Over the course of an 11-part series, the 4dentist group will explore ways to tackle a number of personal and professional challenges by providing advice and guidance to fictional character Dr Mo Lar. In the fifth article we’ll be looking at steps Dr Lar should take now that he is married with a young family.
Since the last article, Dr Mo Lar has undergone a lot of change in his personal life – as well as getting married he has become a proud father of a baby boy. As the main breadwinner of the family, Dr Lar feels responsible for the financial welfare of his loved ones, prompting him to review his finances and level of protection. Between utilities, mortgage repayments, general expenses and the cost of raising a child – which is thought to amount to about £231,843 by the age of 21 –[i] there is a lot that he must account for if anything were to happen. As such, the best place to start would be critical illness.
Critical illness cover is designed to pay out a single tax-free lump sum in the event that the claimant is diagnosed with a serious illness or condition such as cancer, multiple sclerosis, stroke, Parkinson’s disease and so on. To ensure that he receives a payout, Dr Lar would need to choose a policy that covers a wide range of potential ailments, being careful to disclose all relevant details such as existing health problems, age and lifestyle to the insurer. Luckily, Dr Lar is in good health but if he did have a pre-existing illness there is a possibility that it would affect his claim. For that reason it is always wise to seek guidance from a specialist adviser.
Saying that, over 95 per cent of critical illness claims were paid out by a well-known insurance company in 2016, with just 5 per cent rejected due to misrepresentation and not meeting the terms of the policy –[ii] still, one can never be too careful. For a suitable payout, Dr Lar would be advised to take out cover to the value of his mortgage, debts (for example his student loan) and living expenses.
Then there’s income protection. While it is necessary to prepare for the worst-case scenario, Dr Mo Lar must also give thought to everyday sickness or injury. According to the Health and Safety Executive, 30.4 million working days were lost due to work-related illness or injury in 2015/16, averaging at 16 days per person.[iii] It can happen and dentists are no exception. In fact, it is well known that dentists are at risk of developing musculoskeletal disorders and suffering from mental health disorders such as depression and anxiety, so it is crucial that Dr Lar covers himself against such eventualities – especially as he is a self-employed associate at a predominantly NHS practice.
Indeed, NHS sickness leave payments are restricted for dentists, so if Dr Lar was to experience an accident or illness that forced him out of work temporarily and he wasn’t covered, he would only be eligible for statutory sick pay. As the main breadwinner £89.35 per week is not enough to cover his food bill for his young family, let alone his other financial commitments. However, as Dr Lar is extremely risk-averse and prudent with his finances, he intends to take out a policy with the help of money4dentists.
To make sure that no stone is left unturned, Dr Lar would also be advised to enlist the services of a lawyer to put together a will, as it will ensure that his hard earned money is inherited by his closest loved ones. In this instance, Dr Lar wishes for his assets to go to his wife and that she takes on the role as trustee for their sons inheritance until he turns 18. Any estate worth over £250,000 is automatically divided between the surviving spouse and children if there is no will to decree otherwise, so it is crucial that Dr Lar puts his instructions in writing if he is to ensure his assets are divided as he wishes. With his life insurance taken into account, Dr Lar’s estate is worth over £325,000 so he will also need to consider the impact of inheritance tax and the best way to maximise the benefit of available reliefs and exemptions.
One can take great comfort in knowing that one’s family will be taken care of financially in the event of illness or death. For peace of mind follow in Dr Lar’s steps and take out the right protection today.
In the next article: Dr Lar looks to become a principal.
[i] The Guardian: Cost of raising children in UK higher than ever. Article published 16 February 2016 and accessed online 21 April 2017 at https://www.theguardian.com/lifeandstyle/2016/feb/16/cost-of-raising-children-in-uk-higher-than-ever
[ii] Aegon: Claims experience. Article published 27 March 2017. Accessed online 21 April 2017 at https://www.aegon.co.uk/support/faq/Understanding-our-products/protection-products/claims/claims-experience.html
[iii] Health and safety executive: Working days lost. Accessed online 21 April 2017 at http://www.hse.gov.uk/statistics/dayslost.htm
Posted by Gemma