How to protect your future…

Jana C. DavidsonAVMA GHLIT Director of Student ServicesMississippi State University CVMJanuary 30, 2009

"In the end everything will be okay- - if its not okay its not the end"

~ unknown

Where will you be in…

2012?

Imagine what your life Imagine what your life would be like if…would be like if…

you knew the outcome?

You – CAN create the You – CAN create the outcome!outcome!

Set your goals for 1, 5 and Set your goals for 1, 5 and 10 years out. Then work 10 years out. Then work backwards – visualize the backwards – visualize the steps & then you can see steps & then you can see what steps to takewhat steps to take

THE KEY??THE KEY??Start a plan and adjust your

plans over time….

“A journey of a thousand miles must begin with a single step."

~ Chinese Proverb

Things to know before you begin your plan….

• Accepted statistics

• Your prospective & potential income

• Your budget

StatisticsStatistics

• average American lifespan 79-85 years

• 2/3 (66%) live to between 64 and 84• 1/6 (16.6%) of us will die young

(before age 64)

• 84% will live beyond age 64• 1/6 (16.6%) of us will live to be “old”

(after age 84)

Potential IncomePotential Income

• Average pay for new graduates in 2008 was $48,328 ($27,911- $64,744)*

• For future planning purposes, let’s look at 2-3 years post-graduation

($75000- $130000)

*(source: AAVMC 2008)

How do you protect How do you protect your income?your income?

Personal Insurance• Medical Insurance• Disability Insurance• Life Insurance

Business Insurance• Professional Liability• Buy-Sell Agreements• Key Person• Professional

Overhead Expense

PERSONAL PERSONAL INSURANCEINSURANCE

Medical Insurance Plans

Medical InsuranceMedical InsuranceFee-for-Service Health Care

(Traditional Indemnity)─ Visit the physicians of your choice and then

physicians are reimbursed for their services─ Premiums tend to be higher than managed

care plans ─ non-restriction in choice of doctors, treatments

or facilities

Managed Care (Network driven)Subdivided into (1) HMOs; (2) PPOs; and (3) HSAs

─ premiums are less expensive due to more restrictive choices and allowable reimbursement amounts

Basic Insurance Terms You Should Know

Co-pay: refers to a set dollar amount often required to be paid up-front at a doctor’s office or for a prescription.

Insured: person(s) covered under an insurance policy.

Coinsurance: refers to a percentage an insured is required to pay. (80% /20%, 60% /40%)

Out-of-Pocket Maximum: maximum dollar amount an insured is responsible for, per calendar year. Once this is met, the plan pays 100%.

Deductible: dollar amount an insured is required to pay out-of-pocket before the plan begins to pay.

Benefits: monthly amount paid to an insured (disability), or this can refer to a service.

Underwriting: process of examining, accepting, or rejecting insurance risks, in order to charge the proper premium.

Basic Insurance Terms You Should Know

Provider: a physician, hospital, or other credentialed professional that provides care for a patient.

HMO: Health Maintenance Organization – strictly managed plan to help reduce the cost of medical expense waste. More limiting and less expensive than traditional fee-for-service plans.

PPO: Preferred Provider Organization –a managed network of physicians, hospitals or other providers under contract with an insurance company to offer their services at a lower rate.

HSA: Health Savings Account – PPO-type plan with network which requires high deductibles but allows for a tax-deferred savings account to offset out-of-pocket expenses.

Premium: rate that an insured is charged.

Waiting Period: length of time that must pass before benefits are payable. Often 30, 60, or 180 days. aka elimination period.

PERSONAL PERSONAL INSURANCEINSURANCEDisability Insurance

Disability FactsDisability Facts 7 of 10 people between ages of 35 and 65

will become disabled for 3 months or longer (Senate Finance Committee, 1998)

For a 32 year-old a serious disability of 90 days or longer is 6 1/2 more times likely than death (Disability Insurance Resource Center)

50% of consumers have 3 months or less of their living expenses saved

(Guardian Insurance & Behavior Study)

1 of 7 employees will be disabled for 5 years or more before retirement

(Commissioner’s Disability Table, 1998)

What are the chances of What are the chances of you becoming disabled?you becoming disabled?

