Author Topic: Doctor's doomed if they don't have expensive income protection insurance  (Read 2000 times)

frugledoc

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Just got this Email from the British Medical Association

" Your income protection insurance may not be enough –
take action now

Have you reviewed your income protection cover since joining the 2015 NHS Pension Scheme?

If not, it’s important that you do because there’s every chance you’re now under-insured and financially exposed. Here’s why…

Let’s say you become ill, or suffer a severe injury and are unable to work, typically you’d claim on your income protection insurance. However, depending on your situation, these pay-outs stop when you turn 60 or 65. Here lies the problem:

Rising pension ages could lead to an eight-year gap in your financial protection

As a member of the 2015 NHS Pension Scheme your pension age is now linked to the State Pension age, which will rise for men and women to 66 by October 2020, 67 between 2026 and 2028 and then to 68 between 2044 and 2046. The gap in your income protection provision will only widen further, meaning you could be looking at up to an eight-year gap in your financial protection.

To make matters worse, the new scheme may pay out less than its predecessors if you are forced to retire early on the grounds of ill health.

What can you do to fill this gap?
     
You could draw on precious savings or take your pension early with a penalty, and thus suffer an income shortfall. Or you could bite the bullet and experience a very significant shortfall in your lifestyle and income – until you reach the State Pension age.

However, neither option is desirable.

The solution could be as simple as to extend your existing policy or to use the opportunity to add better cover, but each BMA member’s situation is different. That is why our independent financial advice partner, Chase de Vere, is offering you a complimentary initial consultation on how to bridge the gap in your income protection insurance.

They specialise in advising medical practitioners; over 11,000 of your fellow BMA members have used their service over the past 11 years to build and protect their wealth.
     
Make sure you have the right cover – give you and your loved ones financial peace of mind by
arranging your initial complimentary consultation today. "


No thanks,  I'll just live off my massive mustachian inspired stash :)

Kimera757

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How much does that cost? What sort of unemployment benefits are there in the UK?

BTDretire

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They specialise in advising medical practitioners; over 11,000 of your fellow BMA members have used their service over the past 11 years to build and protect their wealth.
     

 Be interesting to see how many of those 11,000 that bought the service, had to use the service!

TheGrimSqueaker

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Insurance is a pretty good idea for anyone whose primary asset is his or her earning potential, but who has a large, non-negotiable financial commitment that must be met regardless of what happens to the breadwinner. It's not unusual to see businesspeople or professional people who have minor children take out life insurance policies and similar to ensure that their children are provided for in case they die or become incapacitated. Prior to financial independence, it's a fairly intelligent and conservative thing to do. A family where one of the parents has fallen ill has enough to worry about: they don't need financial worries too.

For most Mustachians, the point at which the insurance no longer becomes necessary will be earlier than average due to financial independence and low consumption. Eventually our asset level reaches a point where we have such modest assets as we need, such as living space and transportation mechanisms, and where our biggest asset is not our ability to earn an income, but our Vanguard portfolio's ability to crank out a sizable enough 4% withdrawal rate. At that point the rules do indeed change, and income protection insurance becomes ridiculous. However I'd like to point out that even with low consumption there's a stretch of several years prior to FI where people have to work hard, save, and invest. Prior to that point, we're all vulnerable. A big enough storm can sink even the biggest, best-made ship.

There are always going to be people with a bigger financial burden. Maybe it's elder care. Maybe they're responsible for a handicapped sibling, or maybe one of their kids is born with severe autism. But the burden can also come from education. For any profession that's expensive to get into, there will be people who take out loans in order to participate. We've ascertained on other threads that a student loan debt of half a million USD is not at all unusual for doctors. In the United States, student loan debt also cannot be discharged through bankruptcy. If the person with the loan is married, then depending on where he or she lives and whether the debt occurred or increased after marriage, a surviving spouse can and will be held responsible for the debt. (Side note: how does this work in the UK?)

With all this in mind, a person entering the medical profession with significant student loan debt would be quite foolish to not protect his or her family, especially in a community property state where debt accrued during the marriage can and will transfer to the surviving spouse.

I'm all for paying off debt as quickly as is practical, yet I do see a market for this kind of product at least for a few years. Yet there's no reason for people to continue using it after their loans are paid off.

What I don't appreciate is when life insurance, or income protection insurance, is marketed to people who don't have minor children or dependent spouses, whose homes are paid off, and who are in a comfortable financial position. The only practical use for insurance under those circumstances is to balance out an inheritance if things cannot be easily or comfortably divided between heirs.
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BTDretire

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I'll add to your list, buying life insurance for your baby.
 My parents did that, paid on it till I was 18 or maybe older,
then gave it to me. I took the cash value and put it in Vanguard.
 I think it was about $1000, the policy paid $10k at my death.
 That was 40 years ago.

joleran

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Malpractice insurance is a major cost for many doctors in the US, depending on employment (private practice vs. hospital) and field (obstetrics vs podiatrist).  Any practicing doctor is going to want to carry this as many patients are sue-happy.

clarkfan1979

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As you become closer to FI, you can afford to buy less insurance.

TheGrimSqueaker

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As you become closer to FI, you can afford to buy less insurance.
For income replacement, absolutely. For liability and things like malpractice, I'd venture to say the need remains constant so long as you're exposed to risk, because it's too easy to lose everything due to one accident.
I squeak softly, but carry a big schtick.