What kind of insurance do you need?

As graduating veterinary students trade caps and gowns for lab coats and clients, most will find their medical training helps little when choosing personal and professional insurance.

Saddled with student loan debt, graduates might be tempted to avoid expensive costs associated with health, life and liability coverage. Don't gamble against insurance, warns Gerald Snyder, a consultant and VMD. Instead, hire a reputable agent or broker but be smart — salespeople often try to set new graduates up with more coverage than they need.

"Insurance agents will talk kids into buying all kinds of stuff that just isn't necessary at their stage in the game," Snyder says. "Even so, it's important. Insurance seems unnecessary, especially when you're trying to make ends meet. Graduates who think they're invincible and don't need insurance can easily wind up in bankruptcy."

Insurance types

Health, liability and life insurance are common policies bought by veterinarians, and of the three, medical coverage ranks as the most costly. If employers fail to offer medical insurance, the American Veterinary Medical Association (AVMA) provides individual and family policies to veterinarians through its Group Health and Life Insurance Trust (GHLIT). While GHLIT services often are described as "Cadillac coverage" that tends to be expensive, the trust soon will be rolling out cheaper plans targeting new veterinarians, GHLIT officials say.

What's more, the federal government now offers Health Savings Accounts (HAS) that allow individuals to purchase high-deductible plans and put pre-tax money in a savings account that carries over from year-to-year, earning tax-free interest. GHLIT now markets its own HSA plan.

"This is the secret to more affordable health insurance," Snyder says. "The best insurance policies I know of are offered by the AVMA, and you have to expect they'll be expensive. Some gambles are not worth taking, and young people do get into big medical problems."

Life insurance

If graduates opt out of GHLIT's policies, they can hire experts to search companies for services that suit their health insurance needs. Brokers or agents dealing in health insurance also can set clients up with life insurance policies as investments designed to protect their families. For this reason, life insurance is not ideal for many new graduates.

"The need for health insurance is a given, but life insurance is not necessary if there are no children," Snyder says. "Life insurance is designed to protect those who depend on your income. If a 30-year-old veterinarian marries a 25-year-old who works, there's no need for life insurance and it's not a good investment."

If children do factor in, the amount of coverage needed depends on earnings. A general rule is that the coverage should total 14 times the income of the policy holder. If an associate and his or her spouse have a child and earn $80,000 a year, then the family needs $1.12 million in insurance. The policy, if conservatively invested, should yield $80,000 a year at a conservative 7 percent, Snyder says.

"Again, there's no reason to buy life insurance unless there's someone to protect," he says.

Liability insurance

New graduates usually work in established hospitals and clinics that provide liability insurance. Most veterinary establishments buy into the AVMA's Professional Liability and Insurance Trust (PLIT), which provides professional liability, workers compensation and personal property insurance.

"You need to obtain your own liability insurance if you're a new graduate starting a practice," Snyder says. "The premiums aren't very expensive.

"But if a hospital you're working for says you should have your own malpractice insurance, think twice about working for that practice. It's not a good investment on the part of the new graduate."