a tiny proportion of professional investors outperform an index fund over the long-term.  You are likely to lose your money if you try this first. 

Build a decent portfolio of index funds before doing further research and considering whether stock picking is for you.

Remember, being an excellent doctor (or other professional) does NOT mean you are naturally skilled at completely unrelated tasks!

– Bonds / Fixed interest

Buying bonds essentially means lending your money to governments of corporations and receiving interest like income. 

Interest rates are at record lows – great for mortgagees, terrible for retirees. 

Bonds are traditionally used to diversify and lower risk in a portfolio, and allocations to bonds increase with age. 

Rates are currently less than expected long term inflation, so in real terms bonds are losing money.  Unless rates increase significantly, I will minimize my bond allocation to that in my superannuation. 

Long term I plan to park accessible money in mortgage offsets for investment properties in lieu of a bond allocation.

– Commercial Property Investment

Commercial properties are traditionally associated with higher income (or yield). 

They can be used to tilt a residential property portfolio rich in capital gains to increase the income. 

However, there is less information around about commercial property investing. 

Commercial property rental vacancies are often months long. 

The fact that rental incomes could be wiped out completely by increases in interest rates is offputting for me. 

Commercial property is certainly an option for producing rental income, but you will need to research, minimize risk and get professional help. 

– Product development

Some doctors have made their fortune inventing medical devices. If you have a great idea, proceed carefully to ensure your employer cannot claim rights to the proceeds

-Create Intellectual Property

If you write a book, there is obviously a LOT of time and effort involved upfront.  You can potentially continue receiving lifelong residual income though.

Most published authors will attest the incredible amount of work involved, and relatively poor financial compensation, especially in comparison with your day job. 

This is something to do for passion, with income provided a side benefit.  There is too high a risk of not being able to publish or sell your finished masterpiece after so much work to go in for just the money. 

Blogs are frequently touted as a potential source of passive income through affiliate marketing and advertising. 

Writing articles regularly and maintaining a website is definitely more akin to a second job than to passive income. 

Income from this blog has only just covered basic costs in the first year.  The vast majority of blogs don’t make a profit.

Another passion project, for which any income should be a happy side effect rather than the primary driving force.

If you are a skill photographer, you could try selling stock photos.  It’s possible you already have photos that could be uploaded immediately.  But to create ongoing income you are likely to have to take and upload a huge number of photos.  It’s a lot like another job, but if you enjoy it this may be an option.

Peer to Peer lending

I have looked at Ratesetter, now Plenti several times.  This online business allows you to invest money to be lent to people needing personal loans. 

Plenti screen the credit worthiness of the borrowers, but the investor has no input into who they loan to. 

Peer to peer lending seems really popular with young investors, but each time I look at it I can’t really see why (maybe I’m missing something?).

Currently, the top rate advertised is 6.3% for 5-year loan period.  They have a provision fund that compensates investors when borrowers default. 

But there is the risk of the provision fund being exhausted (entering a COVID recession, I would have thought significantly increasing the risk). 

In the case of provision fund being exhausted, investors can lose all their money. 

Given investing in the ASX would be expected to return higher over the long term and is associated with almost no risk of losing all your money.  It seems to me Plenti is offering lower returns at higher risk. 

– Renting Underutilised Space or Belongings

If you have a spare room, caravan, spare car, garage or even designer clothing there is probably a way to rent these items when you are not using them. 

These are inventive ways to produce passive income from items you already own.  They are unlikely to produce passive income you could expect to live on, but could well help you save for your next investment faster.

– Second Job

OK, clearly not passive.  But some extra work in your high paying profession is probably the fastest way to start building passive income streams by dumping all you earn into investments.

Buying an investment property, or investing in the stock market a year earlier could make a lot of difference. 

– Optimise Spending

The most efficient way to increase many higher income earners savings is to reduce excessive spending. 

This is not about self-deprivation, rather consciously assessing which spending provides the most value.  It is about cutting out unconscious spending that brings no joy. 

The faster you start saving, the faster you can start enjoying passive income.

Passive income is the end result of time, effort, knowledge and delayed gratification. 

Get started today building your income streams for the future.

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

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The Secret Super Powers of Stealth Wealth

This article may contain affiliate links. If there are any in this article they are marked *. An affiliate link means if you click on the link and purchase a product, at no extra cost to yourself, I will receive a small commission.

