September 25, 2025 • 23 mins
Get a free audit of your indemnity cover here >>> https://quote.allmedpro.co.uk/dental-indemnity-2025-new-proposal-dwi/
———————————————————————
Get your free verifiable CPD for this episode here >>> https://www.dentistswhoinvest.com/videos/the-top-5-reasons-dentists-are-overspending-on-their-income-protection-with-luke-hurley
———————————————————————
Are you a dentist looking to grow your wealth? You can connect with Luke here: https://www.viderefinancial.com/investment-options-review
———————————————————————
What happens to your financial security when you can't practice dentistry?
For most dental professionals, income protection represents the cornerstone of financial planning, yet it remains riddled with costly mistakes that could leave you vulnerable precisely when you need support most. In this eye-opening conversation with independent financial advisor Luke Hurley, we dissect the five critical errors dentists consistently make with their protection policies – and provide clear, actionable solutions to fix them.
We start by challenging the dangerous mindset that income protection can be postponed. As Luke powerfully states, "Ensuring your future self will never be cheaper than ensuring your today self." Delaying coverage not only increases premium costs but risks accumulating health-related exclusions or even becoming uninsurable. Regular reviews around career transitions prove equally essential, especially when purchasing practices, switching between NHS and private work, or establishing limited companies.
The discussion delves into the complexities of aligning protection with various dental income structures. Whether self-employed, operating through limited companies, or employed, different insurers handle income verification distinctly – potentially leaving dangerous gaps in coverage. We explore the critical importance of appropriate deferment periods, coverage definitions, premium guarantees, and inflation protection to ensure your policy delivers when needed most.
Perhaps most crucially, we examine how complete transparency during underwriting prevents future claim denials and how income protection should integrate with critical illness coverage, life insurance, and increasingly, private medical insurance to create comprehensive financial security.
———————————————————————
Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Dr James (00:00):
Income protection is something that a lot of dentists
have, but are they getting thebest out of it?
Virtually none in my experience, and that's why this podcast
today is co-hosted byindependent financial advisor
Luke Hurley.
We're going to be talking aboutthe five biggest mistakes that
dentists make whenever it comesto their income protection
policies, and also how to fixthem.
(00:22):
Let's go.
I'm also happy to share thatthere is free verifiable CPD
associated with this podcastepisode.
Whenever you finish the episode, all you have to do is click
the link in the podcastdescription.
It'll take you right throughthe Dentists Who Invest website.
You'll be able to complete ashort questionnaire and, once
passed, you fill in yourreflections and we'll go ahead
(00:42):
and email over to you yourverifiable CPD certificate,
which is entirely free.
What that means is this podcastepisode will be able to
contribute towards yourverifiable CPD hours during this
learning cycle.
Do dentists pay way too muchfor their income protection,
(01:02):
Luke?
What are your thoughts?
Luke (01:04):
Sometimes would be my initial response.
I think there's a variety offactors and mistakes that I see
made, and we're going to gothrough five of the biggest
mistakes that dentists make withtheir income protection.
I think, before we delve intothe detail, it'd be good to just
make sure we have a workingdefinition of what income
(01:24):
protection is, because you mighthave some listeners that are
new to this.
So income protection isinsurance to support you if you
cannot work due to incapacity.
So if you're ill or suffer illhealth or hurt yourself, you've
got something to fall back onfor you and your dependents, if
you have them.
The first mistake to kickthings off is, for me, getting
(01:45):
your priorities wrong, and whatI mean by that is I see a lot of
people kicking the can down theroad, thinking that they don't
need income protection.
They might not have dependents,they might be at the earlier
stage of their career, but therisk you run with that approach
is that premiums will get higherin time.
(02:05):
The older you get, the morelikely you might suffer some
form of ill health andexclusions might be added to
your policy.
You might become uninsurable ifyou're diagnosed with a new
illness or if you have an injuryand, I think, on a broader
level, when we talk aboutsomebody's financial plan and we
(02:25):
talk about income, expenditure,assets, liabilities and how
they all link together toachieve financial independence.
Income and having positive cashflow is the lifeblood of the
financial plan, and so youexpose yourself to quite a
significant risk if you don'tprotect yourself from disasters.
So my advice is lock in coverbefore life events can take over
(02:49):
.
Do it as soon as you havestable income.
Ensuring your future self willnever be cheaper than ensuring
your today self.
And if you want to befinancially independent, then
without income protection, yourfinancial plan is really built
on sand.
So you need solid foundations.
Yes, with insurance, we hopeit's a complete waste of money.
(03:10):
With all insurance, youultimately hope that it's a
waste of money, but disasters dohappen and sadly I have seen
multiple cases where people havehad to claim from these
policies.
So my advice is don't putthings off.
Get the cover in place.
That follows on nicely to thesecond part of this point, which
is make sure you're reviewingyour cover.
