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Essential protection

Kath Ryan
Med J Aust
Published online: 19 March 2012

Most of the doctors who seek financial and personal help from a medical benevolent association have no income protection or trauma insurance.

It worries Meredith McVey that so many doctors are not financially prepared for a major illness or accident. Ms McVey, executive director and social worker with the Medical Benevolent Association of New South Wales, says even those who do take out insurance often don’t have adequate cover or miss out because of exclusions in the policy.

“By the time doctors get to us, they have been through a lot of financial and personal hardship”, Ms McVey says. Many have to apply for Centrelink payments to get by.

The association strongly recommends that doctors have, at the very least, income protection insurance, to ensure they are financially covered if the worst does happen, she says.

For Associate Professor John de Campo, having adequate insurance was just one of many practical issues that made his being diagnosed with non-Hodgkin lymphoma last year more bearable for him and his family.

Professor de Campo, from the department of radiology at the University of Melbourne, who was 60 years old when diagnosed, is married with two adult children. Now fully recovered and back at work, he has written an aide-mémoire (see page C9) for colleagues, outlining the practical issues that should be considered and kept up to date in case of serious illness or accident.

Insurance expert Mr David Gay says doctors — whether employed by others or self-employed — should have both trauma and income protection insurance. Most self-employed doctors have no other source of income if they cannot work.

“If you have a serious illness or accident and can’t work, your income is going to dry up”, says Mr Gay, of Austbrokers Financial Solutions. And he recommends that doctors have cover from a young age as “you never know when something is going to happen”.

“For example, if diagnosed with cancer, the [out-of-pocket] medical costs can amount to $50 000, plus the loss of income — it can be devastating.”

Income protection insurance can provide up to 75% of income and trauma insurance pays a lump sum of the insured amount that can be used for any purpose.

The reason Mr Gay advocates both forms of insurance is that in some instances a doctor may be able to do some work, but not enough to generate his or her full income. Income protection insurance can only be claimed if you are unable to work. However, trauma insurance can be claimed in certain circumstances even when you can still work.

“For example, a surgeon doing invasive procedures may contract HIV so is still physically able to work, but faces strict restrictions on what he or she can do. Their income can be affected significantly even though they can still work”, Mr Gay says.

However, he says not all insurers recognise this issue in their income protection policies. “It is therefore essential for those in certain fields of the medical profession to review their existing cover to ensure that their policies will respond under such circumstances.”

The cost of insurance protection depends on a variety of factors including age, gender and smoking status. Mr Gay says this makes it impractical to provide meaningful premium indications.

Insurance companies offer a range of benefits and options that may be more relevant to one doctor than toanother.

“The role of an insurance adviser is to clearly identify the specific issues that are relevant to a particular client, then identify the insurer whose policy best satisfies those specific needs”, he says.

Disputes with insurers over the definition of a disease and the severity of illness are possible if these issues have not been agreed on when the policy is taken out. Mr Gay says most insurers have clear definitions of what will be covered but these can vary between insurers and it is wise to review and update policies regularly, at least every few years.

Practice principals, who may need to keep their practice open while recovering from serious illness, can also consider adding business protection insurance to their policies so practice costs as well as income needs are met.

Ms McVey says the Medical Benevolent Association adds, on average, two new referrals to its books each month. The doctors who seek help include all age groups and are equally male and female.

For those who do have trauma or income protection insurance, it is often exclusions in the policy that can leave them without cover when they try to make a claim.

Waiting periods can also cause financial hardships. “People take out insurance when they are young and well and may think they can survive without income for 6 weeks”, Ms McVey says.

However, a serious illness can be costly, on top of having to maintain a mortgage, pay practice running costs and everyday cost-of-living expenses. It does not take long to eat up savings. Ms McVey says shorter waiting times might be more expensive but should be seriously considered.

Cost and complacency are often the reasons why many doctors take out little or no insurance to protect their income. However, the cost of no cover can be enormous.

Ms McVey says the cost of insurance is worth it if it gives a doctor time to get back on their feet after a serious illness. Nearly all doctors who seek help from the Medical Benevolent Association feel a desperate need to get back to work.

“As one doctor told me, ‘being a doctor is not something I do, it’s what I am’.”

What’s the difference?

Trauma insurance
This cover provides a lump sum payout if you are diagnosed with a critical illness. The payment is made even if you are able to continue working and you can use the funds for any purpose, but in most cases it is designed to cover medical expenses and additional costs associated with the illness including rehabilitation expenses.
Each insurance company will have different definitions for the conditions and diseases covered by the insurance. Illnesses covered include cancer, multiple sclerosis, Parkinson disease, stroke and heart attack. Most policies provide around 30 to 40 listed medical conditions. Always check for exclusions.

Income protection insurance
This cover provides an income stream if you are sick or injured in an accident and are unable to work. Depending on the policy, it will pay up to 75% of your income. The cover will continue for as long as you are affected by the illness/disability and unable to return to work, or for the period you select before the insurance cover starts. This can be as short as 2 or 5 years or right through to when you turn 65 or 70 years of age. Benefits are only payable for the period you select.

You can select your own waiting period before the insurance cover starts. A typical waiting period will range between 30 and 90 days, but it can be as short as 14 days and as long as 2 years. Shorter waiting periods cost more.

Some policies offer the option to convert future monthly benefits to a lump sum payment if a person is totally and permanently disabled. This is often seen as a significant benefit, for an immediate lump sum is payable and there is no need for any future medical checks. Premiums are tax deductible; however, tax is payable on the income stream.

Self-employed medical practitioners can add to this insurance to cover business expenses, eg, staff and rent, during the period they are unable to work. Always check for exclusions.

Total and permanent disability insurance
This cover can be added to your life insurance or taken as a separate policy. Unlike trauma insurance, this cover only applies to permanent disability, such as total blindness, loss of limbs, or any condition that prevents you from completing everyday tasks.

Conditions vary significantly between insurance companies, so you should check
the policy and the exclusions carefully.



Where to get help

Doctors’ health advisory services and medical benevolent associations are available in all states and territories to assist doctors who need professional and financial assistance.

Contacts for all organisations are available through the Australian Medical Association website (www.ama.com.au).

  • Kath Ryan


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