What is stealth wealth?

Stealth wealth is when a wealthy person avoids displaying the outward trappings of wealth in order to blend in. 

This young retiree has gone pretty extreme by not even telling his friends and family that he is financially independent and retired! 

Deception of family and friends whilst trying to hide the fact your retired sounds awful!

But perhaps playing it cool and low key by not showing off your wealth is an approach that may suit you. 

Why Practice Stealth Wealth?

-Relationships Struggle When Wealth is Unequally Distributed

The financial independence +/- Retire early movement has rising popularity. Many young people are saving aggressively and accumulating impressive levels of wealth as a result. 

We have all heard horror stories about big prize lottery winners.  Those that have had a big win often tell of unanticipated difficulties associated with having so much money. 

Long lost friends and family members pester them for money. 

New friendships can feel tainted with doubt they are motivated by the hope of financial gain. 

Early retirees and young people that have accumulated significant assets on their journey towards financial independence are reporting similar problems. 

People seem to resent these young go-getters success, despite it coming from hard work and delayed gratification. 

These attitudes can even come from their own family.  Having raised kids willing them to succeed, not all parents are immune to the green-eyed monster.  When a child far exceeds expectation, family relationships can become strained by jealousy. 

The Wealthy Are the Common Enemy Everone Loves to Hate

People love to judge the rich. 

Regardless of how they achieved their wealth, the wealthy are often seen as greedy money hoarders. 

Those that have earned an equivalent income and spent it on new cars, top of the range televisions and jewellery tend to be less judged.  They are the ones often seen as “doing well” and “smart” rather than greedy.

There is also small minority that are on the look out for opportunities to gain wealth without the hard work. 

The worst-case scenario would be to attract a spouse who intends to divorce and take as much of your assets as possible. If you want to appear wealthy to attract a mate, first consider what kind of partner you are keen to attract!

Australia is becoming a more litigious society, though luckily still far behind the United states.  Advertising your wealth really make you an obvious target for those looking for an easy law suit.

Asset protection often seems irrelevant to the young professional with a negative net worth!  But within a few years, if you spend less than you earn and invest regularly, asset protection will soon become an important issue.  No-one wants to delay gratification and save their cash instead of blowing it for someone to take it away with a frivolous law suit. 

Blending in

Do You Really Need to Show Off?

I suspect readers of this blog aren’t prone to spending on frivolous status symbols.  

The only reason to have a flashy status symbol such as a Rolex watch is to show off.  I hope no-one really pretends to themselves it has anything to do with telling the time! 

What do people really think when they see you wearing that watch?  Do you think they are impressed and like you more?

Or do they assume you’re a bit of a tosser?  This might be motivated by jealousy, but the end result is the same.  It seems rather distasteful to flaunt wealth when plenty are still struggling. 

If there are any desperate people about, it will surely identify you as a good target to rob! 

Options 1. Look Wealthy OR 2. Be Wealthy

Probably the most important reason is that by “looking rich” people are usually preventing themselves from becoming rich! 

Luxury status symbols, if desired, should be brought after a family has secured their financial future.  By this, I don’t necessarily mean financially independent, but on target to all goals. 

With the time it takes to reach financial security, you will be well practiced at weighing up your spending choices.  And you will be more aware of the environmental and financial wastefulness of consumerism. 

You will be able to consciously prioritise spending that brings you and your family the most joy.  This will allow you to spend far more effectively than haphazardly buying every next best thing. 

Most will have developed the maturity and self esteem to value discretion over showing off.

Not stealth wealth!

Disadvantages of Stealth Wealth

In the short term, many initially feel they are missing out on those self indulgent consumer purchases.  Especially for high income earners, there are societal pressures that encourage a certain way of living.  If you are still developing self esteem (and many of us take a while!) this can be challenging.

As a doctor, it’s pretty hard to practice stealth wealth.  There are societal expectation that doctors are wealthy.  I find this expectation rammed down my throat at every opportunity.  It is a large reason, I suspect, that doctors can struggle to save enough for retirement despite well above average incomes. 