(03:31):
As you know, life and workevents change throughout the
course of your career.
So if you don't review, then yourun the risk that your cover is
kind of lagging behind thosebig events that might happen,
whether it be mortgages orchanges in mortgages, having
some kids, lifestyle costsincreasing, major events like a
practice purchase or a rolechange or switching from NHS to
(03:55):
private dentistry or a mix.
You know there's lots ofpossible events for a dentist
throughout the course of theirworking career and it's
absolutely vital to make sureyou're reviewing your income
protection, because that's oftenwhere I see mistakes made is
around those events and thosetransitions.
So, lock-in reviews if you'vegot an advisor that works with
(04:16):
you on this side of yourfinancial affairs, make sure
that they're looking at yourcover periodically, particularly
if you switch to a limitedcompany, for example.
I see that quite a lot.
If there's changes in work,changes in your income levels,
if you've got kids, if yourlifestyle costs significantly
increase, if you've changed yourdebt, if you've bought a
(04:37):
practice, if you've switchedbetween NHS and private, all of
those things I think areabsolutely essential to use as a
trigger for having a review.
Dr James (04:47):
Or even, could I ask and I hope I'm not jumping in
too early because this might beone of the subsequent points Is
it even worth having a review,simply even if you've had a
policy for a while, because it'squite possible that the policy
has went up quite a bit in termsof the payments, in terms of
what you have to pay every month, and there might be a cheaper
(05:08):
policy that does exactly thesame thing out there
significantly.
Luke (05:12):
It's always worth having a review.
I mean, you tend to see less ofan opportunity to kind of
review the cost of things as youget older, but it's not
impossible, certainly worthconsidering.
Some people have been soldpolicies that have reviewable
premiums and it might besensible to look at that where
(05:33):
they've had kind of reviews inthe level of their cover.
So, yes, absolutely, it's notjust around those life event
triggers.
I think it's worth justchecking in every now and then
and making sure you've got thebest deal possible.
But overall, for me, on thissort of mistake number one, it
boils down to kind of treatingit as optional rather than
foundational.
For me, income protection isthe first pillar, so to speak,
(05:56):
and then you can layer on top ofthat.
It just gives you solidfoundations on which to build.
Dr James (06:02):
Excellent, and yeah, not much to add there.
Luke (06:06):
I guess we can move on to point number two yeah, point
number two is making sure you'vegot the right fit for your
income structure, and I thinkthis is absolutely fundamental
and probably the biggest causeof most mistakes.
So, as you know, dentists canbe remunerated in different ways
.
They set themselves up withdifferent structures to take
(06:28):
their income, so you might havethose that are self-employed,
you might have those that areoperating through a limited
company.
Some are PAYE if they've got anemployed position as part of
what they do.
So all of that needs to befactored in in terms of the type
of policy that they take outand the provider that they use,
because all providers havedifferent rules about how they
(06:49):
require you to evidence yourincome, and so it's absolutely
key to make sure that the policyis the right fit.
The other issue with this isincome variability.
So, again, you need to know howyour provider is going to treat
your earnings and your incomeand possibly your drawings from
a company, if they were tofluctuate over time, and make
(07:12):
sure that your advisor ismatching your policy to your
remuneration structure.
And I would say that this isprobably one of the biggest
reasons to get advice, becausethere is a substantial
difference between the providerson how they'll treat things,
for example.
A prime example would be if youswitch to using a limited
company and that's often becauseof tax reasons, where you want
(07:32):
to shelter some of your incomefrom income tax then a lot of
insurers will only look at yourdrawings from that limited
company.
So they'll only look at theamount that you're taking as
salary and dividends.
They won't look at the retainedprofit that's within the
limited company.
So again, it's a real triggerfor having a review of the cover
that you've got in place.
Dr James (07:54):
Seems reasonable.
Luke (07:56):
The second part sorry, James.
The second part of that, theextension of that, actually is
making sure you've got the rightdeferred period.
So the deferred period is theperiod of time that has to pass
before you can make a claim, andit's important to get the right
balance on that.
So you might have a policy thathas a deferment period that's
too long, in which case there'sthe potential for a cash flow
(08:18):
gap before the policy startspaying out.
But on the other extreme, youmight have a policy that's quite
expensive, that's kicking infrom, say, day one, and you
really do pay for that.
So it's about finding the rightbalance in terms of the
deferred period, aligning itwith your sick pay entitlements,
if you have any, if you haveNHS work.
(08:38):
Aligning it with an emergencyfund, which we always recommend
people have, in terms of havingan easy access cash reserve to
kind of self-insure for a periodof time, and finding the sweet
spot.
And don't just assume that youknow you're you're just because
you're doing some nhs work thatyou've got substantial sick pay,
because it really does justrelate to your nhs earnings.
(09:00):
So again, a good, good reasonto get proper advice on this.
Dr James (09:06):
Nice.
