As a junior doctor, it could be easy to dismiss the prospect of being unable to work because of illness or injury as something that only happens to older colleagues. However, as a doctor, you know anyone could be struck down by illness and be unable to work at any time of their life – with the risk obviously increasing if they are working in dangerous places – which could have serious implications for their finances.
An income protection policy, which pays you a tax free sum each month if you are unable to do your job because of injury or ill health, should be an integral part of any financial plan right from the start of your career, as it will enable you to maintain your standard of living should anything happen to you.
What keeps doctors off work?
Wesleyan has analysed income protection claims made by doctors from 2004 to 2014. It found mental health issues were the most common complaint that kept doctors off work over the past ten years, accounting for 40% of claims in 2014 alone. This is well ahead of the next highest causes, led by cancer at 11%, problems with the nervous system and sensory organs at 10% and circulatory conditions at 9%.
Why you need income protection
If you work in the NHS and fall ill, the maximum amount of sick pay that can usually be claimed from your employer is six months full pay, followed by six months half pay after five years continuous service. Remember, this only takes into account your NHS work, not any private work. If you work wholly in the private sector, any sick pay you are entitled to will be determined by your employer.
Income protection policies are generally based on your full earnings and will pay you a regular tax-free income, typically up to 50% of your pre-incapacity level. Most policies pay out until you are well enough to return to work, are no longer suffering from a loss of earnings (such as if you start receiving your pension), you reach the maximum age for your policy, or you die.
Without an income protection policy, once your sick pay stops you may have to draw upon any savings you might have or, if eligible, rely on state support. The Employment and Support Allowance currently pays out a maximum of £105.05 a week, which is likely to be some way short of your regular income.
What to look for when buying income protection
When buying income protection you should ensure the policy is specifically tailored to your needs and provides all the key benefits you require if you need to claim. For example:
- Ensure the policy includes an ‘own occupation’ definition, meaning it will pay out if you are unable to carry out your specific job. If the policy states ‘any suited occupation’, it won’t pay out if you are able to carry out other types of work based on your knowledge and experience.
- Check the insurance offers ‘permanent’ protection, meaning the terms on which it is offered will remain unchanged until the policy expires or you retire, whichever comes sooner.
- Think about how long you can wait before it pays out. Premiums are normally cheaper if you wait longer before benefits are paid, so you might choose to defer payments until other sources of income, such as sick pay, have expired or reduced.
- Review your policy regularly to make sure it provides the right level of cover. As your income and financial commitments change over time, you may want to change your insurance to match.
Wesleyan has recently launched a new income protection policy that includes guaranteed options to increase cover without providing further medical evidence, as well as an option to suspend, reduce or continue cover on an own occupation bass during career breaks such as maternity or paternity leave.
There is also access to Wesleyan’s Health & Wellbeing Scheme, which has been set up to support policyholders while they are healthy, rather than waiting until it’s too late. It provides a range of specialist health treatments and services to help them stay fit, including chiropractic and physiotherapy, face-to-face counselling and health checks.
Any time you are off work without receiving an income could leave you financially vulnerable. In the worst case, you could lose your home or build up substantial debts. A financial adviser with understanding of the medical profession will help ensure you are protected and have adequate cover in place.
The above information does not constitute financial advice. For more information or for specialist financial advice contact Wesleyan Medical Sickness on 0800 072 3749 or visit the website at www.wesleyan.co.uk/bank.