We are constantly being told we can afford it, and can feel pressure to keep up with the Dr Joneses. There are some occupations where a fancy car and house are an important part of painting the image of success.  Estate agents may feel the need to project a picture of successful affluence (with a flash car) to provide social proof of their ability to sell homes.  Beyond smart work attire, I don’t feel this is the case with doctors.  I suspect a flash car in the driveway of a private clinic is inclined to make patients resent the fee more.   

Perhaps it’s best to be a stealth doctor too!  Advertising yourself as a doctor, in my experience, will result in larger invoices (you can afford it!). There is also an expectation to deal with random niggling medical issues at the most inappropriate times. I once got asked for a script for blood pressure pills in a jacuzzi!  For once, gender stereotypes work in our favour, ladies.  Almost everyone assumes you are a nurse if you tell them you work “at the hospital”.  I often don’t bother to correct outside work.

Gold chains on dogs. Also Not Stealth Wealth

Impact of upbringing on Attitude to Wealth

If, like many doctors, you are from a wealthy family, you may see things a little differently. 

What I think of wealth likely seems normal to you.  Stealth wealth is probably not going to work for you. 

Inheritances, however, are never guaranteed.  The lifestyle expectations you have been brought up with may hold you back in creating financial security independently.  Never rely on money that may never come.   

For those from humbler backgrounds, the implied financial and educational success as a doctor can be awkward.  You can easily find yourself as an outcast among  family and old friends. 

I would not be caught dead by my extended family driving a frivolous status symbol, or carrying a designer handbag! 

For many of us, we find we fit in more (if not in the medic crowd) by practising stealth wealth. 

Think Ahead and Start As You Mean to Go on

It can be difficult to roll back the lifestyle once you start displaying your wealth publicly. 

A job in a new city may provide a great opportunity to reinvent yourself as an average Joe.  But generally, it’s easier if you start as you mean to go on. 

And by not spending on expensive status symbols, you obviously have more ability to save, invest and actually become financially secure.  

Consider carefully how much you would like to display wealth if and when you have the means.  If in doubt, keep things low key as you can always upgrade later. 

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

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RMO: 10 Steps to Designing a Perfect Life

This article may contain affiliate links. If there are any in this article they are marked *. An affiliate link means if you click on the link and purchase a product, at no extra cost to yourself, I will receive a small commission.

Resident Medical officers (RMO) are 2nd+ year doctors.  They have survived the sick initiation ritual of internship and are asked at every performance review what they want to specialize in.

Young professionals have often been fed a powerful script by their parents and society. As a result, some can feel under pressure to succeed and meet expectations.

  • Expectations for your life get ingrained into your brain from toddler-hood.  It’s often decades later before we question the script we’ve been given.
    • Work hard at school
    • Get good grades
    • Get into a prestigious university
    • Work hard and please the boss
    • Buy a house (probably the most house you can possibly “afford”)
    • Get married (to a person of the opposite sex, (Same race?) from a respectable family, with a “good career”
    • Progress up the career ladder (RMO, Registrar, fellow in medicine) and be a “Go getter”
    • Have babies (for ladies, not too soon, but soon it will be too late.  There is a small window and you must get this right).
    • Continue earning more…and…more…and more.
    • Obviously, you’ll have to work super long hours, but all that time away from your family is a worthy sacrifice after all.
    • Upgrade your car.  And home.  And wine.  And clothing.  And jewellery.  And cuisine.  After all, you are successful now!
    • Take a few weeks holiday a year (apart from Americans who seem to get a few days if their lucky)
    • Work, work, work
    • Midlife crisis – it’s all a bit pointless after all – new car, new wife, the pool boy…
    • Retire

This is Your Life and You Only Get One

It’s actually a bit depressing laid out like that!

You only get one life.  It’s your life.

The above script may be exactly what you want.  But if you don’t question it you will never really know.

The infamous “Midlife crisis” I believe, comes from suddenly realizing this is NOT what you want.  After all, it’s often easier to conform to expectations.

The RMO / young professional years are a perfect time to take some time and consider your choices carefully.  For the RMO, definitely take this time before committing to postgraduate exams!  Paying thousands of dollars, and more importantly, thousands of hours studying for an exam you end up not needing would be a very painful experience!.

Design Your Life – For the RMO and Other Young Professionals

1. Dream big

What do you want your life to look like in 15-25 years time?

  • Who do you want to be?
  • What do you want to experience?
  • Which achievements are important to you?
  • Who do you want to be close to?