Luke (09:08):
The final point I wrote down on the subject of income
structure is around executiveincome protection, which is a
type of income protection wherethe premiums are paid for by
your limited company and are taxdeductible.
So there's the allure, thereallure get the words out there
(09:29):
of executive income protectionbecause of the tax advantages
and in truth they can be areally useful tool in the right
scenarios.
I wouldn't want to completelywrite it off.
For the right fit they can besuitable, but the payout is to
the company.
So then you'll have to payincome tax on drawing the money
out of the company and they willrely on you keeping your
(09:50):
drawings from the company at acertain level again, so that
might slight restrict your, yourincome and your you know your
tax planning in in due course.
So just just be, go into thatwith an element of caution and
make sure that it's actually theright fit for you and your
circumstances and what yourlonger term plans are in terms
of the drawings that you'regoing to have from your company.
(10:10):
Number three the third one I'vegot written down here, James is
making the wrong cover choices.
So every income protectionpolicy there's different choices
that you have to make,different features, if you like,
and different variables.
So the big one for me isunder-insuring or over-insuring.
(10:32):
There's a danger that youunder-insure yourself.
There's also a danger that youover-insure yourself.
I said at the start that incomeprotection like all insurance,
hopefully is a complete waste ofmoney because if it's not, then
something has unfortunatelyhappened that won't be
particularly pleasant.
So you want to get the rightbalance of cover, but you don't
want to be paying too much inpremiums.
(10:56):
But if the payout doesn't meetyour sort of monthly burn rate
you know your lifestyle coststhen there could be a shortfall.
And there's also a danger, ifyou have too much cover based on
your income, as in terms ofwhat I just said that you
wouldn't actually be able tomake a full claim at the point
of needing the policy.
So get the right level of cover, get the right level of premium
(11:16):
in terms of the cost for youand your family, and really put
some thought into what is theright number based on the cost
of your lifestyle.
And everybody has a differentlifestyle cost ultimately, and
that doesn't stay static, itchanges over the course of your
life.
You know, as you get older,you're typically your, your
spending needs, your lifestylecosts go up, your risk goes up,
(11:38):
and so it's important to factorthat in over to
wwwdennis2investcom and hit thevideo slash CPD tab and you can
go right ahead and help yourselfto as much CPD as you need.
Dr James (12:10):
You'll also find a link that takes you straight to
the CPD section of the Denniswho Invests website in the
podcast description.
Luke (12:19):
Building on top of that, so picking an unrealistically
early kind of end age for thepolicies.
Now, these run for a set term,so you're really insuring
yourself to a point in time inthe future where you think that
you'll no longer need the cover.
So a lot of people will tiethat to a retirement age and
there's a danger of you beingover optimistic in terms of what
(12:41):
that retirement age is and alsobeing overly pessimistic.
My general feeling is if adentist still requires income
protection long into their 60s,then something's gone wrong with
the overall financial plan, andso just be wary of that.
I do see some brokers encouragepeople to run income protection
(13:02):
through to, say, state pensionage.
You just need to think aboutthat.
Do you realistically think thatyou won't be financially
independent and won't have theasset base to sustain a
retirement by the time you get,to, say, age 68?
For me, I'd like to think thatI'd have got things in order by
then.
So it's finding the rightbalance.
It's having a sensiblediscussion over what that that
(13:24):
age is likely to be in terms ofwhen you'll be financially
independent and you'll no longerneed to insure the risk because
you've got those assets andthose resources to fall back on.
Also, factor in particularly adentist that's got significant
NHS pension benefits, as thosebuild up over time.
There is ill health retirementbenefits associated with a NHS
(13:45):
pension and so there is also adanger and I do see this for
clients that get you knowadvanced and reach those later
years of their working life thatif they were to claim an ill
health retirement pension thenit might actually jeopardise the
amount that they can claim fromtheir income protection policy.
So, again, worth reviewing thatas you get older, as to whether
(14:06):
the policy would pay out fully,and give that review as you get
older.
Building on that, so one of thepeople would have instantly
probably know what I mean when Isay own occupation, because it
was quite a big thing reallywhen I first started that a lot
of insurers didn't necessarilycover a dentist on what's called
(14:29):
an own occupation definition.
But that's, I think, changedand evolved over time and now
that's pretty much the norm,it's now common.
So, yes, you absolutely need toensure that your policy is
written on an own occupationdefinition when it comes to
incapacity and that that isimportant.
But it but it is prettystandard now for for the main
(14:53):
insurers out there.
You may want to.
There are.
There are some companies thatnow offer what's called an own
job definition, which is usefulif your role is more specialist,
you know, if you've got more ofa niche, it's.
It's something you might wantto consider.
But own occupation just meansthat if you're only able to do
you know, fulfill your role as adentist and work as a dentist,
(15:15):
then it will pay out, as opposedto something like you know work
tasks or similar, which is notstrong.
