When should you review your Personal and Practice insurances?

Although not exciting or glamorous, your personal insurance cover – Life, Total & Permanent Disability, Trauma/Critical Illness, Income Protection and Practice Overheads – is a very important part of you and your family’s financial protection.

Quality comprehensive personal insurance cover offers you peace of mind, and more importantly, provides financial security for you and your family, including financial and lifestyle choices you would not otherwise have if something happens to you.

Naturally, your need for personal insurance cover will change as you progress through your medical career and different stages of your life.

For example:

• A single Doctor-in-training with minimal debt needing to set up income protection cover and
  ensuring it keeps up with their rising income,

• Consultant married with a young family and a mortgage needing much more comprehensive cover, or

• Gradually winding down to retirement with the need for insurance and the affordability of premiums declining.

You may only think about insurance when you or someone you know suffers a major illness, disability, or death, or when you receive your annual insurance policy statement.

However, without updating your cover to reflect your current situation, you may become over-insured (and pay higher premiums unnecessarily) or under-insured (which may cost you even more if you need to claim). You may also not maintain competitive insurance premiums, nor the most generous up-to-date definitions for claiming.

So, what should trigger you to consider a review of your personal insurance cover?

• Not insured yet

• Relying solely (and perhaps naively) on the default insurance in your super fund

• Changing employers

• Purchasing a new home

• Major home renovations

• Considering working overseas e.g. a fellowship

• Completion of your specialty training

• Increases in your income

• Commencing in private practice or considering it

• Buying or selling a practice

• Employment of new people who are key to the operation of your practice

• Marriage or divorce

• Birth of a child or planning to start a family

• Major illness, accident or death of a family member, friend or colleague

• Your wealth creation means you are close to being financially independent

• Receiving an inheritance or other large financial windfall

• Retiring or getting ready to retire

• A teenage child obtaining their driver’s license

• Your children start working and become financially independent (well, mostly!)

• Setting up your own Self Managed Superannuation Fund (SMSF)

• Sorting out your estate planning, including ensuring you have a valid up-to-date Will

• Your premiums are getting out-of-hand

• Your last review was more than 2-3 years ago

Let’s consider a few of these triggers:

Not insured yet

You have invested so much of your time, money and focus into your many years of education and training. Shouldn’t you protect one of you and your family’s most valuable assets – you and your ability to earn an income?

Relying solely (and perhaps naively) on the default insurance in your super fund

The default insurance cover you may automatically be provided with by your super fund is certainly better than no cover for you and your family at all. However, there are many drawbacks to such policies.

For example, for Queensland Health employees with QSuper, your default income protection insurance policy:

• Is relatively very expensive,

• If you cannot work, will only pay you for the lesser of: 3 years or the end of your contract, and

• Ceases automatically if you leave Queensland Health.

Changing employers

When you change employers, there are two reasons to review your insurances:

• Your employer benefits might change (like the default policy above), and

• Your salary might change.

Commencing in private practice or considering it

There are many things you should be considering at this time, such whether your Income Protection is for a guaranteed amount. If your income drops initially when you commence in private practice, you would still receive your full insured benefit if you became ill or injured and unable to work?

Birth of a child or planning to start a family

Do you love your family? Whether you’re having your first child or your third, your life insurance is critical to safeguarding their financial future. If you pass away and your spouse is left with no money, how will they provide for the kids and repay your mortgage?

Purchasing a home

When you purchase a house, likely you will be taking on a mortgage representing a significant debt. Regardless of you and your spouse’s respective incomes, you’ll need life insurance so that if one of you were to die, the other would have the necessary replacement income to pay the mortgage, keep your home, and maintain a similar lifestyle.

Increases in your income

If you have any major increase in your income, you should ensure your insurances are increased too. That way, you won’t experience a rude shock if you need to claim and realise you have not increased your insured amount to reflect your much higher income.

Income protection insurance is also fully tax deductible. For example, if you earn $180,000+ per year, you should receive about 49% of the premiums back in your tax return each year.

Completion of your specialty training

You have finally completed many years of training to become a Consultant – congratulations! This will likely mean a substantial increase in your income, more responsibility, decisions like where you would like to work and perhaps the opportunity to commence private work.

Marriage

You don’t need to discuss it on your honeymoon, but at some point early on in your marriage, take the time to ensure that you are each protected from financial hardship if the other dies or is unable to work for a prolonged period.

Major illness, accident or death of a family member, friend or colleague

This can be an abrupt reminder of the value of quality insurance cover. For you and your family’s peace of mind, this is a good time to check your insurance cover.

Buying into a practice

Life insurance is essential for business owners. Personal life insurance provides a death benefit to your family or heirs, not your fellow business partners or your business in general. So, you’ll want to consider different types of business coverage in addition to your personal coverage.

Setting up your own Self Managed Superannuation Fund (SMSF)

Will you lose any insurances if you rollover your super accounts to your new SMSF?

Considering working overseas
Do your insurances still cover you overseas?

Will you still be paid your full insured benefit if your income is much less, such as if you are completing a fellowship?

Your premiums are getting out-of-hand

There are several strategies for saving on the cost of premiums, whilst maintaining financial protection for you or your family.

Are you aware of these to be able to make smart decisions and save $1,000’s-$10,000’s?

Sorting out your estate planning, including ensuring you have a valid up-to-date Will

Does your insurance cover complement your estate planning to ensure your insurance payment goes to your family or intended recipients in the most tax-effective manner?

Your last review was more than 2-3 years ago

Reviewing your insurance cover every 2-3 years acts as a good double-check of whether there have been any changes in your circumstances. In addition, your adviser can also check whether more competitive premiums or generous insurance definitions are available for you.

As such, its good to get in the habit of checking with your adviser when you experience a change in your circumstances, or at least every 2-3 years.

Its also very important that, in addition to offering first-class service and time-saving convenience for you, your adviser also specialises in Doctors. This should include a thorough understanding of your profession, the best insurance products for the unique risks you face as a Doctor, exclusive insurance offers available only to Doctors and even tailoring your insurance to your particular medical speciality.

Please contact us on Tel: (07) 3252 8810 or email: website@doctorswealth.com.au if you would like to review your insurances, or are interested to explore how we can assist you.