These are two common questions we get asked when putting a financial plan in place to ensure you and your loved ones are cared for financially in unforeseen circumstances.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it.
Benefits of Income Protection
Before we come on to look at the questions posed, first a brief look at how income protection works:
- Income protection involves a proportion of your monthly income being paid to you should you incur an accident, injury or become sick, preventing you from being able to work.
- This monthly payout can be used to continue with your existing lifestyle; from maintaining the mortgage, rent and other debts, continuing school fees, right through to grocery shopping. It is aimed to help you and your family survive periods of illness or injury without eating into your wealth.
- Compared to Critical Illness Cover (CIC), Income Protection doesn’t have such a stringent set of illnesses or conditions that are covered. Many insurers have very few exclusions, which is why of all incapacity insurances, Income Protection it is considered as the most comprehensive and usable.
- Policies can be linked to your own occupation and role, so if you are a surgeon and break your arm, you would be able to claim as you wouldn’t be able to do your specific job. Other policies may have payout terms dependent on whether or not you could perform any job.
- It is possible to submit multiple claims within the period of your policy term, which can continue until retirement or death.
How much is Income Protection cover?
Income Protection cover is surprisingly good value. Here are some broad estimates to give you an idea of the monthly premium based on age. [Please note that premiums may differ depending on your circumstances.]
Premiums are gender neutral and each provide a tax-free monthly benefit of £3,000. Key to note is that the premiums are fixed at the point of inception for the entire policy duration.
- Age 36 – deferred 6 months, to age 67, monthly fixed premium £48.80
- Age 46 – deferred 6 months, to age 67, monthly fixed premium £79.09
- Age 56 – deferred 6 months, to age 67, monthly fixed premium £152.00
NHS dentists and doctors are entitled to a maximum of six months full pay following incapacitation – so we have factored this into the example quotes above. There are other options for those not working within the NHS to access a shorter deferment period.
*Quoted figures using Iress exweb.exchange
“The takeaway here, is the younger you take cover, the cheaper it is. Leaving it ten years broadly doubles the cost.” Darren Scott-Guinness, Independent Financial Advisor
Do I need Income Protection cover?
The ultimate goal of any protection policy is peace of mind. Our aim in financial planning is to always consider what could happen. Even though it isn’t a very cheerful topic, there is genuine reassurance for you and your family in knowing that you could carry on life as usual even in the event of being unable to work and earn your usual salary.
Consider how long your savings may last if you had to utilise these. Would you be prepared to dig into your wealth – for example, by releasing equity in your home? Most people are not comfortable with this idea as their wealth is being built for the longer-term; their retirement and beyond. Needing to use this just to make ends meet, can be a big back-step.
This is one reason why doctors and dentists are making income protection a key priority.
When is the best time to apply for Income Protection?
(1) When you are young and healthy
It is unfortunate that many people wait to take out Income Protection insurance until it is too late. If you only apply when your health is at risk, then you may not be able to get cover, or you may face higher premiums due to pre-existing conditions.
Because the policy premiums are fixed for the policy duration, the younger and healthier you are, the more affordable the monthly premium becomes.
(2) At key milestones in life
A trigger for many doctors and dentists to apply for Income Protection are key milestones in life;
- a new home that you wouldn’t want to jeopardise
- becoming self-employed and not having the fall-back of any sick-pay
- the birth of a child, meaning more reason to ensure your income is adequately protected.
“I set up an Income Protection Policy with Dental and Medical Financial Services help. They first looked at my overall situation and provided me with all the advice I required. I felt listened to and was kept informed about the progress.”
Dr Nuzhath Consultant Psychiatrist MBBS, MRCPsych.
Speaking with an independent financial advisor can help you to feel reassured in your decision to apply for income protection. We work with hundreds of doctors and dentists in helping them to protect their income and their wealth as part of a wider financial plan. Contact us today to discuss your requirements.
It is also important to regularly review your Income Protection Insurance policy to ensure it is suitable for your current circumstances.
Gain peace of mind with income protection
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Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.