Why Doctors Income Protection?
Doctors Income Protection provides you with a tax-free monthly income you can rely on should you be too ill or injured to work.
Designed to cover your core monthly financial commitments such as your mortgage/rent, bills and food.
Income Protection for doctors often includes a number of additional benefits, such as no HIV/AIDS exclusions, NHS sick pay mirroring, and coverage for sabbaticals.
Income Protection is the one protection policy every working adult should consider. Which? Money 2013
Speak to our expert independent advisers or get an instant online quote to compare the UK’s leading insurers.
What Does Sickness Insurance Cover?
Accident & Sickness
If you policy uses an ‘Own Occupation’ definition of incapacity, your insurance provider will pay out for any medical condition that prevents you from working in your specific job role.
This is important for doctors, as you don’t want to be told that although you can no longer practice medicine – perhaps because you’re a surgeon with a hand injury – you’re capable of doing another job, such as teaching medical students.
Income Protection policies do not have a set list of conditions they cover and most insurers do not have standard exclusions. Because of this, Income Protection remains the most comprehensive form of protection against the risks of accident and sickness.
Being a doctor or surgeon you are able to cover between 50% and 70% of your gross earnings (including both employed and self-employed income).
How Does Income Protection Work?
You cease working due to any accident or sickness which prevents you from doing your job role.
You make a claim with the your insurer, which may require completing a claims form and providing documents such as your GP note.
At the end of your deferred period, the insurer will start to pay a monthly tax-free benefit after you have been unable to work for the length of your deferred period.
The policy pays out until either you return to work or reach the maximum payout length, which could range from one year to retirement.
Do I Need To Protect My Income?
When deciding if Income Protection for Doctors is worthwhile it makes sense to weigh up the risk of something happening and the potential consequences:
The Incapacity Risk:
1 in 10 people have been unable to work due to illness or injury for +6 months (The Guardian/Unum Survey, 2011).
With government incapacity benefit of only £73.10 per week, someone with a salary of £30,000 would suffer a 77% fall in income.
If you lost your income how would you meet your financial commitments if you didn’t have Income Protection?
Your Key Options
Choose your level of cover
Depending on the insurer, it is possible to cover anywhere from 50% to 70% of your gross (pre-tax) income.
Choose your deferred period
This is the length of time you would need to be off work before the policy kicks-in and starts paying out, which for doctors employed by the NHS often aligns with when their sick pay ceases.
Choose your payout length
Short-term plans can pay out for a maximum of 12 or 24 months and long-term plans can continue paying out either until you are well enough to return to work or you reach the end of the policy life, which is usually set in line with your expected retirement age.
What is Doctors Income Protection?
If you one day become ill or injured severely enough that you need to take time off of work, an Income Protection Insurance policy will pay out monthly benefits to supplement a proportion of your income while you are recovering.
Income Protection for Doctors and Surgeons works slightly differently compared to most standard Income Protection policies.
NHS Sick Pay Guarantee
If you are employed by the NHS, you’ll typically receive 12 months of sick pay after 5 years of service. This will come in the form of full pay for the first 6 months and half pay for the second 6 months.
Income Protection for doctors can be set-up specifically to incorporate this period of reduced sick pay, ensuring that your earnings are sufficiently covered while you are recovering from an illness or injury and helping you keep up with your financial obligations.
If you’re employed in the private sector, you may not get such a long period of sick pay. Meanwhile, if you’re a self-employed locum doctor working through your own company you may not get any sick pay at all and the time after which the policy would pay out will need to be set-up accordingly.
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Do I Need Income Protection Insurance?
If you had to cease working for months or even years, what impact do you imagine that would have on your personal and family finances?
It is worth considering some form of sickness insurance for doctors. A Doctors Income Protection plan is usually the most appropriate given that cover is based upon earnings and offers the most comprehensive cover when set-up on an own occupation basis.
Drewberry’s 2017 Wealth & Protection Survey revealed that 2 in 5 people in the UK have no more than £1,000 in cash savings to fall back on. Without sufficient savings or other cover in place, a significant and needless financial exposure can arise.
