In this episode of PodMD, Certified Financial Planner, Simon Hepson from Oxlade Financial will be discussing the topic of; Cover vs Cost – Smarter Insurance for Medical Professionals.
- Transcript
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*As always, all in this PodMD podcast is intended for health professionals and the comments are of a general nature. Information given is not intended as specific medical advice pertaining to any given patient. If you have a clinical issue with one of your patients please seek appropriate advice from a colleague with expertise in the area.
Oxlade Financial is an independent financial planning practice that specialises in helping medical clients. They help doctors use their income to build real wealth and reach the lifestyle they’ve aspired to.
Today I’d love to welcome to the PodMD studio, Certified Financial Planner, Simon Hepson from Oxlade Financial; talking with myself, Peter Chaplin from rooms with Style.
Today we’ll be discussing the topic of, cover versus cost, smarter insurance for medical professionals. Simon, thanks for talking with us on PodMD today.
Simon: Thanks for having me, Peter.
Question 1
Simon, there’s a frequent discussion on medical formus about personal insurances, mainly around whether cover is too expensive and “why do I have to have it anyway?”. Could you give us some context as to why these questions have been asked?Simon: Peter I have a bit of an unfair advantage to others here. My wife’s a GP, and as such I get to see these questions when they regularly pop up and she’ll read me some every now and again. Insurance costs are expensive and they do go up every year, and in the past there have been significant extraordinary increases, especially around income protection for doctors. As a heads up, on that note, that’s probably going to happen again soon. Doctors are right to ask questions on whether their cover is still right for them. There are many reasons why insurances go up in cost, which we can discuss it a bit. Before we do, it’s important for listeners to know that there are things that can be done to reduce cost without chucking the insurance in the bin completely. This is the gist of what I want to get across today. Be smarter about your cover, and that the main drive for doctors should be to ensure that you have the right level of cover. To us at Oxlade, we believe that insurance should be there to cover only what you need based on your situation and how much you can shoulder yourself from your own assets. Some of our favourite things to do with insurance is a) cancel it when clients no longer need it or b) help clients save 25% plus on premiums without actually changing anything about their cover. Which of course can really add up, especially for doctors paying big premiums.
Question 2
Yes, certainly saving 25% every year on cover without changing any of their benefits-that’s appealing to everybody. How can doctors do that?Simon: Yeah, ultimately this comes down to Commission and the team you have helping you with your insurances. Many insurance advisors or brokers will receive 25% of the client’s premiums in Commission, and it’s in addition to. This is how they’re paid. We at Oxlade are declared independent, which is a legally protected term and part of this means that we can’t receive any kind of commissions. For our medical clients, this means that we don’t receive any commissions on their personal insurances, hence the saving of up to 25%. With this said, it is important to note that paying a Commission can be fined and in some circumstances, it actually is a good thing. What we see happen in many cases, though is that a doctor might have a policy that was set up years ago, even as far back as internship. But their insurance might not be appropriate anymore-it hasn’t been reviewed or looked at and they don’t really have a relationship with that advisor who’s getting that Commission anymore. So, the doctors can reduce the effective cost of the insurance in a meaningful way by ensuring that they are either getting that Commission rebated back to them or ensuring that they’re getting value from that indirect fee by working with that advisor who understands his situation and goals really well.
Question 3
Yeah, it certainly sounds like a great opportunity for listeners. Thanks Simon. So outside of reducing Commission, what else can doctors do to keep their insurance cover smart?Simon: This part is key. So, reviewing cover every few years or as things change. This is a mistake that we’ve seen many doctors make, and it’s ignoring cover once it’s set up. You go “ohh I’ve ticked that box, but don’t need to think about it anymore”. That’s the wrong mindset. As part of reviewing what it is that you actually need as cover, there are many variables that impact the cost, which is of course where help can come in. But some of the main ones, just so people are aware, the main variables for cost is obviously quantity of cover. So, first off, yeah, if you’ve got more insurance, that’s going to be more premiums, obviously. Sometimes we do increase cover from where it was, you know, even though my favourite thing to do is cancel insurance, if we don’t need it anymore, we do increase it if life has changed meaningfully. But many other times clients are coming to us with more cover than they need, and this is really prominent for established specialists. Regardless though, where you are in your career and your journey, if your income, your debt or family position have notably changed since taking out your existing cover- you almost certainly need to review what you have in place. The second thing, is breadth of cover. So, are you covering absolutely everything, including very fringe things with bells and whistles or double covering on stuff that now you can cover yourself because your assets have improved. There’s a really common insurance that we see on this one on this doubling up is trauma or critical illness cover. It can be particularly costly and it’s one that tends to be over insured and overused for doctors, and that the final really large variable is the quality of the cover, which is really hard for clients to assess on their own. As on face value it might say the same thing on the tin, but underneath- under the surface it can play a very, very. So, the 3rd and final really big area is the quality of cover which can be really hard, for clients to assess at face value the definitions which lie under the surface in your policy play a really large role in cost. So, for example, it might be income protection on the tin, but is it own occupation or any occupation cover? A very prominent other example here is old school income protection versus what’s available nowadays. There’s a huge quality difference again, even though it’s as income protection, the ability to claim the likelihood of you getting the support you need is quite different in those. Just a quick note on those income protection policies that that was set up, you know, pre 2022, you need to be really careful before making any changes to these because these policies are very hard, if not impossible to get back. You can’t go back to them if you cancel. So, these sort of three main areas that will impact cost and and definitely should be a focus of review, but there can be some, some other smaller areas too and I’ll give a couple of examples of this here. Underneath these things are areas doctors can review, and these can still save meaningful amount once the big picture changes are made that have mentioned above. The first is the waiting period on income protection, and this is a really common one that we see with doctors with set up as a 30 day wait before you get any sort of payments. But that difference now between a 30- and 90-day weight if someone can support themselves for a bit longer, that’s worth considering, worth reviewing. That has a massive impact on it and insurance costs. Be the final other one that I’ll make mention of right now is the policy stepped or level and this was a decision that was started when you took out the insurance. It can have a significant impact on premiums, both in the short and long term. With this one, making the wrong choice for your situation can actually in fact cost you more, with no benefit. So, it’s also an important one to review. At the core-so summing up all this stuff I was talking about there- finding out what clients’ need is our main imperative-and then ensuring you get value for money.