So, yes, make sure that thedefinition is right.
But, as I say, that is reallyquite standard.
Now, so is the other point Imean for me.
I always would advise somebodyto take out guaranteed premiums
(15:37):
rather than reviewable.
That just means that you've gotsome certainty over the cost of
the policy in the future andit's not tied up with the
insurance provider and theirfortunes.
So I would default toguaranteed premiums so you know
exactly what your cost is goingto be over time, albeit you may
link it to inflation, which youcan't be certain of which I'll
(15:59):
come on to in a moment.
But yes, make sure that you'vegot that certainty over the
lifetime cost of your policy.
Indexation touched on it there,absolute must for me
particularly around incomeprotection, to make sure that
your cover is going to keep pacewith inflation and protect you
against changes in the cost ofliving over time.
(16:21):
Clearly, we know the power ofinflation and the destruction of
inflation.
So ensure that your policy isindex linked and also that it's
index linked in terms of, if youwere to make a claim, not just
the level of cover going upbefore a claim, but also, once
you've made a claim, making surethat that escalates as well in
(16:42):
claim escalation.
So all good points to checkwith your broker, with your
advisor, and I would also add ina point there that how insurers
increase your premium alongsidethe increase in cover, if you
choose indexation is alsoimportant.
They all do.
There is some differencesbetween insurers in terms of how
(17:05):
they will increase the premiumsalongside the indexation of the
cover, and that can make aquite big impact over a long
period of time.
So it's always worthwhilechecking what the potential cost
would be on a like-for-likebasis over the life of the
policy and not just the initialpremium.
That's.
You know, that's best practice,really okay.
(17:29):
Point number four makingmistakes when it comes to
underwriting a disclosure.
So this this boils down tobeing completely open and
transparent when you're puttingyour application in.
You can see the the statisticsaround.
You know the claim statistics,statistics and how the insurers.
You know the proportion ofclaims that they pay out on.
(17:49):
Overwhelmingly a large numberof claims that don't get paid
out on is because there's somesort of omission during the
underwriting process wherethings haven't been disclosed
correctly.
So as you go through thatapplication process, you just
need to be completely open andtransparent and honest with the
application, not omit anythingfrom that, and if you do that
(18:13):
then you shouldn't have aproblem.
Yes, if there's something there, the insurer might take a view
on it and they might add anexclusion or they might slightly
change the premium they'reoffering you.
But it's much better to befully transparent at the start
and ensure that you're going toget a payout in the future.
Otherwise the whole thing issomewhat pointless as an
(18:35):
exercise and as a regular cost.
So don't make omissions.
And you see that around BMI,smoking, vaping, extreme sports
all of these things need to bedisclosed to an insurer as part
of the application process.
So make sure that you're sortof fully upfront in that to
(18:56):
ensure that the policy willactually pay out when you need
it in the future and there's nowiggle room for the insurer to
kind of take a view that becauseyou've not been fully open with
them during the applicationprocess, that they're gonna.
You know that it jeopardizesthe claim in the end.
And then the final point Iwrote down was not blending it
(19:17):
correctly with other types ofcover.
And yeah, I think that's that'simportant and I'm sure we'll do
other podcasts in the future,James, on the different types of
cover.
That's, that's out there, butbig ones for me.
Don't assume that criticalillness cover replaces income
protection.
It doesn't.
They're very different types ofinsurance.
Critical illness tends to payout a lump sum based on
(19:39):
specified conditions and youcould be ill and be off work,
but it won't necessarily triggera payout on your critical
illness policy.
So they're very different.
Treat income protection as thecore, as the foundation, and
critical illness is somethingthat you might want as an
optional bolt-on in the future.
But for me income protection isvery much the pillar of the
(20:01):
foundation Overspending somepeople will overspend on
critical illness when incomeprotection already covers kind
of their outgoings and I seethat a lot where people load up
on critical illness cover whichis really quite expensive.
For me, the foundation shouldbe, as I said, income protection
and life cover.
Life cover paying out on death,income protection paying out on
(20:22):
incapacity.
If you do develop an unpleasantillness that would trigger a
claim on a critical illnesspolicy.
Well, if it keeps you off workfor an extended period of time,
you'd have a valid claim on yourincome protection policy, and
if it's really serious andultimately is going to lead to
you passing away, then yourdependents will claim on your
life insurance policy.
(20:42):
So that's why I think those twoare kind of the most important,
and critical illness is a bolton top of that.
The other type of insurance I'mjust going to mention here
because I'm seeing a growingnumber of inquiries about this
and conversations about this isprivate medical insurance.
It's fairly well documented thewait times on the NHS for
(21:05):
various things, the wait timeson the NHS for various things
and having just had a daughterthat's suffering nosebleeds at
the moment and has been toldthat she's on the priority list
to see ENT paediatrics and thenbeing told that it's a 22-month
wait for her to see someone, Ican well understand why people
are looking at the costs ofprivate medical insurance, and I
think it's a really good kindof fit and dovetails quite
(21:26):
nicely with income protectionfor dentists, so well worth
considering that as well as partof your overall plan.
