Income protection insurance for doctors is designed to start paying out once your NHS sick pay period comes to an end, ensuring that you can continue to meet your financial commitments, such as your mortgage, rent, bills and groceries.
Income protection policies will usually cover between 50-70% of a doctor's gross earnings, be that employed or self-employed income. In almost all cases the benefit (payout) is paid on a monthly basis and is tax-free - the amount that's paid will depend on your specific policy and your insurer.
You're able to get an income protection policy for doctors as long as you're currently employed (or self-employed) as a doctor in the NHS, your own private practice, or as a partner or locum. Typically, income protection insurance is written using the "own occupation" definition, which we'll explain in more detail later, but essentially means that as long as you're unable to carry out your own role due to illness or injury, the policy will pay out. This is far more comprehensive than other definitions of incapacity, giving you an excellent level of cover and the reassurance that there is a high probability your policy will pay out in the event you cannot work.
Whether you work in the NHS, privately or both, you'll be aware that you’re only entitled to a set amount of sick pay (see below) and that if for some reason you were signed off long-term, financially things could become difficult when that sick pay ends. Income protection insurance for doctors takes away that worry, by providing you with a monthly benefit of up to 70% of your gross income, right up until retirement age if needs be.
As the consumer rights group Which? points out:
The one protection policy every working adult in the UK should consider is the very one most of us don't have - income protection.
Source: Which? December 2020
Assuming you work for the NHS, the amount of sick pay you receive will vary depending on your length of service as detailed below:
- Year 1 - 1 month full pay and (after 4 months) two months half pay
- Year 2 - 2 months full pay and 2 months half pay
- Year 3 - 4 months full pay and 4 months half pay
- Year 4 and 5 - 5 months full pay and 5 months half pay
- Year 6 plus - 6 months full pay and 6 months half pay
Income protection for doctors is designed to complement your NHS sick pay, kicking in when your NHS payments drop to half and then increasing when they stop. So for example, your income protection would start to top up the payments when you move to half pay, before rising to the full benefit level. This unique way of structuring a policy ensures that you are neither over nor under insured, paying a fair monthly premium and receiving the level of cover you need at the right time. It's important to bear in mind that while your income protection benefit will top up and eventually replace your NHS sick pay, it'll never be the full amount as the maximum you can cover is 70% of your monthly gross earnings.
Outside of your NHS sick pay period, you may also be entitled to Statutory Sick Pay on top of your income protection payments, which is currently £95.85 per week, paid for a maximum of 28 weeks.
Doctors who work in a self-employed capacity, whether that's alongside their role in the NHS or entirely, face an increased risk of hardship in the event they are too unwell or injured to work. With most self-employed doctors having no sick pay entitlement if they become unwell, their primary, or secondary source of income is almost immediately cut off. It's therefore especially important for these doctors to consider an income protection policy, and look at setting the deferred period to a short length of time, so that the monthly benefit starts relatively quickly. With many doctors working in various capacities, both privately and in the NHS, some time and thought needs to be given about how best to structure a policy to ensure that you're not overinsured and paying through the nose, but equally not underinsured.
A term we've used several times in this guide to doctors’ income protection is the "deferred period", which is the time lag between when you're first signed off work and when the policy will start to pay out. With many doctors working in the NHS, the deferred period needs to be set at a length that complements the NHS sick pay schedule. Of course, if you're self-employed, the deferred period will likely need to be much shorter to account for the fact that you have less or no sick pay entitlement. As you might expect, the shorter the deferred period, the higher premiums tend to be as it increases the probability of a claim. Deferred periods can be as short as only a week, but are typically set between 4 weeks and 12 months.
As we've outlined, an income protection insurance policy is designed to pay a monthly benefit to you in the event that you're too unwell or injured to work. But what is actually covered, why is the definition of incapacity important and what exclusions can you expect?
What is usually covered?
Income protection insurance policies for doctors tend to be fairly comprehensive, in that if an injury or illness prevents you from working, it'll usually be covered. This is quite different from critical illness insurance as an example, where you are only covered for a prescribed list of illnesses.
Crucially, the definition of incapacity that your insurer uses is one of the most significant factors that can impact on how comprehensive a policy is, as we’ll examine in the next section.
Definition of incapacity
Insurers use several standard definitions of incapacity in their policy wording, with each affecting the level of cover you receive. By far the best and most comprehensive definition is "own occupation" which effectively means if you're unable to work in your specific role, you wouldn't be expected to go back to work and would receive the monthly benefit. The next level down from that is "suited occupation" under which you would be expected to return to work in a different role if you were able to. For example, if you're a consultant who is signed off due to stress, you might be expected to return to work in a position that isn't as stressful, assuming you have the skills and expertise for it. The final definition is "any occupation" where you would be expected to return to any job, as long as you were capable. Because of the implications of that final definition, it's not one we would ever recommend to our customers.
Own occupation is by far the best definition that can be applied to your policy and it's where we'd always recommend doctors to start.
Exclusions from a doctors income protection policy
All income protection insurance policies, whether you're a doctor or not, will have some standard exclusions such as:
- Claims arising from self-inflicted injuries
- Claims from illnesses and injuries caused by misuse of alcohol or drugs
- Sometimes claims relating to pre-existing conditions - see next section
Are pre-existing conditions excluded?
