One of the often-missed considerations among the many tasks and requirements when setting up a private practice is personal risk insurance.
Most people will recognise this more generically as “life insurance” however, it comes in various forms including lump sum cover for critical illness, total & permanent disability (TPD) and death cover. Typically, a financial adviser will help you calculate appropriate benefit requirements - most of which will factor in the big-ticket items in life. Some of these include out of pocket medical costs (beyond what private health cover provides), education costs for children, debt (mortgage etc) and even an annuity for surviving dependents.
There is another type of cover however that is certainly worth considering prior to starting on your own, and this is income protection cover. Due to recent regulation changes, policies available after 1 October 2021 will pay a monthly benefit of between 60% and 70% of your “earnings by personal exertion”, however if you had a policy in place prior to this time it’s likely to be a higher proportion of your income.
The main reason to consider income protection insurance whilst you are still paid as an employee and before starting in private practice is simple. The financial evidence required by insurers at application time for employees is just a couple of recent pay slips. Once you cross over into sole trader, service trust or as an employee of your own company the requirements change. They then need two years of tax returns (in your capacity as sole trader etc.) along with full financials. Being a new entity, this may not be possible, so the insurer will typically restrict the amount of cover and apply conditions if offered at all.
Risk comes in many shapes and forms, not the least starting in private practice. You can however mitigate your personal financial risk by insuring against it.
Please feel free to contact our team of personal risk insurance specialists to discuss your circumstances.