Every 19 seconds someone is injured in an auto accident

Every 17 seconds someone is injured at work

Every 4 seconds someone is injured in some form of accident

Could it happen to you?

Becoming disabled is one Becoming disabled is one thing. The length of time thing. The length of time

with the disability is with the disability is another…another…

1 in 3 American workers will become disabled for 90+ days before age 65 (Commissioner’s Individual Disability Report, 1985)

People with disabilities are almost 3X as likely to live in poverty (Harris Survey, 2002)

Age of Onset

Probability of Disability

Average Duration

25 1 in 3 2.2 yrs

35 1 in 3 3.2 yrs

Regardless of your age, a disability Regardless of your age, a disability for any length of time can mean a for any length of time can mean a

loss of your ability to earn an loss of your ability to earn an income. This loss can have a income. This loss can have a

tremendous impact on you and your tremendous impact on you and your loved ones lifestyleloved ones lifestyle

Back Back 18.2%18.2%Emotional / Psychiatric Emotional / Psychiatric 12.7%12.7%

Neurological 11.3%Neurological 11.3%Extremities 9.0%Extremities 9.0%

Cardiovascular 4.1%Cardiovascular 4.1%Diabetes 3.6% Diabetes 3.6%

Substance Abuse 3.3% Substance Abuse 3.3% Hearing 2.9%Hearing 2.9%

Vision 2.6%Vision 2.6%Blood Disorders 2.6%Blood Disorders 2.6%

Cancer 2.3%Cancer 2.3%Asthma 1.7%Asthma 1.7%Other 25.7%Other 25.7%

Most Common Impairment / % of claimsMost Common Impairment / % of claims

HIAA Sourcebook of Health Insurance Data 1999-2000

Disability Insurance – Disability Insurance – Protecting Your Most Valuable Protecting Your Most Valuable

AssetAssetDisability: an accidental bodily injury or sickness that

disables you so that you are unable to perform the substantial and material duties of your occupation.

• Provides a monthly check if you are out of work due to a covered disability.

• Max. monthly benefit available is based on age and earnings from the previous year - equal to 60% or 70% of yearly income.

• Only individual Disability Coverage is PORTABLE – stays with you if you change jobs – unlike group insurance. Premiums DO NOT increase with age, unless you apply for more coverage. The younger you are, the lower the premiums.

Short Term Disability (STD)

• Coverage for up to 6 months, equal to 70% of earnings.

• Choice of waiting periods – 1 day for an accident, 8 days for an illness; or 30 days.

• When applying under normal conditions, you would be required to prove income during the previous year. (AVMA GHLIT does offer a one time exception for Senior Veterinary Students)

Long Term Disability (LTD)

• Coverage for up to a lifetime (depends on age at onset of disability), equal to 60% of income.

• Choice of a 30, 60, 90, or 180 day waiting period. 30 days is most practical as a new practitioner, but also much more likely to be more expensive.

• Most carriers will allow to apply for up to $10,000 per month in LTD if you can show proof of income. (subject to underwriting).

PERSONAL PERSONAL INSURANCEINSURANCE

Life Insurance

Some of us will have 50 years, some 15 years, some a year or two….

Do you ever know for sure?Motto to assume: The trip is more

enjoyable if you know where you’re going..

Life InsuranceLife InsuranceWhy do I want Life Insurance?

Questions to ask yourself:1. Would your family be able to stay in their

community and home – same schools and churches?

2. Could your spouse/partner pay for all the living expenses – Day care, repairs, utilities, car payments?

3. Could your spouse/partner pay for children’s college and be able to save for his/her retirement, too?

Life InsuranceLife InsuranceWhy do I want Life Insurance?

In the event of your death, the proceeds can help provide for your loved ones daily life expenses…

And it can also:

•Pay off your debts (loans, credit cards, mortgage, etc)

•Preserve your estate for heirs

•Charitable endowments and financial legacy

BUSINESS BUSINESS INSURANCEINSURANCEProfessional Liability

Insurance

Professional Liability Professional Liability InsuranceInsurance

(malpractice insurance)(malpractice insurance)In general, policies purchased are

designed to provide legal fees, court costs and damages related to civil suits for personal injuries suffered by clients or bystanders or for the alleged mishaps that occur while treating or performing a procedure to a client’s animal.