Great, so I think, James, I'vedone a lot of talking there,
James, but I think we've donethat justice in terms of the
five core areas where we seemistakes.
(21:48):
If anybody wants to have adiscussion around their current
income protection, or if theydon't have protection they'd
like to discuss it, then feelfree to reach out.
You can find me on the group orpop me an email or visit our
website.
I'm Luke viderefinancial.
com and we can have a chat.
Income protection is something that a lot of dentists
have, but are they getting thebest out of it?
Virtually none in my experience, and that's why this podcast
today is co-hosted byindependent financial advisor
Luke Hurley.
We're going to be talking aboutthe five biggest mistakes that
dentists make whenever it comesto their income protection
policies, and also how to fixthem.
(00:22):
Let's go.
I'm also happy to share thatthere is free verifiable CPD
associated with this podcastepisode.
Whenever you finish the episode, all you have to do is click
the link in the podcastdescription.
It'll take you right throughthe Dentists Who Invest website.
You'll be able to complete ashort questionnaire and, once
passed, you fill in yourreflections and we'll go ahead
(00:42):
and email over to you yourverifiable CPD certificate,
which is entirely free.
What that means is this podcastepisode will be able to
contribute towards yourverifiable CPD hours during this
learning cycle.
Do dentists pay way too muchfor their income protection,
(01:02):
Luke?
What are your thoughts?
Luke (01:04):
Sometimes would be my initial response.
I think there's a variety offactors and mistakes that I see
made, and we're going to gothrough five of the biggest
mistakes that dentists make withtheir income protection.
I think, before we delve intothe detail, it'd be good to just
make sure we have a workingdefinition of what income
(01:24):
protection is, because you mighthave some listeners that are
new to this.
So income protection isinsurance to support you if you
cannot work due to incapacity.
So if you're ill or suffer illhealth or hurt yourself, you've
got something to fall back onfor you and your dependents, if
you have them.
The first mistake to kickthings off is, for me, getting
(01:45):
your priorities wrong, and whatI mean by that is I see a lot of
people kicking the can down theroad, thinking that they don't
need income protection.
They might not have dependents,they might be at the earlier
stage of their career, but therisk you run with that approach
is that premiums will get higherin time.
(02:05):
The older you get, the morelikely you might suffer some
form of ill health andexclusions might be added to
your policy.
You might become uninsurable ifyou're diagnosed with a new
illness or if you have an injuryand, I think, on a broader
level, when we talk aboutsomebody's financial plan and we
(02:25):
talk about income, expenditure,assets, liabilities and how
they all link together toachieve financial independence.
Income and having positive cashflow is the lifeblood of the
financial plan, and so youexpose yourself to quite a
significant risk if you don'tprotect yourself from disasters.
So my advice is lock in coverbefore life events can take over
(02:49):
.
Do it as soon as you havestable income.
Ensuring your future self willnever be cheaper than ensuring
your today self.
And if you want to befinancially independent, then
without income protection, yourfinancial plan is really built
on sand.
So you need solid foundations.
Yes, with insurance, we hopeit's a complete waste of money.
(03:10):
With all insurance, youultimately hope that it's a
waste of money, but disasters dohappen and sadly I have seen
multiple cases where people havehad to claim from these
policies.
So my advice is don't putthings off.
Get the cover in place.
That follows on nicely to thesecond part of this point, which
is make sure you're reviewingyour cover.
(03:31):
As you know, life and workevents change throughout the
course of your career.
So if you don't review, then yourun the risk that your cover is
kind of lagging behind thosebig events that might happen,
whether it be mortgages orchanges in mortgages, having
some kids, lifestyle costsincreasing, major events like a
practice purchase or a rolechange or switching from NHS to
(03:55):
private dentistry or a mix.
You know there's lots ofpossible events for a dentist
throughout the course of theirworking career and it's
absolutely vital to make sureyou're reviewing your income
protection, because that's oftenwhere I see mistakes made is
around those events and thosetransitions.
So, lock-in reviews if you'vegot an advisor that works with
(04:16):
you on this side of yourfinancial affairs, make sure
that they're looking at yourcover periodically, particularly
if you switch to a limitedcompany, for example.
I see that quite a lot.
If there's changes in work,changes in your income levels,
if you've got kids, if yourlifestyle costs significantly
increase, if you've changed yourdebt, if you've bought a
(04:37):
practice, if you've switchedbetween NHS and private, all of
those things I think areabsolutely essential to use as a
trigger for having a review.
