Let’s talk about Income Protection. Planning for a tough time isn’t always cheerful, but in the event you actually need to make a claim on your income protection policy, you have the reassurance that you and your family could carry on with life as usual because you have safeguards in place to receive money without interruption.
This does not constitute advice and advice should be sought in all instances before acting on it.
Our Protection Spotlight series will take you through the four key elements of a robust wealth protection plan: Life Insurance, Critical Illness Cover, Income Protection, and Estate Planning.
When you’re creating a financial plan, you should always consider every possible scenario, including what could happen if you have an accident, become injured, or fall sick — anything that could prevent you from being able to work.
Ask yourself – how long will your rainy day fund last?
When deciding if protection is right for you, think about how long your savings will last if you had to dip into your account for an extended period of time.
Could you survive on sick pay or government benefits alone? Is early retirement an option? If you don’t have a plan to protect your income, you could drain your savings and be left with nothing for your future. Planning for any potential loss of income now will keep you in good spirits later.
Income Protection Overview
Income protection policies dictate that should you incur an accident, injury, or become sick, a proportion of your monthly income should be paid to you. It’s not disbursed as a lump sum, rather, this monthly pay out can be used to help you and your family continue to live your existing lifestyle.
You can use the money to pay the mortgage or rent, pay down other debts and continuing school fees or even just grocery shopping. The aim of income protection insurance is to help you and your family survive periods of illness or injury without eating into your hard-earned wealth reserves.
How is it different to Critical Illness Cover (CIC)?
It’s often compared to CIC, but Income Protection covers a wider variety of illnesses and conditions.
Many insurers have very few exclusions, which is why it is considered one of the most comprehensive and usable protection insurance policies. Also, unlike CIC, it’s possible to submit multiple claims during your policy term, and you can continue to do so, as long as you retain the policy, until retirement or death.
Check the small print
Income protection is income-based and is often linked to your own occupation and role, so if your particular illness or injury precludes you from performing your specific job, you are eligible to make a claim. However, some policies’ pay out terms may depend on whether or not you could perform any job, so be sure to check your policy document.
The earlier the better
With Income Protection insurance, the earlier you secure coverage, the better. In fact, the best time to take out a policy is when you are young and healthy, without any pre-existing conditions.
Applying when you are low risk provides the best premium and the most options to choose from. You’ll be able to find a policy that suits your needs no matter what they are, but policy premiums are fixed for the life of coverage, so if you lock in a great rate at a young age, that’s the rate you’ll get for the entire period of the policy.
Working out what exactly you’ll need to get covered might seem overwhelming, but not if you have help.
Doctors, medics, dental professionals, and medical professionals know all too well the hectic lives they lead, especially in the midst of a pandemic.
Our advice is built around your personal and professional needs and circumstances. An adviser will create a bespoke plan for you but will likely include:
- Income Protection: A monthly, tax-free sum paid out to you if you’re unable to work due to illness or injury.
- Life Insurance: A lump cash sum, usually tax-free, paid out on the death of the policyholder.
- Critical Illness: A tax-free sum, paid out if serious illness or injury prevents you from being able to work.
- Estate Plan: Craft a will, set up trusts, assign power of attorney, choose executors and trustees all to ensure your family is taken care of once you pass.
Working with an Independent Financial Adviser to protect your wealth will help you to ensure you have comprehensive cover. As well as income protection, there additional policies that could help provide peace of mind for a hard-working dental or medical professional. Call us today to get started on your wealth protection plan.
Let’s talk about protection planning…
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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.