The workshop

Do I need income protection as a locum?

Daniel James, director of client services at AOP affinity partner, Lloyd & Whyte, explains why protecting your income is vital when setting out on your own

finance graphics

The scenario

Ahmed, optometrist

“I’m currently making the move to locum optometry after a few years of working in a multiple. I want to organise my overheads and business admin before I leave my full-time job and have come across the issue of income protection. I’m in two minds as to whether I need this as a locum, and what the benefits are/what it can protect against. Could you advise?” 

The advice

Daniel James, director of client services, Lloyd & Whyte

Daniel James
Daniel James
There are many things to consider when you leave the relative security of working for an employer to benefit from the greater flexibility and other advantages that being a self-employed locum offers.

One thing to consider is what happens if you are ill and unable to work? Most people accept the need to insure their home or car, or take out travel insurance, yet ironically, insuring themselves is often not viewed to be as important, with many feeling that being off work long term won’t happen to them.

However, insurer Aviva estimates that 45% of all families in the UK would last for under a month, based, on their current spending, with no income.

Ask yourself: “If I were ill or had an accident and couldn’t work, how would I pay the mortgage or the rent, or buy food?” You may be able to survive using credit cards or savings for a few weeks, but what if it becomes longer term? If the pandemic has taught us one thing, surely it is that anything can happen to any of us.

Being self-employed means you don’t have the back up of your employer and therefore any potential lack of income becomes a much more pressing concern. If you can’t earn, unfortunately there are still bills to pay.

Being self-employed means you don’t have the back up of your employer and therefore any potential lack of income becomes a much more pressing concern


So, where does income protection come in?

Income protection is your safety net for when something goes wrong. It is there to provide financial security by paying a percentage of your income each month if you’re unable to work due to any reason such as injury or illness. In contrast, critical illness cover only covers you for a pre-specified list of illnesses agreed in your policy.

It provides reassurance that much of your income is replaced should you have an accident or illness that prevents you from working. In the event of a claim, you’ll receive a pre-agreed monthly amount, typically 50% - 65% of your pre-tax salary, to help cover your essential outgoings until you can return to work or reach a pre-agreed age.

So, what do you need to consider?

  • How long can you survive without income? If you have savings, you could use these to cover any short period of time off work. Income protection policies have a waiting period before the benefits are paid, and generally the longer the waiting period, the lower the premium. Some people need cover that starts from the first day of sickness; some policies will cover you for this
  • Be specific about your occupation and get a policy that will pay out until you return to work in your normal job, rather than the insurer expecting you to find employment in a different capacity. This level of cover is particularly important for optometry professions with high levels of expertise
  • Work out how much money you need. Whilst you could arrange income protection to the maximum the insurer will provide, you may not need the maximum - you may just need a set amount to cover your living costs
  • How long do you want to be insured? Generally, income protection costs less the younger you are when you arrange it. Therefore, having a policy that is in place until you hit a retirement age means that you won’t have to arrange a new policy ever again. Remember – income protection doesn’t have a no claims bonus; once you have your policy in place, the premium won’t change just because you have claimed on it.

Getting your admin in order now and having income protection in place as your buffer gives you one less thing to worry about. It will hopefully provide you with the confidence and reassurance to enable you to focus on your new venture as a locum.

About the author

Daniel James is the director of client services at Lloyd & Whyte Ltd. He specialises in creating insurance programmes for AOP members to ensure the correct commercial insurances are in place.

Lloyd & Whyte (Financial Services) Ltd are authorised and regulated by the Financial Conduct Authority. Lloyd & Whyte Ltd is registered in England No. 03686765. Lloyd & Whyte (Financial Services) Ltd is registered in England No. 02092560. Registered Office: Affinity House, Bindon Road, Taunton, Somerset, TA2 6AA.