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The MMM Guide to Income Replacement

It's no surprise that few subjects are as important to people as their income. After all, for most of us, it's our regular income that decides the kind of house we live in, the holidays we take, the future we may be planning - our whole way of life.

But if serious illness or an accident prevents you from working and your income unexpectedly comes to a stop, your entire standard of living could be threatened.

Consider this..

The Health Sector has higher sickness absence levels that any other sector, with an average of 4.9% of working time lost through absence (source: IPD survey report May 2000).

What cover do you already have in place?

For salaried doctors in the NHS, sick pay entitlement is restricted to the length of service, see the table below:

NHS Service Month's Full Pay Month's Half Pay
1st 4 Months 1 0
4 Months to 1 Year 1 2
1 to 2 Years 2 2
2 to 3 Years 4 4
3 to 5 Years 5 5
5 Years Plus 6 6

A Career Break of over 365 days means that Sick Pay Entitlement will revert back to day one

Medical Money Management Criteria for Approval

In considering all the suitable income replacement plans available for our clients these are the criteria we rigidly apply;

1) Guaranteed Premiums - safeguards must be in place to ensure that the insurance company cannot come to you for more premiums if they experience an increase in their level of claims or you suffer deterioration in your state of health.

2) Increasing Benefits - the level of benefits payable must, on all recommended income protection schemes, be increased each year to provide valuable protection against inflation. This must be in line with the Retail Prices Index, or at a set rate of escalation.

3) Increasing Premiums - if the benefits increase at a set rate or in line with the Retail Prices Index, it is essential that premiums escalated by the same amount.

4) Claims Record - all companies recommended must have a proven satisfactory claims record.

5) Terms and Conditions - your plan must have competitive terms and conditions, essentially to mean that the payment of benefits will be made in the event of the insured being totally unable (not necessarily permanently), by way of sickness or accident, to carry out the duties of his or her own occupation, with the minimum of exclusions.

For Doctors, we know that a plan such as the Friends Provident Income Protection Plan meets our specified criteria and has the added advantage of dovetailing with the NHS Sick Pay Entitlement.

How the Friends Provident plan meets our criteria: -

  • The Doctors' Sick Pay Initiative from Friends Provident GUARANTEES that income protection benefits will always fit in with the NHS sick pay scheme for salaried NHS Doctors, irrespective of length of continuous service
  • Career Break Option - if you take a career break you can reduce your cover with the option to resume your full cover and premium within 5 years.
  • HIV/AIDS - Unlike other plans of it type, the Income Protection plan from Friends Provident provides cover for healthcare professionals against HIV and AIDS if contracted in connection with his / her work.
  • Change of occupation - there is no need to inform Friends Provident of a change of occupation, and they assess the job you are doing at the onset of the incapacity.
  • Potential discount for Income Protection if taken out in conjunction with Friends Provident Life Assurance.
  • Claims Record - Friends Provident meet a very high proportion of their Income Protection claims. This amounted to £156 million over the last 10 years. Examples of claims in the medical profession are as follows: -

Some examples of claims Doctors have made to Friends Provident

Details of Incapacity Weekly Benefit Total Benefit to Date
Brain Stem Tumour
Date: July 1999
Age: 41		 £891.83 £130,500
Anxiety and depression
Date: Aug 2001
Age: 55		 £225 £4,500
Angina, pectoris, hypertension, acute coronary insufficiency
Date: Sept 1991
Age: 59		 £96.00 £54,500
Cardiomyopathy with arrhythmia
Date: Aug 1996
Age: 57		 £100 £31,200
Anxiety/depression
Date: May 1994
Age: 59		 £200 £88,800
RTA - post traumatic stress
Date: Feb 1998
Age: 41		 £1,102.50 £317,600
Parkinson's disease
Date: May 1993
Age: 54		 £330 £130,700

This guide highlights just one product provider to illustrate how we judge the suitability of income replacement cover. For specific advice and guidance on your own requirements contact us using our web enquiry service, or look up your nearest MMM office for who to contact.