Don’t let sickness damage your wealth

by Dr Tommy Perkins 

How would you support yourself if you could not work because you were ill or injured?

Maybe you could get by on your savings. Or your family could support you. You could survive on benefits, or you might be able to take early retirement through ill-health and start drawing your pension. Remember, you may require a replacement income for a long time. 

If none of these solutions seem ideal, then it’s worth thinking about income protection.

What is income protection insurance?

Income protection insurance (sometimes known as permanent health insurance) is a long-term insurance policy designed to help you if you cannot work because you’re ill or injured. This is not as unlikely as it may sound. Each year in the UK over 1 million people find themselves unable to work due to an accident or illness (ABI 2017).

What about the NHS sick pay?  
For the first five years as a doctor the sick pay for NHS doctors accrues, so in your first year as a doctor, typically you get one month full pay and two months half pay. After five years as a doctor you get the maximum benefit the NHS provides which is six months full pay and six months half pay. GPs, Locum doctors and Locum GP’s sickness benefits will vary, and some may not get any sick pay at all. 

 
What are the key features of income protection for doctors?

⦁ Designed to protect a proportion of your income – normally 55-60% of your gross monthly income can be protected. 
⦁ Pays out if you cannot continue working due to an accident or illness 
⦁ Deferred period – there is normally a period you will have to wait before a monthly income commences 
⦁ A full policy will continue paying until you return to your occupation, pass away or the policy ends 

Top tips for getting income protection. 

1) Seek advice
We would recommend seeking advice from an Independent Financial Adviser (IFA) when you decide to look into getting income protection. An IFA will search the whole market for the best rates from insurance providers. IFAs are normally paid a commission from the provider, so the policy will cost the same as going direct and you can be assured you receive the most competitive quote. The alternative is to use a tied or restricted financial adviser who will compare only a limited number of policies so you could be overpaying. 

Medics’ Money have a list of IFAs that will offer a free consultation, if you are interested click here 

2) Review existing policies 
If you took out a policy shortly after finishing medical school and not changed it since, it’s likely your situation has changed significantly, and you should speak to an IFA to check your policy is appropriate. 

3) The ‘own occupation’ basis
Ensure any income protection policy is set up on an own occupation basis. This is especially relevant for doctors. For example, if a surgeon was to injure their hand it would be hard to continue performing their job as a surgeon. This would be covered by ‘own occupation’ cover. But lesser policy such as ‘suited occupation’ could require the policy holder to continue working in another job.

4) Start early 
Income protection insurance is based on many factors including health, level of cover chosen, age and occupation. The earlier you start, the cheaper the premiums will be. 
 
5) Make sure it ties in with any sick pay ending 
Check your contracts to see what sick pay you receive before seeking advice. The deferred period can be tied in with the sick pay ending. The longer the deferred period, the cheaper the policy will be. 

6) Make sure it ties in with your retirement 
Many people end these policies at state pension age (normally age 67), increasing the cost. If you tie this in with the date you expect to retire, or can access large pension pots/savings, it will reduce the monthly premium. 

There are other types of insurance to consider including life insurance to protect mortgages and family as well as Critical Illness Cover. If you are interested then you can find more information here:

https://www.medicsmoney.co.uk/income-protection-insurance-a-guide-by-medics-money/