Q&A: Protecting your income
Doctors see at first hand the variety of medical conditions that can keep people off work, and clearly they aren’t immune from falling ill themselves.
If you find yourself unable to work because of illness or injury and left without a regular income, it could leave you and your family financially vulnerable. You need to consider how you would continue to handle financial commitments such as mortgages, loans or school fees.
Phil Mileham answers common questions about how to deal with the financial shortfall following illness or injury.
Q. What are the most common complaints that keep doctors off work?
Wesleyan Medical Sickness has done an analysis of almost 5,000 income protection claims made by doctors over the past ten years from 2002 to 2012 which reveals the most common conditions affecting doctors and the time taken off work.
The single most common complaint that kept doctors off work over the past decade was psychological disorders such as depression (23%). This was followed by musculoskeletal disorders (19%), cancer (11%) and heart conditions (10%). This echoes research recently published in the BMJ Open, which found that almost half of GPs are ‘emotionally exhausted’.
More than a quarter (28%) of all the income protection claims made to Wesleyan during that time were for periods of illness that lasted longer than a year, and, of those, the claims lasted an average of almost seven years.
Our data also showed 90% of long term claims, that is those that last longer than 12 months, were made by doctors over the age of 40. This is a time in your career when you are most likely to be at the peak of your earning potential, so losing income at this stage could have serious implications on your finances.
Q. How would you advise a GP to protect his or her income?
Illness or injury can strike whatever your age and income protection should be a cornerstone of any financial plan throughout your career. The longer you leave it before taking out a policy, the more difficult it could be to find cover later on.
Without an income protection policy, you may have to draw upon your own savings or, if eligible, rely on state benefits once your sick pay stops. The Employment and Support Allowance pays out a maximum of £105.05 a week, which will clearly be some way short of your regular income.
Income protection policies are generally based on your full earnings and will pay you a regular tax-free income, typically up to 50% of your pre-incapacity level.
When taking out an income protection policy, you should also ensure it is specifically tailored to your needs and provides all the key benefits you require if you need to claim.
- Ensure the policy includes an ‘own occupation’ definition, meaning it will pay out if you are unable to carry out your specific job. If the policy states ‘any suited occupation’, it won’t pay out if you are able to carry out other types of work based on your knowledge and experience.
- Check the scheme offers ‘permanent’ protection, meaning the terms on which it is offered will remain unchanged until the policy expires or you retire, whichever comes sooner.
- Review the policy regularly as it may be impacted by any changes in employment conditions and salary increases that occur throughout your career.
- Think about the right deferred period for your needs. Premiums are normally cheaper if you wait longer before benefits are paid, so defer payments until any other protection, such as sick pay, has expired or is reduced.
Locum GPs without sick pay entitlement will need to take into account their individual financial commitments and any savings they have when determining how much of a deferred period they could have.
Q. Would your advice vary for a salaried or locum doctor?
If you are a GP working for the NHS, the maximum amount of sick pay that can usually be claimed after five years continuous service is six months full pay, followed by six months half pay. Remember, this only takes into account your NHS work, not any private work.
If you are a salaried GP working for a practice, any sick pay you are entitled to will be determined by the Practice Agreement. Some will honour any previous entitlement built up within the NHS while others will reset the clock when you join.
There are a number of benefits a salaried GP will have access to that a self-employed GP locum will not – such as redundancy, sick pay benefits and maternity/paternity pay. Because of this, it will be even more important for locums to ensure they have adequate cover in place to protect their standard of living if they are unable to work.
Whether you are a locum or full time employed, you should try to build up an emergency fund, which is essentially a reserve of cash, usually the equivalent of three months’ net income, that will keep you going in the short term if you are unable to work through an illness or accident. If you are a locum, it will also help you if your level of earnings drops due to the lack of available work.
Q. If I work as a portfolio doctor, working maybe only one or two sessions a week, how would long-term sick leave affect my income?
Any time you are unable to work, you are unable to earn. You may only work a couple of sessions a week, but if the money you earn from this forms a key part of your income, then losing it could still leave you short.
Q. How would you recommend a GP in a dual-income family protects their income, if the household could survive on one partner’s income alone?
If you are in a household with two professionals earning high incomes, with a high standard of living and big financial commitments, then it makes sense for both to take out income protection. However, if one partner is earning considerably less than the other, then you may decide to only protect the main income.
Q. How long do income protection policies pay out for?
Most income protection policies pay out until you are well enough to return to work, however long that takes, you are no longer suffering from a loss of earnings (such as if you start receiving your pension), you reach the maximum age for your policy or you die.
Phil Mileham is the national sales manager at Weslyean Medical Sickness.