It is compulsory for employers to pay statutory sick pay of £92.05 per week to all contracted employees for the first 28 weeks of incapacity (although NHS workers typically get more).
If you are still unable to work after this time, you will need to claim Employment and Support Allowance (ESA). This offers an absolute maximum benefit of £110.75 per week, but for under 25s these benefits start as low as £57.90 per week.
Without an Income Protection policy to ensure regular income while you are unable to work, doctors and surgeons may find it difficult to continue affording their lifestyle. In worst case scenarios, individuals unable to work may struggle to meet their financial obligations.
Independent Protection Expert at Drewberry
Our Clients' Income Protection Stories...
What makes Doctors’ Income Protection Special?
If you are a newly qualified or junior doctor with the NHS, your sick pay entitlement will increase with every year of service – usually up to 6 months full pay and 6 month half-pay after 5 years of service.
Some insurers offer special features on their Doctors income insurance plan, such as sick pay mirroring deferred periods and cover during sabbatical leave.
When you’re only receiving half sick pay, most people would see it as vital that their income is topped up in order to meet your basic expenses, but a standard Accident & Sickness Insurance policy won’t always be able to do that.
Specific Income Protection for doctors, on the other hand, usually keep the NHS sick pay structure in mind when planning your policy’s deferred period.
LV’s Doctors & Surgeons Income Protection Cover, for example, will pay out reduced Income Protection benefits when you stop receiving your full sick pay from the NHS to top up your half sick pay to your full earnings.
This happens regardless of how long you have set your deferred period, which means that you can set your deferred period as long as 12 months and significantly reduce your premiums without sacrificing insurance coverage. When your NHS sick pay stops entirely and your deferred period ends, LV will begin paying out your full Income Protection benefits.
Some insures that offer specialised Income Protection for doctors also accommodate sabbaticals by allowing policyholders to take breaks of up to 2 years from their policy. This time can be used to study or work abroad, where policyholders will still be covered as long as they have a UK bank account.
If you move to anywhere in Europe, USA, Canada, Australia or New Zealand, you can keep your benefit on a long-term basis, while if you move anywhere else in the world your benefit will be limited to a maximum of 26 weeks.
How Does Income Protection for Doctors Work?
James, a doctor from Manchester, has taken out a long-term Income Protection plan with LV covering 50% of his gross earnings, equating to monthly benefits of £3,000. When taking out his policy, James agreed to a deferred period of 12 months because that is how long he will be able to claim sick pay.
Needing to claim…
Some time after taking out his policy, James suffers a type of cancer and he takes leave from his work to recover. During the first 6 months of being out of work, James receives the full amount of sick pay he is entitled to from his employer. After this, in line with the NHS’s sick pay scheme, his sick pay benefits are reduced.
Despite his policy’s deferred being 12 months and James being only 6 months out of work, his Income Protection provider is notified that James is claiming reduced sick pay and begins paying out his Income Protection benefit to top up his income.
Paying a claim…
6 months later, James’s sick pay officially stops and he reaches the end of his Income Protection policy’s deferred period. A month later, James receives his first full Income Protection benefit of £3,000. James is able to continue claiming Income Protection benefits until he finishes his treatments and is given the all-clear from his doctors to return to work.
Because James took out a long-term policy, it is possible for him to continue claiming Income Protection benefits right up until his retirement age.
Getting Own Occupation Cover
There are several different definitions of incapacity that insurers use to decide whether or not you are unable to work.
Claim if you are unable to work in your own occupation.
Claim if you are unable to work in any occupation you are qualified for.
Claim only if you are completely incapable of working.
Gaining own occupation cover is very important for doctors and surgeons. For example, if you were a surgeon who damaged a hand it would be very difficult to continue working and this would therefore be covered with an own occupation incapacity definition.
However, with a lesser incapacity definition (such as a ‘suited occupation’ definition) the insurer may require you to continue working in an occupation for which you have suitable skills or experience.
Occupation Definition Calculator
Make sure your Income Protection covers you in your 'Own Occupation'!
Too often individuals take out income protection without being fully aware of the incapacity definition on which their plan would pay out.
