Protecting your income

The scenario

Robert, AOP member

“I am an optometrist who has been locuming for around 12 years. I currently don’t have any income protection in place, but after recently hearing about the experiences of a fellow locum who was left unable to practise for three months due to illness and has struggled financially, it got me thinking. What is income protection, what are the benefits of having it and what should I consider when taking out a policy?”

The advice

Daniel James, director of client services at Lloyd & Whyte

Financial provision is a pressing issue for locum optometrists. In realising the impact that a lack of protection had on a fellow locum, it’s clearly made you think about the reality of life without a back-up income.

The facts on financial uncertainty are concerning. A recent report from Zurich (Cost of Resilience, 2018) found that one in eight UK adults would have to sell their home if they lost their income. This puts income protection into perspective, making it seem like a minor expense when compared to losing a home.

Income protection is a blanket for your income in case you become ill or injured

What is income protection?

Income protection is like a security blanket for your income in case you become ill or injured. If you are unable to work for a period of time, a policy usually pays you 50–65% of your income until you return to work or retire. Like a phone tariff or electricity bill, you can pay a monthly premium for your policy. This gives you reassurance that much of your income is replaced if you experience an accident, illness or injury that prevents you from working.

For locums, having no income protection is like going on holiday without insurance. You like to think that nothing bad will happen, but it’s not until heat strikes or you’re bitten by an unknown species that you start to wonder why you ignored the consequences of medical bills and sickness absence.

Income protection takes away the financial hardship of losing your income. Because locums can’t resort to the support of an employer, it’s a way of sustaining your financial security

What are the benefits of having it?

Income protection takes away the financial hardship of losing your income. Because locums can’t resort to the support of an employer, it’s a way of sustaining your financial security.

Income protection replaces employee benefits such as sick pay. Policies cover a range of sicknesses and injuries that could prevent you from working, including physical and mental illness. This means you can rest and recover knowing that you have a back-up income, especially if you’d rather not spend savings on the routine necessities of mortgage payments, food and bills.

Throughout the duration of your policy, you can claim on your income protection without fear of your premium going up. It’s there to replace your income if or when you make a claim, for as many times as you need it to.

What should you consider when taking out a policy?

When you’re arranging a policy, here’s the jargon to look out for: 

• The deferred period – this specifies the amount of time that you can wait before you want your income protection to start paying. When deciding on your deferred period, take into account any rainy-day funds that could keep you going before you make a claim. The longer your chosen deferred period, the cheaper your monthly premium will be
• ‘Own’ and ‘any occupation’ – choosing to cover your own occupation means that the policy will pay out if you’re absent from your own profession. By opting for any occupation, you’re saying that you would like the policy to pay out until you return to any role, regardless of what the job is
• Pre-existing conditions – income protection doesn’t cover medical conditions that you have before you arrange a policy, so it’s recommended that you arrange a policy as soon as you can.

The fellow locum you spoke of had to go a long time without earnings. Think about how months, or even years, of no income could topple your life, family, or general living situation. Anticipate the best for your future, but always prepare for the worst.

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 can help you make the most of your money. For AOP discounts, an instant quote or more advice, visit our website or our optometrist Advice Zone online.

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