Protecting your financial future with income protection

Kat Wainwright DipPFS, Dental Student Adviser at MedDen Financial Services, explains the need for income protection and exactly what it covers.

You may have heard the term 'income protection' mentioned as something that you need to have while working as a dentist, but what exactly is this, and why is it so important for dentists? This article gives you a guide to the basics.

What is income protection?

Income protection, or permanent health insurance (PHI) as it is also known, is an insurance contract which is designed to replace your income if you cannot work due to an accident or illness. It pays you a tax-free replacement income until you are able to return to work, whether this is after a day or much longer term, subject to your deferred period. Once the insurer has accepted you, they cannot cancel your policy based on your health or claims history, hence the 'permanent' aspect. This differs from professional indemnity (PI) insurance, which is there to protect you if you find yourself subject to a malpractice suit.

Why do I need it?

As a foundation dentist, you are employed by the NHS and are entitled to a small amount of sick pay; one month of full pay and two months of half pay (after four months of employment), but after that, you are entitled to nothing. The position is even worse for associates who are self-employed and initially not entitled to any sick pay at all. Income protection is designed specifically to fill this gap and help you make ends meet until you are able to return to work.

Am I really likely to be ill?

We all hope never to need to use our income protection, however the reality is that illness and accidents, both short and long term, can affect any of us. As a dentist, you are particularly vulnerable as your profession is physically demanding, requiring great manual dexterity and hand-to-eye co-ordination, meaning that injuries that may seem minor to people in other professions may prevent you from working. Another point to remember is that even something like a cold may prevent you returning to work for a few more days than you may like, to avoid cross-contaminating patients. An income protection policy gives you financial peace of mind in these situations.

What to look out for

The most important thing to consider is that your cover is 'occupation-specific,' which means that it will pay out if you can't work as a dentist, rather than at all. This means that the insurer can't insist that you take another job that you can do; you have spent five years training to be a dentist so you don't want to be forced into stacking shelves by your insurance company!

You can also tailor your income protection to your own circumstances; including choosing the amount of benefit you would like, fitting it around any NHS benefits and savings you may have, and whether you would like to fix the price you pay for your cover. Income protection provides you with financial peace of mind until you are able to return to dentistry, making it essential for dentists in both the short and long term. For personalised advice and tailored solutions, your independent financial adviser (IFA) will be able to help you.

Written by Kat Wainwright DipPFS, Dental Student Adviser at MedDen Financial Services, who are specialist Independent Financial Advisers offering a full range of financial planning to young dentists. For further information please visit www.meddenifa.com or email [email protected].