Insurance for Dentist – What else besides Disability Income?

Being a Dentist is known to be one of the most well paid occupation in the society. It is a niche occupation whereby one has to undergo many years of stringent training and exams, paying hefty school fees (normally with the help of scholarships and bonds) and spending lots of time to perfect their skills.

A planning session that I’ve recently done with a client got me thinking about the unique financial needs dentists and other similar professionals have and how they should plan their insurance and finances.

A Typical and Real Example

A client of mine had just graduated with a Dentistry degree and is currently serving her bond with the organisation. The degree is a 4-year course, with an additional four-year bond with the organisation upon graduation. The bond costs more than $300,000 and on top of that, the client would need to minimally fork out about $26,000 per academic year as her school fees. Due to the huge subsidy, she is required to be bonded for a 4 year period upon graduation.

When I asked about the details of her bond, she wasn’t too sure about the consequences of breaking the bond. She only knew that the bond amount will decrease over the period of 4 years, and eventually to zero. Here are three of the more significant clauses I highlighted to her after I helped her examine the contract in detail:

  • Pay for the damages if he/she is dismissed from employment before the expiry of the bond
  • Besides compensating for breaking the bond, a per annum interest will be charged if the “damages” were not paid according to a stipulated timeframe
  • Guarantors of the student will have to fulfil the obligation to pay if the student is unable to

The money has already been invested in the student’s education and it is only logical that clauses are in place for the scholarship provider to recover the money in the event the student cannot deliver their end of the bargain. To put it in another way, the scholarship provider is just preventing their investment (eg: bond) from going into a default and likewise, both the guarantors and students should do the same and come up with the necessary planning to prevent a default on their part due to unforeseen circumstances.

While most people would think that breaking a bond on the student’s front is usually a decision of choice, what happens if it isn’t? For professions like dentists, they are required to be physically fit for work in addition to their subject-matter knowledge. Thus, it is a plausible scenario for them to be forced out of their jobs if an unfortunate accident or illness befalls them. This is why it is imperative for these students to get themselves protected even before they begin their professional career or at the latest, once they begin their professional career. This is where insurance is needed as a form of financial risk management to protect the bonder (the dentist) and the sureties (the guarantors).

3 Main Risks to Protect

For someone in her situation, there are 3 main risks that have to be planned for.  They are:

  1. Medical Bills
  2. Loss of Income
  3. Loan Protection

In my opinion, the type of insurance to consider for covering these risks are medical insurance, disability income insurance and early critical illness insurance.  However, for most people, they will not know which type of insurance is the priority.  I will advise on 2 key protection concepts as a suggestion in this planning,

There are two versions of the protection concepts due to different needs during different phases. During the study period, the student does not earn any income even though they are bonded. Therefore the priority is on loan protection against the loss of health. Upon graduation, the focus is shifted to income protection due to disability. I will now go into details of how each insurance coverage works. 

1. Protection against Medical Bills

Medical and hospitalization benefits are provided and their benefits are:

  • Annual sum capped at a stated figure, subjected to $35 per visit at any Registered Medical Practitioner per calendar year.
  • Any outpatient specialist consultation at the public healthcare network of hospitals and specialist centres subject to a capped figure. Family as a whole is also entitled to a further cap per calendar year
  • About $10,000 per calendar year in public healthcare network of hospitals and specialists centre. Family as a whole is also entitled to a further sum about $10,000.
  • Co-pay of 10% for self and more than 20% for family for all medical and hospitalization claims.

Medical insurance is the foundation of all financial planning, especially with the rising medical costs in Singapore. As Singaporeans, we do have access to some medical coverage (CPF Medishield Life) which entitles one to treatment in B2/C wards. However, there are individual items (surgery tables) limits to adhere to.

There are currently six insurers in Singapore that allows individual to do enhancements to their medical insurance using CPF Medisave account. By doing this, the coverage will be significantly enhanced to which individual items will be capped at “as charged”. However, it will still be subjected to the “deductibles” and “co-insurance” of the bills.

For comprehensive coverage of medical bills, it will be best to include the riders that cover the “deductibles” and “co-insurance” together with some other additional benefits that varies with insurers. These riders require cash premium payment. 

2. Income Loss Due to Disability (D.I)

Disability income protection is not a common policy that Singaporeans look into because when you take up a life insurance, total and permanent disability is usually included in the coverage. This leads to individuals thinking that they are well-covered against disability since they will have a lump-sum payout from the policy if they fulfil the claim criteria.

Group Term life insurance is provided to their employees and coverage is as follows:

  • Coverage covers Death and Permanent Disability and sum assured is 12 months of the total base salary.

This means that when an individual start serving their bond, assuming their salary is $4,000 per month, the sum assured will only be $48,000 for death and permanent disability.

What many may not know is that Total Permanent Disability (TPD) and Disability Income Insurance (D.I) serve different objectives. TPD can only be claimed in the event of loss of two hands, legs or eyes, providing a lump sum of insurance pay out. Its terms are often quite stringent – the disability has to be permanent and severe enough to render the policy-holder unable to perform 3 out of 6 of the activities of daily living (toileting, dressing, washing, mobility, feeding and transferring from bed to wheelchair).

On the other hand, disability income insurance provides a percentage of your income should you be unable to work due to a disability (which can be temporary). For a dentist who will definitely need his fingers to be fully mobile in performing his work, hurting his hands/fingers badly or permanently losing the use of them will entitle him/her to a claim which TPD insurance may not pay out.

Policyholders of a disability income insurance can receive a monthly payout of up to 75% of existing income. For a dentist who is starting, assuming their salary is $4,000 per month, which means that he can claim up to $3,000 per month. This can help with having some form of income during rehabilitation period, after which they can hopefully return to full-time employment.

3. Loan Protection against Loss of Health (Early C.I)

Another plausible scenario that can disrupt the serving of the bond is the diagnosis of a critical illness. Although an undergraduate’s relative youth places him at a lower risk of critical illnesses, the financial implications of it happening can be debilitating.

Upon the diagnosis of early stage critical illness, there is a high chance that the assured has to terminate work or be on a long-term leave of absence for treatments. This can result in either having no income, or being forced to break the bond due to inability to work. Early critical illness policy will be useful in both of these scenarios, providing either funds for repayment of the bonds or money to sustain his lifestyle and cover treatment fees.

When is the best time to act?

Imagine for a moment, you have graduated and started serving your bond. However, a small accident occurs (i.e loss of fingers), resulted in the loss of your ability to continue as a dentist. The consequences you are potentially facing is the immediate loss of income plus the compensation for breaking the bond before the expiry. While it is difficult to predict the future, you can avoid the consequences by planning in advance.

The best time to act is upon graduation. This is because upon graduation, you will start serving your bond for the next four years and that is where the risk is the highest due to the huge amount of bond to be repaid. The financial implication can be too great if individuals are forced to break the bond due to accidents, illnesses and disability. Furthermore, that is also the time where you start earning an income and should start your financial planning.

I have done up a Comparison of Disability Income Insurance from two companies to aid in the understanding of Disability Income Insurance. The guide also highlights the different features of the respective companies’ version of D.I insurance to help in your decision making process.

(NOTE: Get our Guide to Disability Income Insurance to help you understand the key features you need to consider in selecting a suitable Disability Income plan for your needs.. Get your guide Here)

Article by Samuel Koh

Email: samuel.koh@proinvest.com.sg

<strong>Samuel Koh</strong>
Samuel KohFinancial Services Consultant

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