Write down a description of that ideal life.  But don’t limit yourself, just let your imagination go wild.

RMO

Another way of looking at it is, what would you do if you won the lotto jackpot?

My partner loves to buy a lotto ticket.  I disapprove, of course, it’s a silly waste of money. But I have enjoyed indulging in the fantasy of how to spend the money (especially in the broke RMO years)!

Recently we were discussing how we could have family discussions each year to decide how to allocate charitable contributions from our theoretical lotto win.

And then I realized…. we can do that right now!  The values donated will obviously be smaller, but that wouldn’t dilute the experience for our family.

We donate regularly to a couple of charities already and want to increase our giving.  This would be a great way to involve the kids in our giving!  How strange it never occurred to me before the lotto fantasy!

If you won $5 million dollars tomorrow, how would you change your life?  Would you continue with your career?  And would you change your location?

2. Consider lifestyle

How much do you want to work in an ideal world?  If and when you have a family will this change?  Does out of hours work and the thought of on-call fill you with dread or not a big deal?

Do you want to travel long-term at any point?

Which parts of your life to you love right now?  And the bits you hate?

3. Set Big Hairy Audacious Goals and think Long-term

Use your fantasy inspiration to decide on long term priorities and set some big hairy audacious goals.

Having a long-term plan will help you avoid getting into “Drift”.

Drift can result in poor financial and life decision making based on the easiest options.

Most people drift for some periods of their life. Reviewing your dreams and goals regularly will help you get back on track to the life you want to live

4. Always question the norm

Ideally, you want to find a career that bridges most of your desires – Work you will enjoy, that you can earn a decent income from (any form of medicine will achieve this) and that will be sustainable for you in the long term.

If your fantasy lotto involves long-term travel, consider whether this is a priority and maybe take time out before further training to see the world.

I’ve known plenty of RMOs who have saved to take a year off to travel.  One locumed six months of the year in Australia to fund six months EVERY YEAR bumming in Bali!

It doesn’t feel like it at the time, but post-graduate training can go very fast.  You will have plenty of years as a specialist in whatever career you choose.

If you want to take some time off early on, do it.  Make sure you are living YOUR life, no one elses.

5. Look at those 20 years ahead of you

When choosing a career, don’t focus too much on the job in the next 5 years.  You will work far more years as a consultant, or fully fledged professional.

Consider the short term sacrifice in terms of lifestyle, study and exams.  But if it lease to your ideal life for the 20+ years after, it may be right for you.

Observe the peers 10+ years ahead of you in your chosen profession.  Are they happy?  Would their life style suit you?  Do they have any regrets?

6. Choose your role models carefully

The people you are surrounded have subtle effects on your thinking over time.  It’s insidious.

Your immediate social group set the social norm.  This can lead to escalating expectations and extreme lifestyle inflation in the case of doctors.

Make an effort to spend time with consciously chosen role models.

Do you want to hang out a mate who medic volunteers around the world, managing to live on half a year of income or someone  who is always looking to upgrade their vehicle and comparing the features of the latest models?

If you’re content to live a suburban life where you biggest excitement is your mode of transportation, that’s fine.

Others will be bored out of their brains and hitting an early life crisis pretty fast!

7. Leave room for flexibility

Life is fickle.  Situations change with extreme rapidity sometimes.  You change as well.

Opportunities of a lifetime come along with little notice.  It is prudent to leave room for a sudden change.

If you have maximized your borrowing capacity and purchased the most house you can possibly afford (conventional wisdom), you’re stuck.

Mortgage stress can leave very little room for unexpected emergencies, impromptu weekends away or health scares.

Burn out is significant issue in medicine, and I imagine in other careers.  You owe it to your patients and yourself to be able to take time out if and when you need it.

If you spend almost everything you earn, you have no freedom to choose time off if and when burn out hits.  When a family member gets sick.  Or your suddenly overcome with an intense desire to spend a year exploring South America.

Amongst doctors (and probably most professions) there are usually two financial types.  The majority have pride in their successful status and like to show it off.

The minority see the huge potential with their generous income potential, actively limit lifestyle inflation and have bigger lifestyle plans with their cash than consumer purchases.

