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With years of education behind them, and years of earning potential in front of them, Doctors are a valuable commodity. But why are so few protecting themselves with insurance?
You’ve worked to give yourself a good income. And your income is going to play a big role in your lifestyle, and that of your family, for a long time to come.
It sounds like something you’d want to protect, right? But underinsurance is an issue facing an alarming number of Australians, from all walks of life – including GPs, Specialists, Dentists.
The insurance we’re talking about is life insurance – the most common forms of which are death cover, total and permanent disability (TPD), trauma insurance and income protection.
Life insurance isn’t just about protecting your family financially if you die. It’s about protecting your lifestyle if you get sick or injured. So if you can’t work for a while, or ever again, you’ve got a financial back-up plan.
Think of all the cases of physical and financial hardship you’ve seen in your profession. Then imagine it was your family that had to go through it all without financial support.
When you’re working in a career where you’re exposed to career-threatening hazards like contracting a blood borne disease, insurance is a recognition of the unique risks you face every day.
Insurance for business owners
Many GPs, Specialists, Dentists are self-employed, adding another layer of financial responsibility to the equation.
But despite their significant insurance needs, many small business owners are also failing to protect themselves and their families with adequate insurance.
According to a 2006 survey by the Investment and Financial Services Council (FSC), less than half of small business owners feel they have adequate cover[1].
So if they know they’re not properly covered, why aren’t they doing something about it?
One of the reasons is that there’s a perception insurance is too expensive.
But think about the sort of money you’d lose if you couldn’t work for a few months. Or worse, if you could never work again. It certainly helps put the cost of insurance into perspective.
It could even reduce your tax bill
Income protection insurance is one of the most relevant types of cover for professionals – including the self-employed. It can replace up to 75% of your income if you can’t work because of sickness or injury.
In the FSC survey, 95% of small business owners said they were aware of what income protection was, but 56% thought it was too expensive.
So cost is obviously a big reason for the lack of protection.
But the fact 47% of respondents did not know that income protection premiums were tax-deductible shows there’s a lack of understanding around how much insurance actually costs.
Business expenses insurance – which covers fixed business expenses like rent, electricity and non-income producing staff wages if you can’t work because of sickness or injury – is also tax-deductible.
So if you run a business, you can combine these two types of policies to cover your work and personal expenses. And potentially reduce your tax bill.
How much does it actually cost?
Let’s take the example of a 39-year old male doctor who earns $120,000 pa. He takes out:
His total premium before tax is $2,810. But because his income protection premiums are tax-deductible, his after-tax premium reduces to $1,644. At about $30 per week, that’s the equivalent of a take-away pizza each week.
Source: Asteron Life Limited, based on a non-smoker taking out an Agreed Value Income Advantage policy, and an Indemnity Contract Business Expenses policy, both with 30-day waiting periods and stepped premiums paid annually.
Get the cover you need
The best way to find out the types and amount of cover you need is to speak to us. We can help you get the right cover, and make sure it’s structured in a way that makes it as cost-effective as possible.
What you need to know:
Any advice contained in this post is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning Pty Ltd and other companies within the AMP Group will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.
Avante Financial Services Pty Ltd ABN 59 150 871 499 are Authorised Representatives of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No: 232706