Dr James (04:47):
Or even, could I ask and I hope I'm not jumping in
too early because this might beone of the subsequent points Is
it even worth having a review,simply even if you've had a
policy for a while, because it'squite possible that the policy
has went up quite a bit in termsof the payments, in terms of
what you have to pay every month, and there might be a cheaper
(05:08):
policy that does exactly thesame thing out there
significantly.
Luke (05:12):
It's always worth having a review.
I mean, you tend to see less ofan opportunity to kind of
review the cost of things as youget older, but it's not
impossible, certainly worthconsidering.
Some people have been soldpolicies that have reviewable
premiums and it might besensible to look at that where
(05:33):
they've had kind of reviews inthe level of their cover.
So, yes, absolutely, it's notjust around those life event
triggers.
I think it's worth justchecking in every now and then
and making sure you've got thebest deal possible.
But overall, for me, on thissort of mistake number one, it
boils down to kind of treatingit as optional rather than
foundational.
For me, income protection isthe first pillar, so to speak,
(05:56):
and then you can layer on top ofthat.
It just gives you solidfoundations on which to build.
Dr James (06:02):
Excellent, and yeah, not much to add there.
Luke (06:06):
I guess we can move on to point number two yeah, point
number two is making sure you'vegot the right fit for your
income structure, and I thinkthis is absolutely fundamental
and probably the biggest causeof most mistakes.
So, as you know, dentists canbe remunerated in different ways
.
They set themselves up withdifferent structures to take
(06:28):
their income, so you might havethose that are self-employed,
you might have those that areoperating through a limited
company.
Some are PAYE if they've got anemployed position as part of
what they do.
So all of that needs to befactored in in terms of the type
of policy that they take outand the provider that they use,
because all providers havedifferent rules about how they
(06:49):
require you to evidence yourincome, and so it's absolutely
key to make sure that the policyis the right fit.
The other issue with this isincome variability.
So, again, you need to know howyour provider is going to treat
your earnings and your incomeand possibly your drawings from
a company, if they were tofluctuate over time, and make
(07:12):
sure that your advisor ismatching your policy to your
remuneration structure.
And I would say that this isprobably one of the biggest
reasons to get advice, becausethere is a substantial
difference between the providerson how they'll treat things,
for example.
A prime example would be if youswitch to using a limited
company and that's often becauseof tax reasons, where you want
(07:32):
to shelter some of your incomefrom income tax then a lot of
insurers will only look at yourdrawings from that limited
company.
So they'll only look at theamount that you're taking as
salary and dividends.
They won't look at the retainedprofit that's within the
limited company.
So again, it's a real triggerfor having a review of the cover
that you've got in place.
Dr James (07:54):
Seems reasonable.
Luke (07:56):
The second part sorry, James.
The second part of that, theextension of that, actually is
making sure you've got the rightdeferred period.
So the deferred period is theperiod of time that has to pass
before you can make a claim, andit's important to get the right
balance on that.
So you might have a policy thathas a deferment period that's
too long, in which case there'sthe potential for a cash flow
(08:18):
gap before the policy startspaying out.
But on the other extreme, youmight have a policy that's quite
expensive, that's kicking infrom, say, day one, and you
really do pay for that.
So it's about finding the rightbalance in terms of the
deferred period, aligning itwith your sick pay entitlements,
if you have any, if you haveNHS work.
(08:38):
Aligning it with an emergencyfund, which we always recommend
people have, in terms of havingan easy access cash reserve to
kind of self-insure for a periodof time, and finding the sweet
spot.
And don't just assume that youknow you're you're just because
you're doing some nhs work thatyou've got substantial sick pay,
because it really does justrelate to your nhs earnings.
(09:00):
So again, a good, good reasonto get proper advice on this.
Dr James (09:06):
Nice.
Luke (09:08):
The final point I wrote down on the subject of income
structure is around executiveincome protection, which is a
type of income protection wherethe premiums are paid for by
your limited company and are taxdeductible.
So there's the allure, thereallure get the words out there
(09:29):
of executive income protectionbecause of the tax advantages
and in truth they can be areally useful tool in the right
scenarios.
I wouldn't want to completelywrite it off.
For the right fit they can besuitable, but the payout is to
the company.
So then you'll have to payincome tax on drawing the money
out of the company and they willrely on you keeping your
(09:50):
drawings from the company at acertain level again, so that
might slight restrict your, yourincome and your you know your
tax planning in in due course.
So just just be, go into thatwith an element of caution and
make sure that it's actually theright fit for you and your
circumstances and what yourlonger term plans are in terms
of the drawings that you'regoing to have from your company.
(10:10):
Number three the third one I'vegot written down here, James is
making the wrong cover choices.
So every income protectionpolicy there's different choices
that you have to make,different features, if you like,
and different variables.
So the big one for me isunder-insuring or over-insuring.
(10:32):
There's a danger that youunder-insure yourself.
There's also a danger that youover-insure yourself.