The latter wouldn’t be caught dead in the BMW I sniggered at recently, with personalized registration DR123.  Would anyone really be impressed by that?

There is no right or wrong (apart from a “Dr” number plate).

It’s about who and what you want to be.  If you choose to spend your cash on the house and cars, I forbid those jealous comments when Doctor Stealth Wealth takes another mini-retirement.

You have the choice who you’re going to be!

8. Get ahead with retirement planning

Both Docs in the example above can easily put off retirement planning.

This is WAAAY easier if sorted earlier due to the magic of compound interest.  It is really miserable, if possible, trying to catch up after age 50.

A common mistake (I made it too) is to think the small amount you can save and invest now is too tiny to make a difference.

Just start.  Get into the habit .  It will grow quicker than you think.  And you will later be able to increase if needed.  $276/fortnight for 35 years at 7% makes $1 million. Financial security and eventually wealth are build one dollar at a time.

– Make a Financial Plan.  

I know it’s hard, its so far away.

You don’t know how much you will need saved or what you want to do.

Make a best guess plan now using the below questions and this article.

Working to a plan will mean your in a far better position when you are more sure of your goals and change the plan.

Do you want the choice to retire before your preservation age? If so you need some investments outside superannuation

  • What age would you like the choice to retire at?
  • How much income do I need (guess same as now if this is too hard)
  • How much money do I need to save if earning 5% taking into account.
  • How much is going into superannuation each year?
  • What’s the short-fall?
  • Start working up to investing this much inside / outsider superannuation
  • Carefully (professionally) chosen property investments brought 20-30 years ahead of retirement are going to make this incredibly easy
  • Index funds/ ETF are less scary and faster to get going.  They will produce decent income faster for timelines under 15 years.  Learn to “Invest like a girl” to get better returns.

9. Revisit your Dreams and Goals Every Year

Of course they can change completely.  But if you have done the above steps, odds are you are in a far better position to pivot to the new plan.

Set a date – your birthday?  New year?  Tax time?  Set a reminder.  Dreams change.

10. Always Allocate Fun Money

It’s important to have fun along the way.  Life is short and unpredictable.  If started early enough, investing really doesn’t have to mean deprivation.  Prioritise “fun spending money” with each pay.  Just set a limit on how much and only spend up to this and squeeze the most “fun value” you can from each dollar.

If you want to delve deeper into life design, this article was inspired by Life Design*.

We only get (hopefully) 80-100 years on this planet to give it our best.

Many people live with regrets of all the things they didn’t get round to. Don’t be one of them!

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

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Insurance: Which Policies and When to Cancel Insurance

This article may contain affiliate links. If there are any in this article they are marked *. An affiliate link means if you click on the link and purchase a product, at no extra cost to yourself, I will receive a small commission.

If you’re itching to cancel insurance premiums, or want to know where to splash out, and where to skimp, read on.

Insurance premiums are the Aussie Doc household’s second largest expense.  I reckon they are the number one most annoying expense for most households!

With insurance premiums, you are almost guaranteed to lose more than you claim.

Insurance companies exist, after all, to make a profit.   The most important policies are for the financially responsible, a necessary (but hopefully temporary) evil.

As your investment portfolio grows, you will reach the stage of being able to self fund for more worst case scenarios. You can then cancel insurance policies to save money for more exciting things.

It is important to consider whether your policies are a). Necessary b). Adequate and c). providing value for money.

Why Insurance is Important.

Few financially responsible people would take a risk not insuring their home.  But many are dangerously under insured, just one disaster away from financial ruin.

It is also easy to get up sold on the number of, and value of insurance policies.

It’s tempting to think “If this terrible thing happened” it would be nice to have some extra cash.

But we insure for events that are unlikely to happen.  As soon as an adverse event seems plausible, insurance companies refuse to cover it. They are businesses, intending to make a profit of course.

So, insurance can be considered similar to a sort of morbid poky machine.  The company (Poky machine) is programmed to pay out a percentage of earnings.  Which means, you are probably throwing your money away on insurance premiums.

Why would anyone do that?  If the unlikely event you are insuring against is significant enough to threaten your way of life.

So, we insure against death or disability of the main income earners.  We also insure our car in case we are involved in an accident with a TESLA.  If our house is destroyed in a fire, most people would not be able to fund a rebuild – and service the pre-existing mortgage.

