Personal finance: Do GPs need income protection insurance?

Income protection insurance can help protect GPs and their income should they be unable to work. Nigel Pullen explains how this fits alongside existing NHS benefits and how to ensure you have the right policy for your needs.

(Photo: iStock.com/marrio31)
(Photo: iStock.com/marrio31)

Few people question the value of insuring their car or home but too often we neglect to protect our income. If you had an accident or fell ill, would you still be able to cope with your financial commitments such as mortgage payments, loans and school fees?

Sickness benefits from the NHS or alternative sources of income may not last long term so it is important to make sure you are protected for as long as needed.

Below is a four-step guide to making sure you’ve got the protection in place to financially support you and your family should the worst happen.

1. Protect your income and your savings

While most people might have a rainy-day fund, even large savings pots can run dry in the unfortunate event that you are unable to work. For GPs, many of whom can often have significant monthly outgoings, it can be worthwhile considering taking out income protection (IP) insurance to provide cover.

IP insurance works by helping to safeguard your income against unplanned misfortunes like   illness or injury and give you peace of mind that the bills are covered – while potentially leaving your savings available for other things. 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.

2. Get the right level of cover

But what do you need to consider when you buy a policy? The key to buying any insurance is to get the right level of cover.

If you work for the NHS, in private practice, or exclusively as a locum, your needs will vary.

For those who work in the NHS, you’ll know you’re entitled to receive an allowance if you’re off sick. It’s a sliding scale so in your first year of service you’ll get one month’s full pay and two months’ half pay, after five years this rises to six months’ full pay and six months’ half pay.

While this may be enough to cover you for any short-term illness, it’s important to consider what you’d do if any period of sickness extended beyond this. If you are doing any private work alongside your NHS role, this may not be covered by your sick pay so you should check what support you’ll be entitled to.

For GPs who work entirely for a private practice, it is a different story. As an employee, you will be eligible for statutory sick pay for up to 28 weeks, but this will fall considerably short of any income you’ll be used to receiving and may not be sufficient to cover your outgoings in the short- or long-term.

Your practice might have additional policies in place but check to see what level of cover these provide and don’t rely on it being robust enough to cover long-term illness.

And for GPs who only do locum work, it’s likely that you won’t have any cover at all so it’s vitally important you have a policy in place to protect you from day one of an illness.

3. Review your policy

Once you know what cover you need, the next task is to consider the different policies on the market and which one best suits your circumstances.

With competing policies each offering different levels of cover and types of premiums, it can be tricky to really know what to look out for. Before you purchase an IP policy it is important to consider the benefit term and how long it will pay out for, the type of premium – be it guaranteed or renewable – and that it covers you for ‘own occupation’.

Watch out for anything with an ‘any suited occupation’ definition, as it often means you won’t get a pay out if you could do other types of work based on your knowledge and experience.

And once you’ve got your policy in place, make sure you review it regularly. Your circumstances change and the level of cover you require will fluctuate too. For example, if you’re serving in the NHS your ill health retirement pension will grow alongside your length of service, which will reduce the level of cover you’ll need to pay for. It is also worth considering the value of any critical illness or life insurance policies that you also have.

4. Get financial advice

We know that for GPs the priority is their patients and arranging insurances can be a complex and time-consuming task.

If you need support or have any financial queries, a financial expert can provide guidance on reviewing your finances and help make sure you have the right insurances in place for your particular situation, which allows you to concentrate on what matters.

  • Nigel Pullen is financial planning unit manager at Wesleyan, which provides specialist financial advice and services to doctors, dentists, lawyers and teachers. For more information go to www.wesleyan.co.uk or call 0800 092 1990.

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