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Income protection insurance guide

by Medics Money

What’s your biggest asset? Your house? Your car? Your surfboards? No, it’s likely your biggest asset is you and your future income. But what if you get sick and can’t work? How would you pay your bills? You’re probably thinking sick pay will cover it?  Do doctors need income protection and how can they get the right advice for the right price? Take 5 minutes to understand why you need to consider insuring your future.

How much sick pay do doctors get?

The sick pay that doctors get depends on how long they have worked for the NHS and whether they are self-employed or locum doctors.

For the first 5 years as a doctor the sick pay for NHS doctors accrues, so in your first year as a doctor, typically you get 1-month full pay and 2 months half pay. After 5 years as a doctor you get the maximum benefit the NHS provides which is 6 months full pay and 6 months half pay. GPs, Locum doctors and Locum GP’s sickness benefits will vary, and some may not get any sick pay at all. 

Length of serviceSick pay
During the first year of service One months’ full pay two months’ half pay
During the second year of service Two months’ full pay and two months’ half pay
During the third year of service Four months’ full pay and four months’ half pay
During the fourth and fifth year of service Five months’ full pay and five months’ half pay
After completing five years of service Six months’ full pay and six months’ half pay

But what insurance do you need?

Broadly there are 3 scenarios you can insure yourself against.  

  1. Firstly, you can insure against the inability to work due to an accident, or illness. This will usually be covered by income protection insurance. This cover will provide a regular income in such scenarios, and will continue until you are able to re-start work, or you retire. The income you may receive will likely not be equivalent to the pre-illness earnings: expect around 50-60% of your gross earnings. Any income you receive from this policy is free from tax.  
  2. The second adverse event we can insure ourselves against is the diagnosis of a critical illness like cancer, strokes, or heart attacks. These kinds of diagnoses will be usually covered by critical illness insurance, which is paid in a lump sum. This can be a very useful supplementary piece of income in addition to any sick pay you may get from your employers. 
  3. The final thing that you might insure yourself against is an early death. This is covered by life insurance, which ensures that members of your close family – or otherwise specified – receive an agreed sum of money, so that you know that those who depend on you financially will be taken care of to some extent.  

The combination of insurance you opt for depends on your circumstances and preferences. For example, a Junior Doctor with no mortgage and no kids is likely to have very different protection requirements to a 40-year-old consultant with three kids and a large mortgage. Have a think about which kinds of policies might be most relevant to you. 

How can doctors get the best deal on insurance?

To understand how to get the best deal on insurance, first of all you need to understand a really important distinction between types of financial adviser. 

Broadly there are 2 types of advisor. Restricted advisers can only offer certain products or providers to you. They may be restricted by the range of products they advise on (not always a bad thing) or by providers they recommend (usually bad as you may not get the best deal). Unfortunately, the medical market is dominated by restricted financial advisers who often target the financial naivety and trusting nature of doctors.  

In contrast, Independent Financial Advisers have access to, and sell products from any provider right across the market. Therefore you should get the very best advice and products tailored just for you.  

As a result, Medics’ Money ONLY recommends Independent Financial Advisers who are specialists in advising doctors. Read more about how to choose a financial advisor for doctors here. https://www.medicsmoney.co.uk/medics-money-approved/

We can match you to the best specialist medical independent adviser for you here.

How much risk are you at?

This website can help you run some calculations. 

If you’ve got protection already, well done, but did you get a good deal or did a salesperson sell you a policy that paid them the most commission?

Already got insurance? Great! But did you get a good deal?

Top tips to get the right policy for the right price

Apart from using an independent financial adviser that specialise in doctors via Medics’ Money, what else can you do to get the best deal? 

Own occupation 

Ensure any Income Protection policy is set up on an own occupation basis. This is especially relevant for doctors. For example, if a surgeon was to injure their hand it would be hard to continue performing their job as a surgeon. This would be covered by “own occupation” cover. But lesser policy such as “suited occupation” could require the policy holder to continue working in another job. 

Tie in with sick pay ending 

Check your contracts to see what sick pay you receive before seeking advice. The deferred period can be tied in with the sick pay ending. The longer the deferred period, the cheaper the policy may be. 

Start early 

Income Protection insurance is based on many factors including health, level of cover chosen, age and occupation. The earlier you start, the cheaper the premiums will be. 

Tie in with retirement 

Many people end these policies at state pension age (normally age 68), increasing the cost. If you tie this in with the date you expect to retire, or can access large pension pots/savings, it will reduce the monthly premium. 

Review existing policies 

If you took out a policy shortly after finishing Medical School and not changed it since, its likely your situation has changed significantly, and you should speak to an IFA to check your policy is appropriate. 

What next?

If you don’t have insurance, join >10,000 doctors and book a free consultation with an Independent Financial advisor, verified by us with reviews from doctors like you here https://www.medicsmoney.co.uk/medical-financial-advisor/

If you already have insurance, did you get it form a restricted financial adviser? Could you be paying too much like these two doctors https://www.medicsmoney.co.uk/income-protection-for-doctors-getting-the-best-deal/

Want more detail? Then this podcast is for you

https://www.medicsmoney.co.uk/ep-113-do-doctors-need-life-insurance/

Ep 113: Do doctors need life insurance??