What would Dr Mo Lar do? Part 5

Since the last article, Lar has undergone many changes in his personal life: as well as marrying, he has become a proud father of a baby boy. As the main breadwinner of the family, Lar feels responsible for the financial welfare of his loved ones, prompting him to review his finances and level of protection. Between utilities, mortgage repayments, general expenses and the cost of raising a child—which is thought to amount to about £231,843 by the age of 21[1]—there is a great deal that he must account for were anything to happen. As such, the best place to start would be critical illness.

Critical illness cover is intended to pay out a single tax-free lump sum in the event that the claimant is diagnosed with a serious illness or condition, such as cancer, multiple sclerosis, stroke or Parkinson’s disease. To ensure that he receives a payout, Lar would need to choose a policy that covers a wide range of potential illnesses, being careful to disclose all relevant details, such as existing health problems, age and lifestyle, to the insurer. Luckily, Lar is in good health, but if he did have a pre-existing illness, there would be a possibility that it would affect his claim. For that reason, it is always wise to seek guidance from a specialist adviser.

Saying that, taking the example of a well-known insurance company, over 95 per cent of critical illness claims were paid out in 2016, with just 5 per cent rejected owing to misrepresentation and not meeting the terms of the policy[2]; still, one can never be too careful. For a suitable payout, Lar would be advised to take out cover to the value of his mortgage, debts (for example, his student loan) and living expenses.

Then there is income protection. While it is necessary to prepare for the worst-case scenario, Lar must also give thought to everyday sickness or injury. According to the Health and Safety Executive, 30.4 million working days were lost owing to work-related illness or injury in 2015/16, averaging 16 days per person.3 It can happen and dentists are no exception. In fact, it is well known that dentists are at risk of developing musculoskeletal disorders and suffering from mental health disorders such as depression and anxiety, so it is crucial that Lar should cover himself against such eventualities—especially as he is a self-employed associate at a predominantly NHS practice.

Indeed, NHS sickness leave payments are restricted for dentists, so if Lar was to experience an accident or illness that forced him out of work temporarily and he was not covered, he would only be eligible for statutory sick pay. As the main breadwinner, £89.35 per week would not be sufficient to cover the food bill for his young family, let alone his other financial commitments. However, as Lar is extremely risk-averse and prudent with his finances, it would be wise for him to take out a policy with the help of an independent financial adviser, such as those at money4dentists.

To make sure that no stone is left unturned, Lar would also be advised to enlist the services of a lawyer to compile a will, as it will ensure that his hard-earned money is inherited by his closest loved ones. In this instance, Lar wishes for his assets to go to his wife and that she should take on the role as trustee for their son’s inheritance until he turns 18. Any estate worth over £250,000 is automatically divided between the surviving spouse and children if there is no will to decree otherwise, so it is crucial that Lar should put his instructions in writing if he is to ensure his assets are divided as he wishes. With his life insurance taken into account, Lar’s estate is worth over £325,000, so he will also need to consider the impact of inheritance tax and the best way to maximise the benefit of available reliefs and exemptions.

You can take great comfort in knowing that your family will be taken care of financially in the event of illness or death. For peace of mind, follow in Lar’s steps and take out the right protection today.

Next part: Lar looks to becoming a principal.

Editorial note: A complete list of references is available from the publisher.