I said at the start that incomeprotection like all insurance,
hopefully is a complete waste ofmoney because if it's not, then
something has unfortunatelyhappened that won't be
particularly pleasant.
So you want to get the rightbalance of cover, but you don't
want to be paying too much inpremiums.
(10:56):
But if the payout doesn't meetyour sort of monthly burn rate
you know your lifestyle coststhen there could be a shortfall.
And there's also a danger, ifyou have too much cover based on
your income, as in terms ofwhat I just said that you
wouldn't actually be able tomake a full claim at the point
of needing the policy.
So get the right level of cover, get the right level of premium
(11:16):
in terms of the cost for youand your family, and really put
some thought into what is theright number based on the cost
of your lifestyle.
And everybody has a differentlifestyle cost ultimately, and
that doesn't stay static, itchanges over the course of your
life.
You know, as you get older,you're typically your, your
spending needs, your lifestylecosts go up, your risk goes up,
(11:38):
and so it's important to factorthat in over to
wwwdennis2investcom and hit thevideo slash CPD tab and you can
go right ahead and help yourselfto as much CPD as you need.
Dr James (12:10):
You'll also find a link that takes you straight to
the CPD section of the Denniswho Invests website in the
podcast description.
Luke (12:19):
Building on top of that, so picking an unrealistically
early kind of end age for thepolicies.
Now, these run for a set term,so you're really insuring
yourself to a point in time inthe future where you think that
you'll no longer need the cover.
So a lot of people will tiethat to a retirement age and
there's a danger of you beingover optimistic in terms of what
(12:41):
that retirement age is and alsobeing overly pessimistic.
My general feeling is if adentist still requires income
protection long into their 60s,then something's gone wrong with
the overall financial plan, andso just be wary of that.
I do see some brokers encouragepeople to run income protection
(13:02):
through to, say, state pensionage.
You just need to think aboutthat.
Do you realistically think thatyou won't be financially
independent and won't have theasset base to sustain a
retirement by the time you get,to, say, age 68?
For me, I'd like to think thatI'd have got things in order by
then.
So it's finding the rightbalance.
It's having a sensiblediscussion over what that that
(13:24):
age is likely to be in terms ofwhen you'll be financially
independent and you'll no longerneed to insure the risk because
you've got those assets andthose resources to fall back on.
Also, factor in particularly adentist that's got significant
NHS pension benefits, as thosebuild up over time.
There is ill health retirementbenefits associated with a NHS
(13:45):
pension and so there is also adanger and I do see this for
clients that get you knowadvanced and reach those later
years of their working life thatif they were to claim an ill
health retirement pension thenit might actually jeopardise the
amount that they can claim fromtheir income protection policy.
So, again, worth reviewing thatas you get older, as to whether
(14:06):
the policy would pay out fully,and give that review as you get
older.
Building on that, so one of thepeople would have instantly
probably know what I mean when Isay own occupation, because it
was quite a big thing reallywhen I first started that a lot
of insurers didn't necessarilycover a dentist on what's called
(14:29):
an own occupation definition.
But that's, I think, changedand evolved over time and now
that's pretty much the norm,it's now common.
So, yes, you absolutely need toensure that your policy is
written on an own occupationdefinition when it comes to
incapacity and that that isimportant.
But it but it is prettystandard now for for the main
(14:53):
insurers out there.
You may want to.
There are.
There are some companies thatnow offer what's called an own
job definition, which is usefulif your role is more specialist,
you know, if you've got more ofa niche, it's.
It's something you might wantto consider.
But own occupation just meansthat if you're only able to do
you know, fulfill your role as adentist and work as a dentist,
(15:15):
then it will pay out, as opposedto something like you know work
tasks or similar, which is notstrong.
So, yes, make sure that thedefinition is right.
But, as I say, that is reallyquite standard.
Now, so is the other point Imean for me.
I always would advise somebodyto take out guaranteed premiums
(15:37):
rather than reviewable.
That just means that you've gotsome certainty over the cost of
the policy in the future andit's not tied up with the
insurance provider and theirfortunes.
So I would default toguaranteed premiums so you know
exactly what your cost is goingto be over time, albeit you may
link it to inflation, which youcan't be certain of which I'll
(15:59):
come on to in a moment.
But yes, make sure that you'vegot that certainty over the
lifetime cost of your policy.
Indexation touched on it there,absolute must for me
particularly around incomeprotection, to make sure that
your cover is going to keep pacewith inflation and protect you
against changes in the cost ofliving over time.
(16:21):
Clearly, we know the power ofinflation and the destruction of
inflation.
So ensure that your policy isindex linked and also that it's
index linked in terms of, if youwere to make a claim, not just
the level of cover going upbefore a claim, but also, once
you've made a claim, making surethat that escalates as well in
(16:42):
claim escalation.
So all good points to checkwith your broker, with your
advisor, and I would also add ina point there that how insurers
increase your premium alongsidethe increase in cover, if you
choose indexation is alsoimportant.