These are all disastrous events, financially, as well as the occasions themselves.

Cancel Insurance You Don’t Need

When you buy a new fridge, consider this when the sales person asks if you would like an extended warranty.  If your new fridge only lasted 3 years, you would be very annoyed.

Even if the company weren’t embarrassed into replacing it, would the annoying cost of a new fridge destroy you financially?  Not if you are financially responsible and have an emergency fund.

Scott Pape introduced this idea in his fabulous book “Barefoot investor”.  Insure only the things you need insurance for.

You will find insurance policies have extensive exclusions, meaning they often won’t pay up for that 3-year-old fridge anyway!

If your Iphone 37 mysteriously breaks, do you actually need the 38 model to survive or will an affordable brand or preceding model do?

Do you have insurance policies that you don’t really need?  Cancel insurance policies you don’t need and put the savings into your emergency fund or investments.

No lifestyle sacrifice required!

How Can You Save Money on Insurance When You Need It?

I’ve been pretty irritated by the fact I’m paying so much on insurance premiums.  But there are quite a few policies- professional, cars, boats (Mr Aussie Doc’s weakness) health, life, income protection and home and contents.

Keeping the number of vehicles you own to a minimum will reduce the amount you pay in insurance premiums significantly.  Unfortunately, this is an argument I’m not winning at home!

Our home and contents increased significantly over the past few years, and despite the land it standing on never having flooded in the history of time, it is now considered Tsunami prone.

Alas, I have no ocean views, but we are a brisk 10-minute walk to the beach.

I found the only way to get my premium down was to increase my excess.  We increased it to $5000 a few years ago, and this year will see if they will let me increase it to $10K.

I would be annoyed at having to pay $10K towards my house being swept away by a Tsunami, but feel this is extremely unlikely to happen and the 10K will be the least of my concerns if it does!

Income protection is my largest cost.  It is, at least, tax deductible if it’s paid for outside superannuation.

How to Save on Policies & When to Cancel Insurance

– Home and Contents insurance

Home insurance should be organized as soon as you sign a contract.

Imagine buying your dream home, signing the contract and it burning down the week before you move in!

Whose responsibility is it?  Can you back out of the contract? Does the bank care you now have half a million dollars of debt and no house?

Just get it sorted immediately.  The risk of this extremely unlikely event could be catastrophic.

Buildings insurance is the most important.  The building being destroyed while you still owe on mortgage would financially ruin most people.

More than half of those affected by the bushfires were uninsured or under insured.

Rebuilding a home is often more expensive than the purchase price.

There are also significant demolition and architect costs to add.  You would also need alternate accommodation until the rebuild was complete.

The cost of rebuild goes up over the years due to inflation.  In times of natural disaster, prices for the work increase as demand sky rockets and tradespeople don’t multiply.

If you earn an expensive house consider getting a valuation from a quantity surveyor.  More details about getting your insurance right here.

Most people need to keep house and contents insurance lifelong.

If you could pay for house demolition, rebuild and alternative accommodation during rebuild without financial ruin you could cancel insurance on your home.

– Health insurance

Health insurance is often a pretty poor deal. It becomes more attractive once your income reaches over $90K and as you get older.

We have a pretty good public health system though, so consider carefully whether you want to get started paying these premiums if you expect to earn less than 90K long-term.

The benefit with private health insurance really comes with age, and the little luxuries of a quieter environment and skipping the queue for non-urgent issues (eg joint replacement).

Read the detailed article about health insurance here

Given the largest benefit with health insurance comes with age, if you choose to pay for it, ideally you never want to cancel insurance for healthcare.

The financial strain of premiums probably eventually causes people to cancel their policies.

– Car insurance

Compulsory 3rd party (CTP) insurance is mandatory, but only covers personal injury liability.

Third party insurance covers damage to other vehicles if an accident is deemed your fault. I feel like this is the minimum acceptable car insurance.

Fire and theft cover can be added to third party insurance for an additional expense.

Comprehensive insurance is the top-level insurance that covers damage to your own vehicle as well.  There are huge amounts of variation in the value provided, outlined in tiny print in the PDS.

Check out my Budget Direct comprehensive car insurance review.  I had an accident and had to make a claim!

– How to Save on Your Car Insurance

Comprehensive insurance is significantly more expensive than third party.

