Introduction
Dentistry is a rewarding profession, but it can present some unique financial risks. Whether it’s protecting your income or making sure your family are looked after if you’re no longer around, safeguarding your finances is just as important as providing quality care to your patients.
So, how do you identify risks that could threaten your financial situation? And what can you put in place to protect yourself against them? Find out more in this guide.
Protecting your income
As a dentist, your income may afford a particular kind of lifestyle. Even if you don’t consider yourself to earn a substantial amount, it’s important to stop and think about what kind of impact losing your salary could have on your loved ones.
While you may have taken steps to cover certain outgoings in the event of ill-health (your mortgage, for example), there’s also a lifestyle to protect. Would you be able to afford all of your household bills? What about the weekly food shop? Or the never-ending school clubs?
This is where an income protection policy could help, paying monthly benefits to make sure you can meet all of your regular outgoings if you were unable to work due to illness or injury.
The importance of ‘own occupation’ cover
When selecting income protection as a practising dentist, there are a couple of things you should bear in mind. For example, it’s usually wise to choose a plan that offers ‘own occupation’ cover.
Put simply, this means your insurer will assess your claim based solely on whether or not you can work as a clinical dentist. Without this clause in place, your insurer may not pay out on the basis that you can continue working in a different occupation.
Specifying a deferred period
You should also check that your provider will allow you to specify a deferred period. This is so that you can arrange for the policy to kick in when your sick pay runs out.
If you’re a member of the NHS Pension Scheme, your sick pay entitlement will depend on a number of factors, including your NHS earnings, length of service, and where in the UK you live.
Protecting yourself against critical illness
Being diagnosed with a serious illness can turn your life upside down. And with time off work and the potential cost of treatment and recovery to consider, financial support can become even more essential during these times.
While income protection will pay ongoing benefits while you’re recovering from an illness or injury, it’s also worth considering how you would cover major expenses or liabilities if you were to be diagnosed with a serious illness.
Critical illness cover is a type of insurance that pays out a lump-sum if you are diagnosed with a health condition defined by the policy you take out. While conditions will vary by provider, some common examples include cancer, heart attacks, strokes and dementia.
As with any insurance policy you take out, it’s important to do your research before making a decision. In the case of critical illness cover, working out exactly how much you would get if you made a claim can be a useful part of the process.
While a lump-sum can provide a significant amount of money (depending on how much you choose to insure yourself for), you will only receive one payment. If you’re unable to work for a very long time, will this payout last?
If the answer is no, it might be worth considering income protection too, which will pay out for the duration you choose. By having both income protection and critical illness cover in place, you can rest assured that your livelihood is secure, allowing you to focus entirely on your recovery.
Pre-existing medical conditions
You’ll also need to check exactly which illnesses are included in the policy, especially when it comes to pre-existing medical conditions. Insurers will review your family medical history, but that doesn’t necessarily mean they’ll cover existing illnesses. Some policies will offer partial coverage under specific circumstances, which is why reading the fine print is crucial.
Remember too that many policies won’t pay out until a certain severity of illness is reached. You may need to evidence permanent symptoms and claims could be rejected if health concerns are deemed to be self-inflicted (as a result of sporting activities, for example).
Protecting your loved ones
In your line of work, you spend your days looking after other people – but are you taking care of your own financial health and security? One way to do this is by taking out a life insurance policy that would pay a tax-free lump sum to your family if you suddenly passed away.
Life insurance can be particularly important for dentists, especially when it comes to potential costs your family would be burdened with if you were to die. For example, you may still have a significant amount of student debt to repay, or a practice loan that was taken out to start or expand your business.
Like all protection policies, your life insurance cover should be tailored to your individual circumstances. This includes selecting the right type of policy for your needs.
- Term life insurance
- Whole life insurance
- Universal life insurance
Term life insurance provides cover for a set period of time. This is usually 10, 20 or 30 years. These policies tend to offer lower premiums in comparison to permanent life insurance, and flexibility when it comes to term length. However, there’s no cash value accumulation and cover will end when your specified term expires.
Whole life insurance offers lifelong cover, with a guaranteed death benefit and a cash value component that grows over time. This type of insurance is usually more expensive, but can provide additional financial benefits. These benefits include fixed premiums and cash value accumulation that can be borrowed against.
Universal life insurance is a type of permanent life insurance. It offers flexible premiums and a cash value component that earns interest. This policy is best suited to those who want flexibility in their coverage. As with whole life insurance, premiums tend to be higher than term life insurance, and active management is required to maintain the policy.
If you need further help deciding which type of protection policy is best for you, speak to a Specialist Financial Adviser from Wesleyan Financial Services. Charges may apply.
Protecting your mortgage
Another type of life insurance is mortgage protection, designed to help your loved ones pay any remaining mortgage payments if you were to pass away. Unlike a broader life insurance policy, a mortgage protection plan can typically only be used for this purpose, rather than to cover other costs.
Most mortgage protection policies offer decreasing cover. This means that as the value of your mortgage reduces over time, so does your insurance. As this type of policy is designed for a mortgage that decreases over time, it’s most suited to those with a repayment mortgage.
With this in mind, it’s important to make sure you’re taking out the right cover for your needs. While mortgage protection allows you to tailor the amount of cover you need to your mortgage, and is often cheaper than other types of insurance, there are some things to bear in mind.
For example, if you have an interest-only mortgage or other lifestyle costs to consider (such as a child’s education), a broader life insurance policy may be more suitable. With life insurance, you would be able to meet these other costs while also having the security of knowing how much your payout would be.
It’s also worth bearing in mind that the cost of mortgage protection depends on two main factors. The first is the value of your mortgage. The second is the likelihood of your death within the mortgage term. When it comes to the second factor, your age, health, occupation and smoker status will also be taken into consideration.
Protecting your dental business
If you own your own dental practice, it’s important to protect that too. As your personal finances become inextricably linked to your business, it’s essential to put measures in place to safeguard your livelihood.
Have you ever thought about what would happen if your business partner were to become seriously ill or die? What if you were suddenly facing a negligence claim? Or costly dental equipment in your practice breaks down?
Without an appropriate business protection strategy in place, you could easily find yourself out of pocket and experiencing significant disruption to the running of your surgery. Whether it’s protecting your practice, partnership or reputation, making sure you have the right type and level of cover for your circumstances can make all the difference when the worst happens.
To learn more about the types of cover you might need as a practice owner, read our guide to business protection for dentists.