They all do.
There is some differencesbetween insurers in terms of how
(17:05):
they will increase the premiumsalongside the indexation of the
cover, and that can make aquite big impact over a long
period of time.
So it's always worthwhilechecking what the potential cost
would be on a like-for-likebasis over the life of the
policy and not just the initialpremium.
That's.
You know, that's best practice,really okay.
(17:29):
Point number four makingmistakes when it comes to
underwriting a disclosure.
So this this boils down tobeing completely open and
transparent when you're puttingyour application in.
You can see the the statisticsaround.
You know the claim statistics,statistics and how the insurers.
You know the proportion ofclaims that they pay out on.
(17:49):
Overwhelmingly a large numberof claims that don't get paid
out on is because there's somesort of omission during the
underwriting process wherethings haven't been disclosed
correctly.
So as you go through thatapplication process, you just
need to be completely open andtransparent and honest with the
application, not omit anythingfrom that, and if you do that
(18:13):
then you shouldn't have aproblem.
Yes, if there's something there, the insurer might take a view
on it and they might add anexclusion or they might slightly
change the premium they'reoffering you.
But it's much better to befully transparent at the start
and ensure that you're going toget a payout in the future.
Otherwise the whole thing issomewhat pointless as an
(18:35):
exercise and as a regular cost.
So don't make omissions.
And you see that around BMI,smoking, vaping, extreme sports
all of these things need to bedisclosed to an insurer as part
of the application process.
So make sure that you're sortof fully upfront in that to
(18:56):
ensure that the policy willactually pay out when you need
it in the future and there's nowiggle room for the insurer to
kind of take a view that becauseyou've not been fully open with
them during the applicationprocess, that they're gonna.
You know that it jeopardizesthe claim in the end.
And then the final point Iwrote down was not blending it
(19:17):
correctly with other types ofcover.
And yeah, I think that's that'simportant and I'm sure we'll do
other podcasts in the future,James, on the different types of
cover.
That's, that's out there, butbig ones for me.
Don't assume that criticalillness cover replaces income
protection.
It doesn't.
They're very different types ofinsurance.
Critical illness tends to payout a lump sum based on
(19:39):
specified conditions and youcould be ill and be off work,
but it won't necessarily triggera payout on your critical
illness policy.
So they're very different.
Treat income protection as thecore, as the foundation, and
critical illness is somethingthat you might want as an
optional bolt-on in the future.
But for me income protection isvery much the pillar of the
(20:01):
foundation Overspending somepeople will overspend on
critical illness when incomeprotection already covers kind
of their outgoings and I seethat a lot where people load up
on critical illness cover whichis really quite expensive.
For me, the foundation shouldbe, as I said, income protection
and life cover.
Life cover paying out on death,income protection paying out on
(20:22):
incapacity.
If you do develop an unpleasantillness that would trigger a
claim on a critical illnesspolicy.
Well, if it keeps you off workfor an extended period of time,
you'd have a valid claim on yourincome protection policy, and
if it's really serious andultimately is going to lead to
you passing away, then yourdependents will claim on your
life insurance policy.
(20:42):
So that's why I think those twoare kind of the most important,
and critical illness is a bolton top of that.
The other type of insurance I'mjust going to mention here
because I'm seeing a growingnumber of inquiries about this
and conversations about this isprivate medical insurance.
It's fairly well documented thewait times on the NHS for
(21:05):
various things, the wait timeson the NHS for various things
and having just had a daughterthat's suffering nosebleeds at
the moment and has been toldthat she's on the priority list
to see ENT paediatrics and thenbeing told that it's a 22-month
wait for her to see someone, Ican well understand why people
are looking at the costs ofprivate medical insurance, and I
think it's a really good kindof fit and dovetails quite
(21:26):
nicely with income protectionfor dentists, so well worth
considering that as well as partof your overall plan.
Great, so I think, James, I'vedone a lot of talking there,
James, but I think we've donethat justice in terms of the
five core areas where we seemistakes.
(21:48):
If anybody wants to have adiscussion around their current
income protection, or if theydon't have protection they'd
like to discuss it, then feelfree to reach out.
You can find me on the group orpop me an email or visit our
website.
I'm Luke viderefinancial.
com and we can have a chat.
Popular Podcasts
CrimeLess: Hillbilly Heist
It’s 1996 in rural North Carolina, and an oddball crew makes history when they pull off America’s third largest cash heist. But it’s all downhill from there. Join host Johnny Knoxville as he unspools a wild and woolly tale about a group of regular ‘ol folks who risked it all for a chance at a better life. CrimeLess: Hillbilly Heist answers the question: what would you do with 17.3 million dollars? The answer includes diamond rings, mansions, velvet Elvis paintings, plus a run for the border, murder-for-hire-plots, and FBI busts.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.