Protection: what's needed and why

The scenario

Sally, AOP member

“I have recently moved from being an optometrist in permanent full-time employment to locuming. I made this move due to having a young family and the flexibility that it affords me. However, in doing so I know that I lose some of the safety net policies what would have been in place when I was a permanent member of staff. It’s been recommended that I take out critical illness cover. Why is this important?”

The advice

Daniel James, director of client services at Lloyd & Whyte

Financial protection sounds like a dry subject but by helping you understand what the common policies are and how to arrange them, I hope to help save you from some potential heartache.

Most protection policies are taken out to help support you and your family if you’re unable to work for particular reasons.

What matters to you?

It feels strange to spend money on something you hope you won’t need to use. Financial protection, like other types of insurance, is at its most crucial when you need to make a claim. The consequences of not having the right cover in place at the right time can be huge.

The protection you want will depend on the people in your life you want to protect. It really all comes down to what matters most to you.

Back to basics

One of the most well-known policies is life insurance. Life insurance isn’t about you, it’s about the people you love. Who would be responsible for paying your mortgage if you died? How would your family maintain the standard of living that you had been providing?

When you’re arranging life insurance, you need to understand what you’re insuring;

• If you want to protect your mortgage, then you need cover that matches your mortgage balance and term, and if your mortgage is on a repayment basis, a plan that decreases is likely to meet your needs

If you’re looking to provide a lump sum to help raise your children, then maybe a level lump sum would be appropriate.

Let’s get critical

Critical illness cover is often added to a life insurance policy; although it can be purchased on its own. Critical illness cover pays a lump sum if you’re diagnosed with a serious medical condition, such as cancer or a heart attack.

The medical condition is specified when you arrange the policy and most providers cover some 40+ conditions. I have had clients who want particular diseases covered because of family history, but this is very much a personal choice.

The policy will pay out just once so doesn’t act as a substitute for a regular income.

Keep the income coming in

Income protection is common for healthcare professionals. This pays you a percentage of your salary if you’re unable to work due to injury, illness or an accident. If you couldn’t work, how would you pay your bills?

Some of us could afford a few days, possibly weeks, but how about months? At what point would the money run out?

Income protection is designed to help replace your income in the event of sickness or an accident:

• The policy can be tailored to suit you – choose how quickly cover starts, anything from the first day of sickness through to waiting for 24 months
• Most providers will insure you for 50–60% of your gross income, with the benefits being paid (tax free) until you’re fit and well to return to work, or until the policy expires at a pre-agreed age (usually 60–65).

Calling all locum optometrists

As a locum you’re well used to standing on your own two feet. Being self-employed makes your financial situation slightly more precarious than your employed peers. Not only are you without the luxuries of employee benefits such as income protection, but you also have a fluctuating income.

If you were unable to work tomorrow, how would you pay your bills?

How to buy

Most protection policies can be bought online or through a financial adviser.

A financial adviser will know the market and be able to find a provider to suit your priorities and explain the nuances between the different options available to you. An adviser will also be able to assess how the rest of your finances fit with your lifestyle and aspirations.

Buying a policy online can suit people who prefer to research and find quotes in their own time. You can compare policies, make changes where necessary and receive instant quotes.

Whatever you do, having the right protection in place for the right purposes saves time and heartache. It means that you can concentrate on what’s really important.

Where does Lloyd & Whyte fit in?

We’re the AOP’s partner for financial services. We have over 20 years’ experience advising healthcare professionals in areas of financial protection, as well as pensions and investments

We have a team of independent financial advisers around the UK who help our clients make the most of their money. You can find out more on our website, where you will also find our life insurance and income protection comparison tools. For more information, visit the Lloyd & Whyte website.

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