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Update your income protection

GPs have recently experienced a substantial rise in pay and a review of income protection is therefore imperative, says Dr John Couch

At times when incomes are rising slowly it is possible to review insurance cover every few years. However, we have just been through a brief period when GP incomes have risen rapidly, a period last seen more than 25 years ago. This probably means that for most of us our income protection insurance is now completely inadequate and should be reviewed urgently.

Although life assurance is a wise and relatively cheap protection for our families, income protection is much more likely to be claimed. The average male GP is about 20 times more likely to have a period of illness lasting more than six months by the age of 65 than to die by that age. This figure is higher for female GPs.

All GPs may require standard ill-health income replacement. GP partners must also consider locum insurance.Employed GPs are entitled to six months' full pay and then six months' half pay provided they have worked in the NHS for at least five years (the figures reduce for shorter service). After this time payment ceases. The average partnership deed allows partners a full profit share up to six months of sickness but forces resignation after that time.

In addition it is usual for locum payments to be charged to partners after about three months. Therefore drawings would fall after three months' sickness and stop after six months.GPs who work exclusively as locums have no sick pay or drawings at all and must survive on savings from day one of sickness.

Get the right cover

The NHS pension scheme provides some protection to sick GPs but only if they are eligible to retire through ill-health. Few reach this stage and even if ill-health retirement does take place, the level of NHS pension is unlikely to be adequate for most GPs, especially those under 50.

Since we all get used to our current income, a sickness insurance policy paying £40,000 per annum against an income of £75,000 three years ago would now be inadequate for a GP earning £110,000.Although £40,000 would make a fair pension, a younger GP will often have much higher expenses, including family and mortgage.

Generally it is wise to have protection for about 60 per cent of current income.It is sensible to get advice from companies specialising in medics. You must have an 'own occupation' policy that pays if you are unable to continue work as a doctor but can work in another field. Some policies can be index-linked and many also make part payment if you are forced to work part-time.

The cost of this insurance reduces significantly with long deferred periods (the period of illness before the policy pays out). A six- or even 12-month deferred policy should be affordable. Beware of overinsuring, as modern policies often have payment limits and also reductions if pensions or other benefits are paid.

Note that payouts are tax free but premiums do not attract tax relief.For GP partners and partnerships, locum insurance is also cheaper with longer deferred payment periods. Remember that PCTs will not guarantee NHS locum payments for sickness. The current maximum of £1,500 a week is often reduced or even declined.

Even the maximum is well below current weekly locum pay of about £2,000. Once again it is important to get advice and quotes from specialist medical insurance advisers. Unlike sickness insurance, locum insurance premiums are tax deductible but payouts do attract tax.

John Couch is a GP in Ashford, Middlesex

income protection

Generally it is wise to have protection for about 60 per cent of current income

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