You may wish to cancel insurance for comprehensive vehicle cover and downgrade to third party insurance when your annual premium costs 10% of the car value.

If you have emergency savings that will cover the cost of replacing the car, this seems a reasonable option.

You can insure your car for an agreed value,when organizing your policy, or market value at the time of the accident.

Agreed value is more expensive, and probably only of benefit for those with outstanding car loans or vintage/premium vehicles.

Insurance is especially expensive for those aged under 25, although this can be reduced with a skilled drivers’ course.  Drivers aged over 50 and those that don’t use the vehicle much may be able to get discounts.

No claims discounts are the 2nd biggest factor in deciding your premium.  Up to 70% discounts are available to those that can brag 5 years accident free.

The cost of your premium should be weighed against the excess.  Once you have reasonable emergency savings, it could save you money to increase the excess.

Read the PDS documents to ensure you are comparing like with like.  Some policies include roadside assistance cover, and after accident care such as car hire and towing.

Online applications may provide discounts over phone call applications or automatic renewals.

Also, paying the annual premium up friend can also produce a saving over monthly premiums.

Try and spend an hour pricing your policy premium each year to ensure your still getting a good deal.

Finally, check whether your preferred company offer Multi policy discounts.

– Income protection

This is my priciest policy – costing an eye watering $11,000 per year.  And I’m still underinsured.  Gulp!

But we are a single income family, with no ability to replace my primary income in case of my incapacity.

It’s tax deductible, so in reality the cost is just over half the premium.

Income protection may not be necessary for double high-income families, especially those who save ~50% of joint income, or have 5+ years in living expenses invested.

But income protection is often most vital in the most expensive phase of lives – with large mortgages and small children.

With age, policies increase quite dramatically from early 30’s.

There are options of level and stepped premiums.

Level premiums are supposed to stay stable in cost over the years (although everyones policies have increased significantly over the past 5 years).

So, level premiums are more expensive at outset with the idea you will save money over the long-term.

Stepped premiums increase every year with age.  Premiums escalate dramatically over the age of 50, eventually becoming unsustainable to most.

The choice of level or stepped premium depends on your age, how long you are anticipating needing insurance and affordability.

If you are planning to have children, or buy a home, consider securing your policy ASAP to avoid premium increases and the risk that you may suffer a health condition that makes you uninsurable (doesn’t take much).

– How to Save Money on Income Protection Insurance

Premiums decrease significantly with longer waiting periods.

Consider whether you could tolerate waiting periods of 60 or 90 days instead of 30.

It is best to see an insurance broker to organize your premiums.  They will be able to guide you through the pros and cons of each option.

And despite the huge commissions they receive, they tend to be cheaper and provide better quality insurance than the alternatives.

Plus, if you ever need to claim, it’s their job to fight for your claim.  I would consider speaking to more than one broker for recommendations given they are clearly not independent.

As you age, premiums get more expensive, especially for stepped policies.

Throughout your life, it is worth considering your insurance needs annually and considering whether you are adequately, or over insured.

Once you are financially independent, or have enough savings to last until your total disability pay out, you may decide to cancel insurance for income protection and spend the cash on something more fun.

As your insurance requirements increase, it may be worth keeping your old policy and adding a separate policy to make up the shortfall (especially if you have an agreed value policy, which is no longer available).

That way, once you have more savings and investments, it will be possible to cancel one insurance policy and keep the other without re starting at the older age premium.

It is possible to get income protection policies that pay to age 65.  How long you need is a matter of balancing your savings, time to retirement, gap between your living expenses and minimum wage.

As your assets grow, your needs for income protection will likely drop.

Once you are financially independent (able to pay for living expenses out of investment income) you can cancel insurance for income protection.

If you have enough investments to cover the majority of your living expenses, and could (and would) work an unskilled job in case of disability, you could cancel insurance and save your premiums.

Income Protection Inside vs Outside Superannuation

Income protection often comes automatically with superannuation (unless you’re under 25, need to opt in).

This is not tax deductible, and usually a poor-quality product.  It may be sufficient for your needs if you are young, healthy, have no children or debt.

These policies are usually any occupation cover (if you’re a neurosurgeon who has become paraplegic but could still work in a call centre you will not be able to claim).