Will the plan pay out if I am unable to do my current job role? Or will it only pay out if I am unable to do any occupation?
If you do not already have income protection this tool should provide you with guidance as to what to look out for and to ensure you do not fall foul of a lesser occupation definition.
Independent Protection Expert at Drewberry Insurance
Key Doctors Income Protection Policy Options
How Much of My Income Can I Cover?
With most insurers it is possible to insure between 50 per cent and 70 per cent of your gross (pre-tax) personal earnings as a maximum. However, you might be earning enough that you do not need that much income to cover your day-to-day expenses.
It’s important to note that that you don’t need to worry about your benefits being taxed. With a personal plan the monthly premiums are collected from a personal bank account and any payout from the plan would be paid directly to you. As premiums are paid from post-tax income, the benefit is received tax-free.
When choosing how much of your income you would like your Doctors Income Protection policy to cover, keep in mind that the more cover you choose to receive, the more you will need to pay in premiums.
For that reason, it is wise to align your cover requirements with your monthly expenditure rather than opting for the maximum cover allowable.
How Long Should I Set My Deferred Period?
When taking out an Income Protection plan, you will need to select a deferred period, which is the period of time during which you will need to be unable to work in order to begin claiming your benefits.
Setting a longer deferred period can bring the cost of your policy’s premiums right down, so it makes senses to set to avoid a short deferred period if you don’t need one.
It is important that you check your employment contract to understand how much sick pay you are entitled to. For NHS doctors and surgeons, sick pay entitlements usually follow the following scale.
Length of Service
Sick Pay Entitlement
0 – 3 months
No sick pay entitlement
3 – 12 months
1 month full pay + 2 months half pay
2 months full pay + 2 months half pay
4 months full pay + 4 months half pay
5 months full pay + 5 months half pay
6 months full pay + 6 months half pay
Do I Need a Short- or Long-Term Policy?
While a short term insurance policy will reduce your premiums, it may not provide the cover you need when you need to claim Income Protection.
The average length of LV’s Income Protection claims in 2016 was 7 years and 7 months. In comparison, a typical Short Term Income Protection policy will pay out for a maximum of 1, 2 or 5 years.
In comparison, Long Term Income Protection policies can continue paying benefits right up until you reach retirement age. This means that if you develop a debilitating medical condition that prevents you from working, you can claim for as long as you need to with no worry that you will be forced back into work before you have completely recovered.
When Should I Set My Policy Cease Age?
Plans usually have a minimum term length of 5 years and most insurers providing Income Protection for doctors offer plans that run all the way up until age 65 or even age 70. Because Income Protection insurance is designed to protect your throughout your professional life, it makes sense to set your policy’s cease age to be equal to the age you expect to retire.
Naturally, extending the cease age of the policy can increase the monthly premiums significantly as the chances of suffering illness increases vastly between the ages of 55 and 65 years old, which form the highest risk years.
Should I Link My Policy to Inflation?
For long-term insurance policies, it makes sense to consider the option to link your Income Protection benefit to rises in inflation (as measured by the Retail Price Index). Including this option means that your benefit will increase each year in line with RPI inflation and therefore the purchasing power of your cover will not be eroded by inflation over time.
With the inflation linking option it is important to note that the monthly premiums will also rise each year with inflation, even if guaranteed premiums are selected. With most insurers the premiums would rise in line with inflation but a small number of insurers would actually increase the premiums by a greater amount than inflation.
Compare UK’s Best Doctors Income Protection Providers
Not many UK Income Protection providers offer protection specifically for NHS employees, although many providers have enough policy options to help you tailor your policy as best as possible to your circumstances.
The experts at Drewberry can talk you through everything you need to know about Doctors Income Protection so you can be sure the plan you’re taking out is right for you. This includes advice on split deferred periods, which is important to get right.
Independent Protection Expert at Drewberry
Get Expert Doctors Income Protection Advice
If you’re looking for Surgeons or Doctors Income Protection Insurance we’re here to help. As an independent intermediary who deal with medical professionals on a daily basis we are in a great positions to review the whole market to ensure you get the most competitive premium.
Independent Protection Expert at Drewberry
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