Question 4
It certainly is a complex area to navigate and clearly you need somebody to assist you with that, Simon. So how can listeners you know check how much cover they need?Simon Yeah, you’re right. Once you dive into the weeds, it can get really, really complex and I’m a huge nerd, so I dive in and almost off back a bit. So, it’s a great question and putting it in a more simple way and even just three questions that you can ask yourself to get a sense of how much cover you need. You know, they’re given overarching insight into what that insurance need might be and underpins the more targeted needs analysis questions that you should go through with a professional. Those questions are: who are you trying to protect? Under what scenarios and with what quality of life? It’s that simple. These questions will help you work through more difficult practical questions, like what quality, quantity, breadth of cover is right for you. It can lead to getting more cost effective cover, but most importantly cover that is valuable. But no one’s upset for paying for something that feels expensive if it gives them value and insurance doesn’t need to be anything different. Be very careful-as a reminder though, be very, very careful before making any changes that you’ve gone and got personal advice, because this stuff is complex and it does house some pitfalls and risk areas. Once you change that cover, it might be hard or maybe even impossible to get back, so be careful.
Question 5
Yeah, sure, Simon. Any other tips and tricks for our listeners to keep their insurance cover smart?Simon: Yeah look we’re really just scratching the surface here and the devil really is in the detail with insurance, but just keeping a high level, some other key areas we have made level to talk about today, but things that people should be thinking about is tax deductibility of insurance. So nice thing for a change. Income protection is generally tax deductible, and it’s really not great when that tax deduction, is inside your super fund, so you can hold income protection inside super you get a 15% tax deduction there- better nothing. But for specialists, its nowhere near the 47% deduction you get when paying that insurance yourself, so that can massively impact the cost overall. And people were very aware, you know, the cost they’re paying for income protection. Relying on the automatic insurance from Super is also generally not the best sort of first option. You know, unless there are restrictions on getting new covered due to medical history as an example, then if it’s the best thing, that’s great to have it. Whilst these insurances are normally called the same thing, this is an example of where that quality is different, work different and are much, much harder to claim on- which is the point of having the cover in the first place. Furthermore, to that, even if there’s a successful claim, the money might be stuck inside super and might not be available to actually help you when you most need it. Another area is being careful of moving from 1 insurer to another, especially again, if you have that income protection before, say 2022. We are very reluctant to change this cover because that quality difference is huge, even if it means more expensive premiums, and this comes back to value. The tangent sort of thing is a state planning, so don’t ignore it. Having a will and even more importantly, having documents in place to give the right people the right powers at the right time, are essential in building strong foundations, which is part of what insurance is doing too. The final point I suppose I’ll make is that insurance really is just a key part of a wider financial plan. You absolutely should focus on making it obsolete, by investing really well and growing your own wealth to self-insure, because I do love those conversations where we can cancel cover.
Question 6
Thank you for your time here today in the PodMD studio. To sum up for a salmon, could you please identify the three key take home messages from today’s podcast on Smarter Insurance for Medical Professionals?Simon: Yeah, absolutely. The first is to not bury your head in the sand and be aware of what you’re paying and what the value is that you’re getting for that. Second to that, as soon as you look at it, don’t react to the knee jerk-impulse and cancel cover-there are ways to balance cost and effectiveness. The third thing is to review your cover regularly and ensure again that you’re getting value for money, on an ongoing basis and that this cover really represents what you need at that point in time.
Well Simon, thanks again for your time and the insights you’ve provided.
Simon: Thanks Pete.
We do hope you enjoyed this podcast, but please remember that the information discussed here is of a general nature and is not intended to serve as advice. The views and opinions expressed in this podcast are those of Oxlade Financial, not PodMD. Oxlade Financial reminds you that any information or opinion in this podcast is general in nature and does not consider your personal objectives, situation or needs. Nothing in this podcast is a recommendation and you should seek personal advice from a registered financial advisor before making any decisions.
