Do doctors need income protection?

What is income protection?

The idea of income protection is brilliantly simple. If you work for a living and depend on a regular wage to pay your rent or mortgage, bills and other expenses, your income is essential. If you can’t earn it, your lifestyle is likely to suffer and very quickly. Illness and injury can strike at any time, whoever you are, whatever your job, and unless you have unusually generous sick pay arrangements, taking time away from work can be disastrous.

Income protection is insurance that replaces a proportion of your earned income if you have to stop working for health reasons. You take out a policy while you’re fit and in work so that if you’re forced to stop, you’ll get the financial support you need until you’re able to go back to your job.

You can claim as many times as you need to for as long as you maintain your policy. It’s a financial safety netthat can keep you solvent throughout your working life. Without it, you’d have to rely on savings or whatever sick pay your employer offers. For some people it’s the legal minimum of Statutory Sick Pay. For the self-employed there’s only Employment and Support Allowance.

Why do doctors need income protection?

People with little knowledge of the medical profession in general and the NHS in particular tend to think doctors are extravagantly paid. Those in the know are aware that at the low end of the pay scale, doctors don’t earn very much above the national average and this is despite the years of training, the long hours and the immense pressures of the job. Most doctors in the NHS are probably not in a position to build up sufficient savings to prepare for the eventuality of extended sick leave and, without doctors income protection, would have to rely on occupational sick pay.

NHS sick pay

NHS doctors sick pay is worked out according to length of service.

• First year: one month’s full pay and (after four months of service) two months’ half pay.
• Second year: Two months’ full pay and two months’ half pay 
• Third year: Four months’ full pay and four months’ half pay 
• Fourth and fifth years: Five months’ full pay and five months’ half pay 
• Sixth year and above: Six months’ full pay and six months’ half pay

Doctors in the private sector

Most doctors who work in private health are NHS doctors supplementing their income with private work. As for General Practice, there are only about 2,000-3,000 private GPs in the whole of the UK. Outside the NHS, sick pay is a matter for individual employment contracts and if you’re a private GP with self-employed status you’ll have to make your own arrangements. Again, this may mean your only recourse is Statutory Sick Pay or Employment and Support Allowance.

Income protection for doctors can make a huge difference to your financial stability and peace of mind.

Unique challenges of the job

All occupations have their challenges, but doctors face greater ones than most of the UK workforce.

Pressure: responsibility for people’s health and often their lives means every day brings extreme levels of stress.

Burnout: the cumulative effect of this daily pressure can lead to burnout, which makes it virtually impossible to carry out the duties of a doctor.

Risk of infection: the constant exposure to illness means there is an equally constant risk of infection.

Injury: the work of a doctor is often more physical than many people realise, which brings with it the potential for musculoskeletal injuries.

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What to consider when looking for income protection insurance

Income protection policies are lengthy documents with a lot of detail but the key features to look at, particularly with insurance for doctors, are these:

Own occupation

Illness or injury can stop you from doing your normal work but they don’t necessarily make you unable to do other work. This is reflected in the different choices of cover that some policies offer:

Own occupation: in this category you’re covered if you’re unable to work in your usual job.

Suited occupation: you’re covered if you can’t do your own job or another one that is appropriate to your abilities and experience.

Any occupation: this pays out if you’re unable to do any work at all.

Clearly, the preferred choice will be ‘own occupation’, because it’s limited to what you do and doesn’t depend on what you could do. ‘Any occupation’ is the least satisfactory because the definition of other work could be very wide. To take an extreme example, a surgeon may be unable to perform in the operating theatre but might be assigned to a reception desk. In that case, their insurance wouldn’t pay out.

Understandably, premiums for ‘own occupation’ cover are higher than for the other categories, but you may feel this is more than worth it.

Waiting period

When you take out your policy you’ll be asked to choose a waiting period. This is the time you can wait between stopping work and starting to receive your monthly benefit payments. Many people don’t need their payments to start immediately and some can manage for several weeks. For example, since your salary is paid in arrears you could have as much as a month’s earnings to draw on before you need your income replacement. Similarly, if you’re entitled to substantial NHS sick pay for weeks or months, you can wait for longer, or maybe you have an emergency savings fund you’re happy to use first. In any of these situations you might want to set your waiting period to end at the point when you expect to become reliant on your insurance.

One of the advantages of the waiting period is that the longer the period you choose, the lower your premiums will be.

Benefit period

This is the maximum time for which you can receive benefit payments for a single claim. 85% of income protection claims last for up to a year, while only 15% last longer. However, if you can afford the higher premiums, a 2-year benefit period gives you twice the security.

Benefit term

You can hold your policy for as short or long time as you wish. This is known as the benefit term. Doctors often have a fairly well-defined career path, including a planned retirement age. Most income protection policies can cover you until you retire, so this is another factor to include in your calculations.

How the premiums are calculated

The amount of cover you can get is based initially on your salary. The cost of that cover is calculated according to this but also takes account of your age, health, occupation and lifestyle. If you’re young, healthy and not working in a high-risk occupation your premiums will be lower. Whatever your initial premium is, it will rise as you get older.

Keeping the cost down

As mentioned, you can reduce the cost by choosing a longer waiting period. You can also opt for less than the maximum cover (65% of your pre-tax salary up to a maximum of £2,000 per month), A 1-year benefit period will also be cheaper than a 2-year period.

The right policy for your practice area

Not all doctors will have the same priorities when looking for income protection insurance, so it’s worth considering the risks and needs that are specific to your specialism and status.

GPs

In this role it’s common to experience high levels of stress and even burnout, so the extent of mental health coverage may be an important issue. General practitioners are also mostly self-employed so there’s no NHS framework for GP sick pay or GP sick leave.

Surgeons

Income protection for surgeons can give the same mental health support, but it may be that protection for physical health conditions is the greater priority. Physical injury is a major threat to doctors whose workng hours are spent in the operating theatre. Your effectiveness as a surgeon can be hugely compromised by even the smallest injury. 

Junior doctors

Recently the public has come to realise this term is misleading because the term junior doctor applies to any doctor below consultant level. Nevertheless, since it includes those who are just embarking on their career, some junior doctors may want to consider flexible policies which they can adjust as their income and status increases.

Locums

A little like agency nurses, locum doctors rarely have a regular income. This could be a factor in deciding how much cover you need. Bear in mind that an insurer will calculate your earnings as an average over a year or more. If you feel that average restricts the level of insurance you’re offered you may be more inclined to opt for the maximum available cover.