Will you get paid if you are too ill to work?

As a doctor or dentist, your career is spent caring for patients in ill health or after an accident. But what if something happens to you? Who’s going to look after you? Are you truly financially independent?

If you work within the NHS most medics will have some idea of their sick pay entitlement. You may even be aware of Death in Service Benefits, but for most the details are at best ‘a bit foggy’. The NHS benefits are great but seldom enough. Taking out protection policies that suit your circumstances and budget is a key step towards financial independence.

Do I REALLY need a protection policy?

We understand ‘protection’ is often the hardest part of your financial plan to get excited about. Boring in the extreme you might say – right up until the point you need it to payout! Then it becomes vital and more interesting than you ever thought possible.

Your circumstances can change very quickly, so don’t stick your head in the sand and say ‘it won’t happen to me, I don’t need cover”.

Sadly, over the years we have seen income protection, life insurance, and critical illness policies literally saving the day for many families going through the very worst of times.

I already have a policy

Great news! But have you checked it recently? Periodically, policies get updated and modified so if you fail to revisit old policies you’ve set up ages ago, you could be missing out on vital protection updates.

I don’t have any protection. Where do I start?

Here’s a simple guide to protection and how it could start working for you.

Income protection

Income protection is simply a replacement income in case you are too ill to work at some point in your career. It’s paid tax-free and there are lots of different policy types out there. However, not all are worth spending your hard-earned money on! So, what should you look out for?

1. Guaranteed premiums

Premiums can be guaranteed or reviewable. Beware, reviewable premiums can rise in the future making things unaffordable just when you start to have health issues. You could move providers to save money but risk those health issues being excluded from the new cover. It’s always better to have a good policy where the premiums cannot change from day one.

2. ‘Own occupation’ definition

To trigger a claim a company needs to judge your ability to carry out your job. The poorest policies will measure this against very basic criteria such as ‘can you sit at a checkout in a supermarket ‘bibbing’ things?’ Not the highly skilled tasks you perform at work every day. Be sure to always select companies that recognise you not only as a doctor or dentist but also recognises your specialty, for instance; as a surgeon or a GP. That way if you are unable to carry out the duties of that particular role the policy will payout.

3. Deferment period

If you are in an employed role, such as hospital service or are a partner in a GP practice you will have clearly defined sick pay. For instance; a hospital consultant with more than five years of continuous service will have sick pay of six months full pay, and six months half pay. A GP partner is likely to have a contract guaranteeing twelve months’ drawings, but with liability for the cost of locums at that time.

If you are a self-employed locum you won’t be so lucky, as generally, you won’t receive any sick pay. Whatever role you are in, once the sick pay ends you are on your own — except for a possible NHS ill-health retirement pension in cases where you are unlikely to ever work again. This can be very small in the early years of your career.

A good income protection policy will dovetail into your sick pay and replace the majority of your income (70% approx. is the average) until you either return to work or retire. Your fixed outgoings won’t stop if you fall ill, so make sure your ability to pay them is equally as guaranteed.

4. Indexation

Inflation makes the buying power of our income less every year. We always recommend taking the option to increase income protection by inflation, so if you are unfortunate enough to need to claim on your policy, the money you receive will still buy the same goods and services it would have when you started it.

5. Claims experience

When you are ill the last thing you need to worry about is arguing about your claim. We have huge experience in how companies react during the claim process, and can exclude those that are less than helpful. We will direct you towards the swiftest and most problem-free providers.

6. Other things to consider

Sabbatical cover, rehabilitation cover and part-time work. These are situations that could come into play at some point in your working life. How the company providing your policy reacts to them could prove helpful later in your career.

Income protection is all about maintaining independence no matter what your health throws at you, whilst safeguarding your income so you can concentrate on your life and goals! If you haven’t already addressed this important area – do it now! Your future self will thank you.

What about life and critical illness policies?

Both these plans pay out a lump sum in a given timescale, normally tax-free. Where they differ is that a pure ‘life policy’ pays out only if you die.

Critical illness policies pay out if you are diagnosed with one of a wide range of serious critical illnesses. Typically, these include heart attack, stroke, cancer, MS, MND, Parkinson’s and many others. They also include a further ‘catch-all’ condition called Total Permanent Disability which is generally defined as a total permanent inability to carry out your occupation. Just as with income protection plans, it’s important to look carefully at the insurer’s definition, and ensure it’s appropriate for your job.

The definition of what qualifies as a critical illness can differ a good deal between providers. We can help you select the right one. We often find our medical clients like to sit and read over the full definitions list for critical illnesses. This ensures they fully understand when it would pay out before applying for a policy.

If you have an older critical illness policy, it’s a good idea to review it as conditions covered are more numerous now than ever before. It may be worth considering upgrading your old policy with something more up to date. However, some of the older policies had wider definitions of what constitutes a valid claim for heart attack or cancer, so reviewing old policies must be undertaken only after receiving specialist financial advice. 

The most common uses we see for life or critical illness policies are:

1. To clear a mortgage.
2. To be placed in trust for children’s future education.
3. To pay for care costs if someone is too ill to live without assistance due to their diagnosis.

Other forms of protection worth thinking about

Family income benefit

This is a form of life protection, but instead of being paid as a lump sum it is paid as a monthly replacement income for the family. This is often used to replace an income or to pay for additional childcare to allow the remaining parent to continue working.

You can set a policy up to run for a period of time; for example, until your youngest child has finished education.

Are you are a consultant or dentist who has incorporated?

If so, you should consider setting up your life cover as a Relevant Life Policy where premiums are paid by the company and therefore attract tax relief. The tax rules are fairly straightforward but as always you need to discuss this with a financial adviser to ensure it’s appropriate for you.

What if you have less than perfect health?

If you have pre-existing medical conditions don’t write off protection policies. Many providers will still offer cover, maybe at a higher premium or with an exclusion for that condition, but still protecting you for all the other nasties that may befall you.

Maybe I do need protection

I grant you ‘protection’ is not exactly the stuff of a scintillating dinner party conversation! But, you wouldn’t think of building a home without foundations – would you? So why build your financial future without fully considering the triumvirate of income protection, critical illness, and life protection.

Start looking after yourself for a change – you deserve protecting.

Have you been in a situation where you were glad you had a protection policy?  Let us know by adding a comment below.