Pre-existing conditions, i.e. those you've suffered from in the past five years, won't automatically be excluded but should be declared to the insurer when you take out your policy. The insurer will then do one of several things:
- Cover the condition in full
- Cover the condition but load the policy, increasing the monthly premiums to account for it
- Exclude the condition from the policy
It's vital that when you're discussing your policy with an adviser or your insurer that you're open and honest about any illnesses or injuries you've suffered from. This will ensure that there are no nasty surprises down the line, should you need to make a claim.
HIV
Needlestick injuries are a common occupational hazard faced by all doctors and while the risk of HIV contraction is small from such an injury, it is important to make sure that your income protection policy covers you. Because of the nature of doctors' professions, an exclusion for HIV can often be removed from the policy, giving you cover should the worst happen.
There are typically three types of income protection premiums available to doctors when taking out an income protection policy:
- Reviewable premiums - this type of premium allows the insurer to increase the monthly premiums through the term of the policy. Any increases they make are typically in response to market conditions, other economic factors and the number of claims received. Reviewable premiums often start off lower than guaranteed premiums, but can quickly rise. If you want to ensure you can afford the policy throughout its term you should probably consider a guaranteed premium.
- Guaranteed premiums - with a guaranteed premium, the policy will usually start off more expensive than, say, a reviewable premium, but the price will remain the same throughout the policy term, unless you opt for increasing cover or make changes to your policy. Choosing a guaranteed premium is the best way to ensure that the policy remains affordable and the cost doesn't suddenly change.
- Age-banded premiums - finally, age-banded premiums rise by a set amount each year as you get older to factor in the higher risk of illness and injury. Similarly to a guaranteed premium, you'll always know how much the policy will cost, albeit it increases each year.
There are a number of providers of income protection in the UK - here we detail some of the best and the headline facts about their policies.
With over 15 million customers in the UK, Aviva provide a range of insurance products including income protection for doctors. You can choose between full-term cover which pays out for the whole time you're unable to work, or a shorter period which will cover you for up to two years.
Maximum insured amount per year - £240,000
Benefit period (length of cover) - 2 years and full-term
Claims history - 87.3% paid out (2018)
Deferred period (weeks) - 4, 8, 13, 26, 52 or 104
Founded in 1836 Legal & General (L&G) offers a range of insurance and investment products. Income protection customers can choose between a low-cost option, covering you for one or two years, or a more comprehensive full-term policy that will cover you up until retirement age.
Maximum insured amount per year -£240,000
Benefit period (length of cover) - 1 or 2 years and full-term
Claims history - 82% paid out (2018)
Deferred period (weeks) - 4, 8, 13, 26, 52
With over 1.28 million customers, LV= provide a range of products including doctors’ income protection insurance. You can choose between full-term cover or a cheaper option of one to two years of protection.
Maximum insured amount per year -£250,000
Benefit period (length of cover) - 1 or 2 years and full-term
Claims history - 95% paid out (2018)
Deferred period (weeks) - 4, 8, 13, 26, 52
Established in 1861 Royal London offers a range of protection policies with customers being able to choose between full-term or shorter-term income protection cover.
Maximum insured amount per year -£250,000
Benefit period (length of cover) - 1, 2 or 5 years and full-term
Claims history - 72.2% paid out (2018)
Deferred period (weeks) - 4, 8, 13, 26, 52
Similarly to other providers of income protection in this list, The Exeter provides both long-term and shorter-term policies to its customers.
Maximum insured amount per year -£120,000
Benefit period (length of cover) - 2 or 5 years and full-term
Claims history - 93% paid out (2018)
Deferred period (weeks) - 1, 4, 8, 13, 26, 52
Vitality, formerly Pru Health, provides its customers with a large range of financial products, such as investments and insurance. Income protection insurance customers can choose between a shorter-term budget option of two years of cover or a more expensive full-term policy.
Maximum insured amount per year -£120,000
Benefit period (length of cover) - 2 years and full-term
Claims history - 93% paid out (2018)
Deferred period (weeks) - 1, 4, 8, 13, 26, 52
Finally, Zurich is a Swiss insurance company that offers a broad range of insurance products, including income protection insurance. Again, Zurich offers a choice of policies ranging from short-term through to full-term which are priced accordingly.
Maximum insured amount per year -£240,000
Benefit period (length of cover) - 2 years and full-term
Claims history - 98% paid out (2019)
Deferred period (weeks) - 4, 8, 13, 26, 52, 104
Alternatives to income protection for doctors
Income protection insurance for doctors is by far the most comprehensive type of cover for sickness and injury, and ensures that you receive a guaranteed income for the policy's length or right up until retirement if required. However, there are alternatives that you might consider depending on your needs.
Critical illness cover is different from income protection insurance in that, in the event you're diagnosed with a serious illness, it pays out a lump sum rather than a monthly benefit. Importantly, critical illness policies tend to also only cover the most serious of illnesses that can leave you exposed if you can't work due to a lesser illness.
Executive income protection insurance is a type of income protection that is purchased via a limited company rather than personally. Many of the benefits of this type of protection are the same as a personal policy, albeit your company pays for it rather than you.
As with any type of insurance, it's vital that you spend some time comparing the providers of doctors’ income protection insurance and even better if you speak to an independent expert who can help you configure the policy correctly. We’ve teamed up with the independent and FCA approved insurance specialists at Sandbourne, who can work with you to ensure you get the right policy at the best price.