Source for information: AVMA PLITwww.avmaplit.orgwww.avmaplit.org

BUSINESS BUSINESS INSURANCEINSURANCE

Buy-Sell Agreements

Buy-Sell AgreementsBuy-Sell AgreementsA continuation plan or a “will” for a business.

REASONS TO BUY:1.1.Your Your

business will business will continue to be continue to be managed managed properly properly because the because the agreement agreement makes sure makes sure your estate your estate sells your sells your business business interest to interest to those you those you choose.choose.

2.Your estate will have liquidity by converting your business interest to cash. Cash can settle the estate and establish an income stream, giving you a fair market price

3.You’ll have a fair method of arriving at an acknowledged business value for federal estate tax purposes, that the IRS generally accepts.

BUSINESS BUSINESS INSURANCEINSURANCE

Key Person Insurance

Key Person InsuranceKey Person InsuranceAs a business you’re most vital assets are people

who profit your businessYou can write a life insurance policy on these

persons• If the person dies, it can help to compensate

for the person’s loss to your business and for the time you spend on replacing that person

• The plan’s death benefits and cash value can find a non-qualified deferred compensation agreement for the key employee

• If your key employee leaves, the business continues to own the insurance contract

BUSINESS BUSINESS INSURANCEINSURANCE

Professional Overhead Insurance

Professional Overhead Professional Overhead Expense InsuranceExpense Insurance

• For starting or buying a practice - enables you to afford the expenses of your practice – rent, utilities, salaries of staff, etc. while you are out on disability

• Protects your practice from serious debt and will allow you to sell your practice, if needed, at a fair price

• Premiums DO NOT increase with age unless more coverage is applied for

Still feeling overwhelmed?

HOW DO I MANAGE HOW DO I MANAGE ALL THIS?ALL THIS?

Planning - ResearchPatience - Knowledge

Many of your prospective employers already participate in the AVMA GHLIT & the AVMA PLIT Insurance Plans. Many of these employers will be willing to pay for

all or part of your coverage, or provide you with an expense allowance to cover this

cost.

When Applying –Negotiate – Use your Membership Benefits!

Due diligence will pay off!

Due diligence will pay off!

Manage Your Student Manage Your Student Debt!Debt!

Average student loan for 2007 graduates:

$101,211 – $108,468 (12.5%)

Average student loan for 2008 graduates:

$120,000 (20%)

Could this rise to $140,000 in 2008?

Graduate Guarantee provided by AVMA GHLIT

**Graduate Guarantee is only available at graduation!**

Underwritten by one of the most respected, highly rated insurance companies in the

world today – New York Life

Coverage is guarantee issue for ALL graduating seniors and their eligible dependants.

*Area 1 medical rates, our lowest available rates, will be offered for the first 18 mos.

following graduation.

What is the “Graduate Guarantee” ?

Start by laying the foundation for your future. As a senior, you are automatically assured that you and your

dependants will be accepted for the following coverage at our lowest rates available:

Major Medical InsuranceLong & Short Term Disability

Term Life InsuranceAccidental Death & Dismemberment

Basic Protection Package Professional Overhead Expense

Hospital Indemnity Benefits

Regardless of any medical problems you may have had in the past.

You Have A Lot to Protect!

I hope you have a better understanding of why you need insurance, especially at the start of your career.

Check out : www.finaid.org for repayment loan info

More info/calculators at www.avmaghlit.org

Jana DavidsonDirector of Veterinary School

Affairs (813) 503-1564

jdavidson@healthplan.comjdavidson@healthplan.com

Other Sources…

James F. Wilson, DVM, JDhttp://www.pvmc.net – author of six books and over 130 articles in various

veterinary journals. • Law and Ethics of the Veterinary Profession textbook (1988). • The Veterinary Receptionist’s Training Manual, (1996)

published through and available from AAHA Press. • Contracts, Benefits and Practice Management for the

Veterinary Profession (1998) updated twice most recently in 2006.

The Millionaire Next Door (2000), Stanley and Danko

Rich Dad, Poor Dad (2002) – Robert Kiyosaki

Simple Wealth, Inevitable Wealth (2004) – Nick Murray