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Dentists Who Invest

Podcast Episode

Full Transcript

Dr James: 

Hey team, what’s up? Welcome back to the Dennis Invest podcast. I have from Innerface Returning Face, Tony Hammond, here today to talk about cover again and specifically we’re going to talk about critically on this cover. Tony, how have you been since we last talked?

Tonny: 

Yes, fantastic James, thanks for inviting me back again. Really looking forward to today, something I’m very passionate about that hopefully will come across. So, yeah, it’s all good.

Dr James: 

Thanks, mate. Awesome, Looking forward to it. Well, do you know what? I’ve never seen someone talk about coverless and watching enthusiasm talking about amazing things. So why don’t we do just that and dive into that?

Tonny: 

Absolutely Very happy to do so. As you’ve heard me say and people have heard previous podcasts what I do. I summarise it by that we provide your financial safety net, and I think that’s really key. We talk about lots of other insurances and things like that that you have to have as a business and as an owner, with your house and your car and things, but this is about protecting you and your staff and your family and your loved ones, so I think it’s really important that you look at it. And so, with critical illness, it’s sort of asking yourself the question what would you do if you or a loved one was diagnosed with a critical illness? We all know people that have been affected by cancer, things like that, but this is about providing you with a lump sum in the event of something like that happening to you or one of your loved ones, and getting some of the value added services that come with it as well, which is really important. Critical illness really comes on two sides. You have it for yourself and your personal name, for you and your family, and you can have it in your business, which I’ll come through, but most of them it’s about getting a lump sum on diagnosis of a specified illness. You hear me say that word specified a few times as well. So that’s to help support you, your family or your business, and people use it to pay off the mortgage, to help with the bills, the day-to-day expenses and things like that. Or you could use it, if you had to, to fund private medical care. If you didn’t listen to my previous podcast about private medical insurance switch I think everybody should be having now, but for me I try to do things and say what it says on the tin rather than use some of the industry jargon. So critical illness to me I think of it as cancer cover. You know I have difficult conversations with Clarkson a daily basis because I’m not afraid to face it. We might not want to think about it, but one in two of us will get cancer in their lifetime. That’s a pretty scary statistic and that’s why we probably all know somebody out there that’s been affected by cancer and the reason why I’m passionate about it. I lost one of my very best friends when he was 37. Only today we’ve had the very sad news that one of our very close friends has literally got a couple of days left to live with cancer and that’s gone really quick. My dad and my father-in-law, my brother-in-law, have all died of cancer, so this isn’t something you can say that happens to other people. I’m going to stick my head under the pillow. This happens to lots of people that everybody out there listening to know will know somebody that’s affected by cancer and it’s the number one reason that people make a claim for critical illness. Also, there’s a couple of other main areas, but 90% of all claims consist of four conditions. So I’ve already said number one UK cancer. The cancer population is set to growth. This is scary, I’m sorry to say this from 2.5 million to 4 million by 2030, which is not far away. Also, heart-related illnesses. So the 7.6 million people are currently living with heart disease and that’s an average of 450 people will lose their lives to circuitry disease every day, which is a horrible figure. Then we have stroke. Did you know that’s the fourth biggest killer in the UK, around 100,000 people suffer from a stroke each year. So what’s that? That’s one. I’m sorry, I’m not working it out. I already do know that’s one stroke in every five minutes. So these things are real, these things that you have to protect yourself. So, for the top three conditions, just over 65% is cancer, then a big step down, it’s 13% for heart-related, then 7.7 is stroke and then the rest is MS is the next biggest one and, interestingly, three times more women get MS than men. So this is all stuff that everybody that’s listening to this needs to think about. What’s the impact on them and their family if something happened to them? And I speak to a lot of dentists in what I do. I specialize in this area, as you know, and the average for all claims for this type of insurance is only 48. And there’s a lot of dentists out there are getting towards that age or slightly past. So critical illnesses it’s traditionally sold to do with mortgages. So most people out there say well, I’ve got a critical illness policy term. That would have probably been when they’d taken the mortgage out. So if they have a repayment mortgage, they’ll have that on what’s called a decreasing term. So the insurance goes down as you’re paying off your mortgage over time. Or if you’re one of the people like myself that have a mortgage on interest only, then the level of cover stays the same. So if I was to get a critical illness, then the critical illness insurance would pay off my mortgage. That’s traditionally what it’s designed for. You can get ones that increase so it keeps up with inflation and things like that. But a really important message to people think well, I know about critical illness, I’ve got a policy. Not all critical illness policies are the same, far from it. It’s probably the most extreme areas in my industry for the different types of policy that you can get. So, for example, mainly it’s on budget. You get what you pay for, of course, like many things in life. But there are some providers out there that you could have a critical illness policy with. I’m not going to name any provider names that are on this, but they may have around 35 specified conditions. The top one has got 174 conditions. Some will pay 100% cover or if it’s less advanced cancers, for example, then they’ll pay less to start off with and then if it carries on, then they’ll pay the full amount if needs be. But a really important point, it’s all about the small print in the detail. If it’s not a specified condition, it’s not covered. So just because you think you’ve got a critical