As you train in your desired occupation, your specific skills will earn you a significantly increased wage.  Most commit themselves to larger financial obligations (e.g. big house).

If an unskilled job will not cover your living expenses, you need Own occupation income protection.

Superannuation cover also is usually a short-lived policy, mine was for 2 years.  That two years flies by pretty fast when you’re in the midst of a health crisis.

If you qualify for total permanent disability at this point, 2 years cover may be enough depending on how much TPD you have.

John had 2 years automatic income protection, TPD and life insurance through his super.  He’s had a shocking 2 years with a cancer diagnosis, debilitating surgery and cardiac complications.  He is taking daily pain killers that make him sleepy and he cannot drive.  He can no longer work in the occupation he has worked in since leaving school. 

On enquiring if he qualified for Total permanent disability, John was told “If you can move your arms and legs you don’t qualify.”

– Life and Total Permanent Disability insurance

Life insurance provides a pay out to your family should you die.

A significant amount of cover is often required to ensure your family don’t lose their home in the event of your death.

If you children attend private school, most would like this to continue this to avoid any further disruption after such a traumatic event.

Your stay at home spouse may be able to return to work, but will need time to grieve and support children as a priority.  They may have been out of the work force for many years, and may be able to earn only a tiny proportion of the household income prior to your death.

This is all very morbid.  But it requires careful thinking through all scenarios to work out the lump sum required.  Of course, insurance companies will tell you to insure for far higher sums than necessary, to increase their profit margins.

Total permanent disability is often linked to life insurance.

It is probably even more expensive, given the worst case scenario is that you are incapacitated and needing long-term care on top of no longer earning an income.

Consider your income protection and TPD together to calculate how much you require.

Your insurance needs will decrease over time as your assets grow.  Savings in the bank are likely a more effective (and liquid) way to pay for funeral costs.

By the time you reach financial independence, you may only need TPD Insurance in case of long-term care needs.  Some (especially hospital employed) doctors will be financially independent in superannuation, but unable to access it until preservation age.

Early access to superannuation can be granted in catastrophic conditions

“You may be allowed to withdraw some of your super on compassionate grounds. Compassionate grounds include needing money to pay for:
• medical treatment and medical transport for you or your dependant
• palliative care for you or your dependant
• making a payment on a home loan or council rates so you don’t lose your home
• accommodating a disability for you or your dependant
• expenses associated with the death, funeral or burial of your dependant.”

ATO
Website

Take into consideration any income protection you are still paying for, emergency savings and investments outside superannuation.

I would want 12 months living expenses available in emergency savings or income protection before I cancel insurance for permanent disability and death.

It seems likely approval for early super access is not a quick process.

Once you have more investment income than needed to cover living expenses, I cant imagine why you would want to pay any more premiums.

– Professional indemnity insurance

Professional indemnity insurance covers legal challenges from professional incidents.  It is important for all doctors, and many other professions.

A higher amount of cover is required for self-employed individuals.

I personally have been reluctant to shop around for these premiums, with concern if an issue arises and causes controversy over which insurance company covers the incident.

Most of us sign up as students and stay loyal to the company career long.  It’s worth doing some research before signing up for whoever is offering free pizza.

You need reasonably priced premiums, and a history of looking after their members in the event of claims.

A kind and supportive voice to talk to is very important if a mistake is made.

It is important to speak to your medical defence if anything occurs that could possibly become a legal issue.  Small print terms state they may not cover you if you have buried your head in the sand and not told them.

The couple of times I have spoken to my medical defence company, they have been kind and reassuring that I have done nothing wrong.

Insurance premiums are an expensive pain in the butt.  Spend a little time each year going through your insurance needs, and each of your policies.  Ask yourself

  • Am I adequately insured if I die?
  • And adequately insured if I am permanently incapacitated?
  • Am I adequately insured if I am unable to work for a year or two due to illness or injury?
  • And adequately insured if the house burns down or is flooded?
  • Am I over insured?
  • Can I save money by increasing waiting periods or excesses?
  • Is it time to cancel any of my policies?
  • Has my car reached “bomb” status  and it’s time to downgrade to 3rd party car insurance?
  • Am I claiming tax deductions (income protection and professional indemnity)?
  • Have I checked I’m paying reasonably priced premiums for good cover on car, house +/- health insurance?

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

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