When Should You Review Your ‘Plan B’?
Although not exciting or glamorous, your personal and practice insurance cover are very important for you, your family and your practice.
You can either choose to accept such insurable risks and the potential enormous downside of some of these, or pay to transfer these risks to a major reputable insurer with deeper pockets than you.
For the purposes of this article, we will focus on the personal and business insurances where we are insuring you, your spouse, family members or partners/staff within your practice – and Life, Total & Permanent Disability, Trauma/Critical Illness, Income Protection and Practice Overheads insurance.
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 and business 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 in private practice married with a young family, a mortgage needing 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.
You may also not realise you were eligible to claim for a health event, such as a broken arm that is covered by your policy (see article: ‘Are You Eligible for a Claim on Your Insurances, But Not Realised It?’).
So, what should trigger you to consider a review of your personal insurance cover?
Your last review was more than 2-3 years ago
Significant increases in your income
Commencing in private practice or considering it
Buying or selling a practice
Expanding your rapidly growing 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
Completion of your specialty training
Purchasing a new home
Major home renovations
Not insured yet
Relying solely (and perhaps naively) on the default insurance in your super fund
Changing employers
Considering working overseas e.g. a fellowship
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)
Your premiums are getting out-of-hand
Sorting out your estate planning, including ensuring you have a valid up-to-date Will
Let’s consider a few of these triggers:
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?
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.
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.
Significant 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 47% of the premiums back in your tax return each year.
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.
Buying or selling 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.
Conversely, if you are selling a practice, it would be a good time to review whether you require as much cover.
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, it’s good to get in the habit of checking when you experience a change in your circumstances, or at least every 2-3 years.
It’s 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 if you have any questions or would like to review your insurances.