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Time for a spring clean on your income protection

Kicking off a series of articles looking at reviewing personal financial planning, Justine Roberts, director at Medical & Financial, considers income protection.

Kicking off a series of articles looking at reviewing personal financial planning, Justine Roberts, director at Medical & Financial, considers income protection.

In the current economic climate it is more important than ever to ensure your finances are up to scratch. As spring is now upon us it is a time when people traditionally have a spring clean, which is an analogy that can also be used with personal finance.



It is not unusual for a new client to contact us saying it's been a while since they last had a review. When we actually delve into exactly how long it has been a period in excess of five years, or even longer, is often not uncommon.

We recommend that all GPs review their financial circumstances at least annually, whether this be a meeting with an adviser or a quick chat on the phone. This is time well spent ensuring products have competitive charges and still meet with expectations. Many protection policies are now cheaper than they were years ago, and as circumstances change the levels of cover required alter as well.

This may mean a need for more cover, or indeed sometimes amounts of cover need to be lowered now the children aren't dependent or there are no costly school fees to cover! Many of us unwittingly risk our lifestyles by having inadequate, inappropriate or expensive policies.

Income Protection provides a tax free income in the event of illness or incapacity if unable to work through illness or accident. Most GPs will have first taken out income protection when they were in hospital service. Since then incomes and ill health benefits will have changed.

Most practice agreements provide income for 12 months if incapacitated; this is rather more than a hospital doctor would receive. This does mean that cover is unlikely to be appropriate unless it has been regularly reviewed. The NHS has also changed its ill health retirement pension provision in April 2008, meaning most doctors who may need to claim on it in the future will now be significantly worse off.

Income Protection comes in two types, guaranteed and reviewable. A guaranteed policy provides certainty as premiums are fixed at outset, although premiums and benefits generally rise with inflation each year.

Reviewable plans are generally cheaper at outset but are subject to periodic changes in premiums, often every five years when companies assess whether the premium being paid is sufficient to provide the cover. If the answer is no then costs can rise significantly.

Guaranteed policies are therefore preferred by most.

Many of us unwittingly risk our lifestyles by having inadequate, inappropriate or expensive policies. Justine Roberts, director, Medical & Financial Income protection

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