illness, you think that’s going to cover all cancers. For a lot of providers out there it doesn’t. So I’ve just got a note here. So, for example, for men. The most common cancer out there, as you probably know, is prostate cancer. One in eight men will be diagnosed with prostate cancer in the lifetime. This is a cheery podcast, isn’t it? But only 4% of those with low risk prostate cancer undergo treatment and a lot of providers, if they’ve got prostate cancer covered, they’ll only pay out if you need treatment. That’s only going to affect 4% of men that actually get it. Whether there are other providers at the higher end of the spectrum that they’ll pay out for quite low rated cancers, less advanced cancers as well, so they’re not all the same. So if I can just leave that one message if nothing else, I think that’s really important to get across and a lot of providers. Again, it’s budget. You can have the core service. For those who have a bit more budget, you can add on more conditions. So the more conditions the better and at the very best end of it, you can just get it. They pretty much do away with the small print and they will say, for example, that if a UK consultant says you got cancer, then they pay out rather than all the fine print you’ve got to have this and you’ve got to have the other before it pays out. The horrible thing as well I talk about sometimes is around children’s cover. We hate to think of our children getting poorly, but if that does happen, then that can be covered as well. Sometimes with some providers it’s automatic included. Sometimes other times it’s not. But you’ve got to also think that if your child God forbid ever does get something nasty, then you’re going to probably have to have time off work as well, and that’s probably why one of the big reasons why they pay that out as well you can get fracture cover sometimes. Sometimes it’s automatic, sometimes you’ve got to add it on. Talking about adding on with some providers you get a lot of other value-added services that you’ve heard me talk about. So where you can access a GP 24-7, wherever you are in the world British GP, you can get a second opinion. It doesn’t have to be something nasty like cancer, but you can get a second opinion by the best consultant in the country. A lot of these things are automatically given as far as part of the cover that you may have, and so a lot of this is covered for it’s not covered for existing conditions, so a bit like the private medical you need to do as part of the application you have to say what issues that you’ve had in the past is not going to treat something that’s chronic. If you’ve got that problem, they’ll probably get exclusions and maybe they even have premium loading, dependent on where you’re at with it and what your risk is. But so we do everything specific to that individual person. So one policy is not going to be the same as somebody else’s, even if you think it’s similar, because we’re all made differently. But the good thing, you can get instant cover as well About 85%. With most providers you get instant decisions with the underwriting. Sometimes it’s got to go to a human underwriter, but there are some providers out there that as soon as you put the application in, you get cover for 90 days. So hopefully the application would have gone through within that time anyway. But it’s really about you get what you pay for, with not all providers, not all brokers, but certainly a good advisor will provide you with a free report for critical illness. If you’ve got an existing policy out there that you’ve had, say, for example, for five years or more, I’ll strongly recommend that you get that reviewed. So, for example, with what I do with my clients, I’ve had one this morning where they’ve had. I think it was about 10 years ago they had a critical illness policy. They thought it was doing everything that they needed. But with this report that I can do. You can compare it against what else is out there Even could be. The same provider today is offering you a lot more conditions than you had five, 10 years ago. And the report I provide for all my critical illness clients. But I would say, look, I’ve recommended you this one because and then an alternative one is X and this is what you get with them. And the report is really detailed by conditions. So if you’ve got children it will also add in the children’s sickness in there, but if you don’t have children it will knock that out. So it’s really specific on you and your needs. But it’s a really detailed report. So what I like to do for all my clients is help them make a decision based on knowledge, which is what this is all about. So I talk to my clients, I get a good fact find, I find out what conditions they may have had in the past. I can provide quotes, I get it checked. If I need to have it under, then it pre underwriting to make sure can you be covered. I’ve had clients in the past that have had skin cancer and I can still get cover later on and things like that with certain providers in certain circumstances. I don’t think you can’t sometimes you can but make that decision based on knowledge and don’t just assume what you have is what you think it is and it’s what it’s going to do. I’m very happy to provide that review for people because I think that’s really important to know. So even if you, even if it is right, at least you know you’re getting a thumbs up, you’ve had it reviewed, there’s no cost to you, there’s no obligation to you, but you know you’ve got the right policy for what you want. And our circumstances change as we get older. So I’ve talked about critical illness being often it’s sold as a way to pay off your mortgage. If you were to get cancer, for example, you’ll pay off the mortgage, whether that. A lot of people recover now, which is great, so you can then concentrate on getting better. You don’t have to worry about the financial catastrophe if you can’t work because you’re poorly and things like that. So if you go into any cancer ward and you would say to but I think it’s been clinically proven as well that if you take the financial worries out, it will help on people’s recovery as well, which I think just makes sense anyway, doesn’t it? But an area I did want to concentrate on is because I know a lot of the dentists out there. They’ll have their own businesses. I mean, I’ve talked to a lot of dentists that will some some sole traders sure, some sole traders and the limited company, but there’s lots of limited companies out there. But I wonder if how many people realize they can get critical illness through the business. So it’s about you know I talked about you’re ensuring for most damaging events. You