Income Protection For Doctors

by Carl Roberts

Before I start any wealth building journey with a client I always ensure the proper foundations are in place. One of these foundations is insurance: the financial plan's parachute.

When I mention insurance to a client, they usually think we will be talking about life insurance. While life insurance is important, statistically a client is far more likely to be unable to work due to accident or illness than they are to become critically ill or die.

LV's Risk Reality Calculator  shows that for a couple (one male and one female) both aged 35 and non-smokers, there is a 58% chance of one of them being unable to work for 2 months or more.

This percentage is much larger when compared to the chances of suffering a critical illness (23%) or death (just 7%).

In terms of the length of illness, the average individual income protection claim pays for around 4 years. So, income protection really should be starting point when looking at insurance.

Medical Professionals Need Income Protection More Than Most

I've written before about how advising doctors, particularly locum doctors, is its own category of financial planning. Likewise, for medical professionals (and yes, especially locum doctors), Income Protection is essential.

For one, the job itself has a much higher risk when it comes to potential serious illnesses. Not only are doctors dealing with diseases everyday, but also there is the long hours and stress that take a mental toll.

While doctors may be entitled to sick pay and some of the doctors I see believe this is enough, what a doctor receives in sick pay will depend on their employment status.

Full time employee of the NHS

• The NHS operate a sick pay policy which pays out a combination of full month's salary and half month's salary depending on how long the doctor has worked.
• You can find out the NHS sick pay scale here.

Employed through an agency/umbrella company

• Benefits with the individual agency will need to be checked.
• Likely to be only Statutory Sick Pay if qualifying.

Self-Employed

• Unlikely to have any form of protection unless a benefit has been negotiated into each individual contract.
• Down to the individual to arrange their own income protection.

Regardless of the level of sick pay available to the client it's unlikely to cover them for long or at a level that pays their mortgage/rent, food and other essential outgoings.

We teach clients to typically hold around 6 months-worth of spending in an emergency cash account. Nowhere near enough to cover the potential 4-year period a client could be off work due to a serious accident or illness. Cash savings are not for this purpose. They perform a different essential job for the financial plan.

Specialist Income Protection for Doctors

Income protection for doctors and especially locum doctors is an area which requires a good understanding of the market.

Traditional income protection policies will either include more expensive monthly premiums for doctors due to the risk of their line of work, or decline cover altogether where work is not guaranteed (locums) each month.

A typical specialist income protection policy for doctors will include:

• Payouts that start and increase alongside any NHS sick pay reduction.
• Guaranteed minimum benefit payouts regardless of income.
• Cover that continues even if the doctor takes a work sabbatical.
• Cover that continues if they decide to work abroad.
• No HIV/Aids exclusions.

There are only a handful of insurance providers that will offer the above benefits, so it's vital to explore the market thoroughly.

I always remember one client who came to me desperate to set up some Income Protection insurance after I had sent out an article in my weekly newsletter. The article reminded her of her colleague who had suffered a horse riding accident and was unable to work for 3 years. My client had seen the financial hardship her friend had to go through. She had to move back in with her parents and ended up leaving her job.

It's important doctors don't miss out on this very valuable form of insurance. We need to be taking as much financial worry away from them as we can so they can focus on their vital work.

Carl Roberts is a Managing Director and Chartered Financial Planner at RTS Financial Planning.

The views expressed in this article are that of this author and do not necessarily reflect the views and opinions of Voyant.