We take out insurance for everything; holidays, cars, phones, pets, valuables and even weddings. Why then does insuring our income stream get given less importance?
The inability to work can come at any time from accidents, illness, disability or stress. What would happen to your mortgage payments and other financial commitments if your income stream was taken away?
Protecting your income stream
Income protection insurance is different to Critical Illness insurance, which typically pays out a lump sum in the event that you are diagnosed with a listed critical illness that prevents or restricts your ability to work.
Income protection insurance, if set up properly, will pay a regular income to replace a part of your normal income, typically 70%, but this sometimes differs.
These regular payments are used by policy holders to continue to meet mortgage payments, pay utility bills and ensure any other financial commitments are not left to fall behind whilst at the same time preventing savings accounts being eaten away.
The aim is for life to carry on largely as usual, financially, until you are back on your feet and able to return to work.
Types of income protection
There are typically three categories of income protection insurance for doctors and dentists:
- Any occupation – where you are assessed as unable to work in any job suited to your education, experience and age.
- Own occupation – where you are assessed as unable to work in your own job. For example, a surgeon or a dentist who injured their hands would not be able to perform their usual work.
- Suited occupation – where you are assessed as unable to work in your own job but may be able to commit to a less demanding role, where the insurance would cover the difference in your earnings. Stress is an example where this situation arises.
Insurance policies are priced differently for different requirements and the process of selecting the most suitable one can be helped by a financial adviser, who will also make sure your insurance provider is reputable.
It is also important to note that income protection policies don’t usually start to pay out immediately, it’s usually after three months, and they are generally designed to be a short-term solution to help you financially in a difficult time.
Is redundancy covered?
There are also some policies that enable you to protect yourself in the event of redundancy, however, these are different to regular Income Protection policies and have differing terms and conditions.
Several variables come into effect so professional advice is recommended.
The hesitancy to income protection insurance
This is largely due to poor reputation and scepticism. Before stricter financial policies were introduced there were many cheap policies available on the market, but with flawed terms and conditions.
Legislation has tightened significantly in recent years with the Mortgage Market Review and stricter lending policy, yet it will take a while for this reputation to improve and for the market to start to have faith in the benefits of insuring their income again.
Income protection for doctors and dentists
Doctors and dentists, on the whole, do opt for protecting their income through insurance, as income packages are generally substantial and assets are valuable. The small sacrifice each month offers peace of mind that you and your family won’t suffer in the event of you are unable to work.
Review your income protection policy
Income protection policies require regular reviews to ensure they are up-to-date.
Read more: 4 essential reasons to review your income protection
Dental & Medical Financial Services are specialists in providing mortgage and financial advice to UK doctors and dentists. Protect your future financial position in the event of being unable to work. Call today to discuss a new or existing policy.
Tel: 01403 780 770