know, running a business involves an element of uncertainty. We know that now you can rebuild your premises. If it burns down content, material, assets, things like that can be replaced. But the gap that you have there, sort of created by the long term loss of a dentist, say, or a dental nurse, can be far more difficult to fill. It all replace, and I think it’s important that we consider having relevant protection policies in place to help ensure that the business can serve the loss or long term absence of an individual. So you could say you know what would damage your business the most. What could it be, for example, in dental practices, loses their computer systems or patient records, or their x-ray machine goes US, or the Dekon equipment, things like that. Or it could be that the principal dentist or the business owner is diagnosed with critical illness. Are you putting that into your, into the mix when you’re thinking about what cover that you’ve got? What if this happens? What if that happens? Or what if someone’s poorly and it’s the people that make your business run smoothly? Without them, or even yourself, your business could have a hard time functioning. I talk about asking questions such as does my business rely heavily on one or more key individuals? Could my business survive without those individuals? What would go wrong if a business owner were to die or become diagnosed with a critical illness? And how would you retain control of the business and have you got something written down if that was to happen, so you know, if a key person was diagnosed with critical illness, how would the staff feel? That can really affect your arm or things like that. And what about your customers that they’re coming to see specific dentists and then on around even things down to how the bank managers going to react if one of the key fee earners is no longer around. So some really important questions to ask. And how much money would you need to keep the business going, and where’s that going to come from? Well, that’s really where critical illness plays a part. There’s three areas that critical illness can play in a business. One is ownership. So you may have heard of shareholder protection. We can talk about that later. But with critical illness, let’s say you’ve got three directors of the limited company and if one of them suffers from a critical illness, you have an option agreement where the, if they do get diagnosed with a specified illness, the insurance pays the business and it goes into trust where the person that’s diagnosed with Kant has a choice. They can either make that agreement come true so sorry, not come true, but the agreement so they’ll actually say that they’ll want to sell the shares to the remaining directors and they’ll take that lump sum, so their share of the business, for example. So if it’s a third and a third and a third, they take a third of the value of the business that the insurance has paid out and the remaining directors get their shares. Or if they want to come back to work, it sits in the trust until a later time when they either leave the business. If they were to die or something like that, they’ll actually say, no, I want the money. So that’s ownership. A big, real important area is profit. So key person critical illness pays a lump sum if one of the specified key people in the business so it could be one of the dentists, the principal dentist, could be the practice manager, it could be whoever it is that’s key to your business If that person was to be diagnosed with a specified illness, then the insurance pays out to the business a lump sum and that’s regardless of whether that person can then come back to work or not. So that’s covering the profits. And then the last one, the main area that critical illness is used for when I’m talking to my clients, is for debt. So if you’ve got a business loan and let’s say the dentist is the one, it’s their income that’s paying off the loan for, whether it’s the equipment or whatever it would be, then that can be insured as well. So if that dentist is off, sick, is not earning, it can make sure that business loans are being repaid as well. An alternative one, although it’s not strictly critical illness, I still think. I think critical illness is part of a menu plan for me where it fits really nicely with other particular types of insurance. But on this particular point, although not strictly critical illness, as an alternative there’s something called key person income protection. So that’s not to be confused with the executive income protection that we’ve talked about a couple of times, where that’s to pay the individual. The key person income protection pays the business. So if the dentist was off work, for example, the insurance would pay out a monthly amount so you could, either to protect the profits again or recruit another dentist or a dental nurse the dental nurse is off. That can be really expensive if you’ve got to get a locum in, because not only have you got to pay the expensive locum, you still got to pay the nurse that’s off sick. So a monthly amount can be insured as well to protect the profits or recruitment or that debt again if you’ve got a loan to be paid. So those are the sorts of areas that critical illness can be used in a business Because, as I said, you know, for key persons diagnosed with a specified critical illness, the effects on the business can be quite substantial. In some cases it’s more costly when they’re off sick than if they’ve even died, which is a horrible thing to think about. But that’s true and the key person usually needs time off work. With a short term or long term that can have a damaging effect on the profits as well. So I’m thinking this very specifically from a business perspective as well for all the business owners out there. So if a dentist was incapacitated for an extended period of time or had to leave the job, you’d need funds to recruit and I know in the dental world recruiting dentists, particularly in certain areas of the country, can be really tricky, so the profits of the business would slump. That’s where this insurance carries you through until you’ve got time to replace that dentist or recruit somebody else and I’ve talked about the locum nurse is very expensive If you’re still paying the sick pay as well. So this type of critical illness for businesses it’s sort of aimed at a small to medium sized businesses. So typically dentists are ideal for this. So it’s safeguarding that financial future. I talked about that financial safety net again. So it’s gonna provide typically a one-off cash payment if the business owner or the person’s diagnosed that critical illness.

