Income protection for health professionals
Insurance products have moved forward a long way over the last decade, but income protection options for medical professionals have lagged behind.
What is typically recommended is often outdated and doesn’t give health professionals the best cover. Better options are overlooked, or not available through some providers.
This article is for doctors, surgeons, dentists, specialists and other health professionals who already hold income protection.
Two contracts that behave very differently
We compare the most commonly recommended contract, indemnity income cover (Medical Assurance Society calls this Income Security Insurance), with what we consider the better contract for health professionals: loss of earnings cover.
The insured amounts can be exactly the same, but the two contracts behave very differently when they pay out alongside ACC.
Example one: a senior physician
Karla is a senior physician earning $250,000 a year. She holds an Income Security Insurance policy with MAS, insured for $187,500 a year. A mountain biking accident leaves her with a dislocated shoulder and a fractured wrist, and she needs three months off work.
Her indemnity cover is fully offset by ACC. Under a loss of earnings contract, her total entitlement is based on her actual loss of income, so it is considerably higher.
| Monthly payment | Indemnity income cover (MAS Income Security) | Loss of earnings cover (Asteron) |
|---|---|---|
| ACC | $9,102 | $9,102 |
| Insurer | $6,497 | $8,797 |
| Total each month | $15,699 | $17,899 |
What this means in practice: loss of earnings cover pays 14% more, an extra $26,400 a year while on claim.
Example two: an orthodontist
The higher the income, the bigger the shortfall. Shae is an orthodontist earning $500,000 a year, insured for $330,000 a year with a MAS Income Security Insurance policy. A snowboarding accident damages the ligaments in his knee, and he needs five months off work.
| Monthly payment | Indemnity income cover (MAS Income Security) | Loss of earnings cover (Asteron) |
|---|---|---|
| ACC | $9,102 | $9,102 |
| Insurer | $18,397 | $24,422 |
| Total each month | $27,499 | $33,524 |
What this means in practice: loss of earnings cover pays 21% more, an extra $72,300 a year while on claim. Over a five year claim, that is a shortfall of $361,500 before inflation adjustments.
ACC figures in both examples are from when this article was written. ACC’s maximum payment has increased since, but the difference between the two contracts works the same way.
Other loss of earnings features
Specific injury benefit: can be added to pay a lump sum, with no wait period, for a wide range of breaks and fractures.
Serious illness benefit: can be added to pay a lump sum, with no wait period, for serious illnesses.
Tax: the premium is generally tax deductible as a business expense. Confirm your position with your accountant.
How Finsol can help
Life, health and income protection products can be confusing. We compare the options for your specialty and income, and show you how each would pay at claim time.
Call us on 0800 346 765 or book a free consultation.
Finsol is a financial advisory business founded in Hawke’s Bay in 2010, looking after more than 6,000 clients across New Zealand. This article is general information only and does not take your personal circumstances into account. Examples are illustrative. Benefits depend on the policy wording and your claim.
