for doctors and dentists
Comprehensive insurance cover should be the cornerstone of every financial plan.
Too often we believe we are invincible and that ‘it’ (i.e. getting seriously ill or passing away young)
won’t happen to us.
As a medical professional you experience how fragile life can be every day. So do you really want to take the risk of facing significant financial loss and potential hardship due to a lack of appropriate insurance? And do you know how much your health is actually worth?
Comprehensive insurance cover for surgeons and medical specialists
Let’s now explore what insurance options are available for medical professionals. It is important to note that whilst none of these policies will provide comprehensive cover on their own, in combination with each other they can provide a robust risk management solution. Because this is such a complex area, you should always seek specialist financial advice before making any insurance decisions.
As a doctor or a dentist, your income earning capacity throughout your career would easily be multiple millions of dollars. As such, it should be your priority to insure against loss of income due to your inability to work, particularly as the premiums are tax-deductible.
Some important features of income protection policies are:
– Monthly benefit: Generally speaking, you are able to insure up to 75% of your pre-disability income, up to certain limits.
– Waiting period: You essentially choose how long you can afford to delay the claims payment. This will depend on your level of savings or other financial resources, accumulated sick and other leave, or it may also be driven by cost: the longer the waiting period, the lower the premium.
– Benefit period: There are a number of options, ranging from a fixed time period (2 or 5 years) to your age 65 (or 70 on some policies).
– Disability definition: This is an important feature as it determines how your inability to work will be assessed at the time of claim. It may be based on the number of hours that you are able to work at the time, the loss of income or the duties you are (un)able to perform. Some policies only use one type of assessment, whilst others use 2 or 3 and may thus offer a higher probability of a successful claim.
– Ancillary benefits: ‘Basic’ income protection policies will have very few ancillary benefits, while the more ‘comprehensive’ policies come with extra benefits such as an in-built needlestick benefit, rehabilitation benefits, etc.
Life insurance is the most traditional form of personal insurance and typically also the least expensive out of all personal insurance policies. It pays a lump sum upon your death or diagnosis of terminal illness.
There are several ways of calculating an appropriate level of cover, but the most common factors to be considered are the following:
– Repayment of debts;
– Provision of a lump sum to generate ongoing income for the surviving family (living expenses);
– Provision for school fees;
– Provision for planned capital expenses;
– Provision for medical and/or funeral costs;
– Provision for an estate gift.
While income protection is designed to replace your income during a period of temporary illness or disability, TPD insurance (Total and Permanent Disability) pays a lump sum in the event you will never work again through illness or injury.
However, it is important to note, in particular for Medical Professionals, that ‘your ability to work’, may be assessed in two entirely different ways:
– Any occupation, or
– Own occupation
The ‘Own occupation’ definition is much more flexible, as it pays in the event that you are not able to ever return to your specific occupation (as opposed to any type of work), as a Surgeon for example. You can appreciate the subtle but important difference, which is particularly relevant for specialist medical practitioners.
Critical illness/Trauma insurance
Trauma (or critical illness) insurance pays a tax-free lump sum in the event of the diagnosis with one of the listed medical conditions. However, the qualifying definitions can be quite specific and differ between insurance companies, so it is important to consider this type of policy from a more technical and medical point of view, and carefully consider the definitions.
Trauma cover can also be useful to provide extra cover for a non-working spouse, as income protection would not be available. It may also allow the working spouse to take time off to care for their affected partner.
Needlestick injury is one of the specific risks you are exposed to being a doctor. Whilst you take every precaution to prevent this type of incident, there always remains an element of risk with potentially devastating financial consequences for the rest of your career.
However, most insurers now offer Needlestick insurance cover either as a separate policy or as part of a Trauma or income protection policy. This type of policy can pay a tax-free lump sum of typically up to $1 million if you are infected with HIV, Hepatitis B or C.
Business expense cover
Business Expenses Insurance can cover 100% of your eligible practice overheads (e.g. rent, insurance, non-income producing staff wages, lease costs), to keep the practice running should you be unable to work due to illness or injury.
This cover takes care of your business expenses and prevents you from eroding your personal wealth. Yes, if you have income protection, you may be able to cover your living expenses and mortgage repayments, but without business expense cover you will have to dip into personal savings or simply shut the practice down.
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“Very informative, a financial ‘nuts-and-bolts’ that every doctor should read.”
~ Dr Green
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