Dr James: 

Tony, thank you so much for that comprehensive cover, I suppose you could say, of critical illness and the comprehensive ways it can cover us, so to speak. Anything else to add on top of that?

Tonny: 

Just very briefly. Through the business you can also get children’s critical illness cover. It can be automatically included at no extra cost as well, because I said if your children was off sick that could be anything from birth up to their 23, then it would pay out as well. So that’s just something else to bear in mind. But apart from that, I think I’ve covered the essence of it, so you can do it in your personal name or through the business and just think of it as something else like that that you’ve got to do as well.

Dr James: 

Yeah, a key takeaway from me is that a lot of the stuff that you were talking about can be done through our business, which obviously opens up so many doors and makes it so much more accessible to us. Given a lot of us, dennis, we want to stay under 100k where we can when it comes to taxable income, and even if we can stay under 50k, then even better still. So if it’s a business expense, it completely changes the game.

Tonny: 

Some of the insurances I talk about can be offset against tax. Some can’t, but yeah, it’s certainly the business can pay for it all anyway.

Dr James: 

Tony, should anything that you said today interest anybody who is listening on the podcast, where they best off finding you?

Tonny: 

Yeah, give me a shout. You can find me at Hammond Financial. So that’s Tony at HammondFinancialcouk, or give me a call on my mobile, which is 07-857-630-570, and happy to help anybody and provide that free review. If they have an existing critical illness policy, make sure they know what they’ve got.

Dr James: 

Thanks so much for your time as ever. I’m sure we’ll see you again soon on the Dennis University Podcast. God Blesswww. Begginings는데com. Thanks for watching and茶fuhosing.