Income protection insurance can give you a regular income, free of UK income tax, if you lose income because you can’t work as you are ill or injured. The main types of contract tend to replace a proportion of your lost income. We have put together this section to help you understand income protection better.
For more details please see the insurance company’s key features document.
Income protection insurance pays you a regular income, often until your retirement age, if you cannot work because you are ill or injured, in return for you paying a regular premium.
No one wants to think about the possibility of falling ill or having an accident but, on top of the unexpected, it's worth remembering that dentistry is a physically and mentally demanding profession. Therefore, it's no surprise that many dentists suffer some form of illness or injury during their careers.
Every year we help over a thousand dentists support their lifestyles, by providing them with an income when they can’t work because they are ill or injured. Some of these members, including a few just in their 30s, will never be able to practise dentistry again, so they will receive this financial support until they retire.
Could you still maintain your lifestyle without your current income? You may have specific insurances to cover your practice costs, the mortgage on your home, as well as personal loans, but not necessarily to help you maintain your standard of living.
So the question should be ‘can I still maintain my lifestyle without protecting my income?’ not ‘why do I need income protection?’
When you are deciding what income protection cover you may need, it could be worth reviewing any other sources of income that you may have, if you were off work. These can include:
If you feel you can cover your outgoing expenses with any of these; or perhaps your employer covers you not only for the short term, but the long term as well; or you feel you can live on state benefits, then you may decide that you don’t need income protection insurance.
If you work in a dental school, hospital, the armed forces or a company, you will often have NHS cover or cover from your employer, so it is important to know what your sick pay entitlement is. This could cover you in the short term, but what would you need if you were off for longer?
As an NHS employee, you could receive your full salary for up to six months and half your salary for the next six months. Beyond that you could find yourself reliant on state benefits, if you have no other sources of income.
If you work in a practice, you are usually self-employed. This means that you would, most likely, experience an immediate loss of income if you couldn’t see your patients. You therefore might wish to cover this loss from the very first day you are off sick.
Current standard NHS contracts have a variety of qualification criteria and don’t start paying benefits until you have been off for four weeks with an illness or injury, up to a maximum of 22 weeks in any 52 week period. Would this be enough for you?
If you are an employee, and don’t have a company scheme with your employer, you may only be entitled to Statutory Sick Pay, which is currently £89.35 per week for the first 28 weeks if you have been sick for more than four days in a row.
If you are self-employed or after your entitlement to statutory sick pay has stopped, you may be entitled to claim the Employment and Support Allowance, which is currently up to £73.10 per week (up to £57.90 if you are under 25) for the first 13 weeks after your claim. After that, depending on a Work Capability Assessment, you may be entitled to up to £109.65 per week.
Take the time to consider what options you need, remember they are likely to affect the premiums you have to pay, so read the insurer’s key features documents carefully.
Many insurers provide income protection cover alongside other products you may buy from them. Some may have standard contracts with little flexibility for your profession, and others may not offer any cash when you leave them, whether you have claimed or not. So it is always important to check the details of any policy. The key features document will allow you to compare the various products in the market.
Many commercial insurers are owned by shareholders and not the policyholders. Mutual organisations are different as they do not have external stakeholders, and are run for the benefit of their members. A few Friendly Societies (including Dentists‘ Provident) have a unique contract called the ‘Holloway Contract’ (there are only nine in existence), that combine income protection with a fund for retirement.
The health insurance industry can give you the ‘peace of mind’ that you and your family are supported if you suffer an illness or injury. Their products include:
All references to taxation are within the context of UK tax regulations. HM Revenue & Customs rules, regarding tax treatment of premiums and benefits in relation to Holloway contracts and income protection, may change in the future. Members outside of the UK should seek professional tax advice. State benefits quoted represents our understanding of the current state benefit rules and allowances in the UK.
These pages are intended for general information only. They are not designed to provide financial or other advice, nor are they intended to make recommendations regarding the suitability of our plans for a particular individual. Nothing on these pages constitutes an invitation, inducement or offer to subscribe for membership or additional benefits of Dentists’ Provident. You can find full details of our plans in our memorandum and rules. Applications are required and non-standard terms may apply.