Dr James, 7s:

We are here to talk today about everything income protection and how lots of dentists 100% could be getting a better deal. As to why that is, Warren is going to reveal all in just a second. A little bit of an intro as to who we both are before we begin. My name is Dr James Martin. I'm a dentist, like most people who are watching this broadcast this evening. However, I left Clinical Dentistry about three and a half years ago because of a platform that I started called Dentists who Invest. What that platform is is two things really helping dentists boost their income and helping dentists get the best deal possible whenever it comes to the investing side of things. What the heck do we actually do with that income? That's when investing comes in, and related to that this evening is my very special guest, Mr Warren Robbins. Warren, how are you tonight? Are you happy to give a little bit of a bio for the listeners and the viewers who are tuning in this evening?

Warren, 54s:

Yeah, absolutely fantastic, james, good to be here and speaking to, hopefully, a few dentists. So, yeah, I'm sort of currently an insurance advisor, so I specialize in the insurance side of stuff. I've been in financial services for nearly 20 years in fact, 20 years this year, so, um, a lot of experience in this field. Prior to that, I did something very different. I was a research scientist, so I'm a chemistry graduate, um and then decided to move into something entirely different when I did my master's degree, so moved into initially mortgages, um, and now I'm an insurance specialist and for the last four, maybe five years I've predominantly been working with with dentists and doctors. So that's what I do, and those skills that I learn as a research scientist have come in surprisingly useful when it's come into looking at the, the real costs of income protection, which is what I'm going to sort of discuss this evening.

Dr James, 1m 51s:

And you know what, warren? The biggest thing that is remarkable about yourself is how much you bring that data scientist brain to the IP game, which is needed, of course, because it's full of numbers and data right.

Warren, 2m 4s:

Absolutely. I think sort of, yeah, there are occasionally in life. There are some advantages to being a bit of a nerd, and the nerd skills from being a research scientist transfer into the ink protection field surprisingly well, much better than I would have thought when I sort of made the transition. So in terms of the key thing with ink protection is it's actually incredibly difficult to work out what is the best or best value cover when you're doing your own research or even if you're speaking to an advisor. And there's a couple of really good reasons for that. The first one is when you get the documentation from any advisor or insurance company, you get information which gives you the monthly premium. That's absolutely cast iron correct. But there's also a figure where they reveal the lifetime cost of the policy over the policy term. Now if you look at, say, for a third example, a 35-year policy, it will say that roughly every pound of the starting premium is going to cost you around about 420 pounds. Now, if there's a mathematician around, then that is essentially saying that the premium never changes. So the reality is, if you apply typical average annual cover increases which the long-term average is about 3.6 percent used by most insurers to retail price index the real cost is going to be for each pound is rather than 420, it's more likely between 800 and 3,100. So it's massively different. Now that information is not shown. Now the reason there is that difference is because when insurers apply the annual cover increases, they don't just do it on a one-to-one basis, they apply a factor. Now that means that if you apply, have a three percent increase in cover, your premium is going to go up between anywhere between about three percent and twelve percent per year, which is a massive difference. Now, when you consider that these well small or even slightly less small increases every year, effectively their compound interest, which is something, is something also you're a big fan of and Einstein referred to as the most powerful force in the universe, because it is bloody strong and people underestimate the impact that has, and that's why you've got this massive price range. Now, generally speaking, the mechanism that the insurers use when they apply these annual cover increases is not shown in the documents you get before you take the policy out. So you've got to wait to get the policy document before you can actually then, if you're a mathematician, work out who's going to offer the best cover. So that means that you may have a policy that is £50 and a policy that's £55 a month, and the one that's £55 a month from day one will cost you, say, £30,000 less over the policy term. So it makes it incredibly difficult to work out which policy you should go for, because the total cost on the documents issued by the insurers is completely misleading. And then, secondly, just going for the lowest premium won't get you the best deal either, necessarily. So it's a real minefield. So what I've done is, when I've looking at all of these sort of various permutations, it's enough to make your head explode. So what I did? I built a spreadsheet which models the mechanisms that all the insurers use. So when I do my research, I'll put in all the premiums from all the insurers, put in a realistic annual cover increase, which generally is around a 3.6 percent, which is the long term average, and then it'll show me the premium progression over the full policy term and it then totals up the total cost. And by doing that I can work out which insurer is likely to and I will stress, it's likely to, because nobody knows what the future cost of living is going to be. So it's an assumption, but it's a bit more realistic than the 0% increase that the insurers use. In fact, interestingly, there's only been one year since World War II when there wasn't an increase in the cost of living. So although my 3.6 percent is it's not guaranteed it's probably a lot more realistic than the zero that most insurers use. So by doing that I can at least provide my dentist clients with enough information to at least make an informed choice about what is going to happen. And if they tell me they want to use a different figure for the annual cover increase, I can do that instantly and still come up with a premium progression that they're happy with.

Dr James, 6m 38s:

Right. So when the cover goes up by 3.6%, what they're saying is, what they'll pay out will go up by 3.6%. Is that right?

Warren, 6m 47s:

Yeah, your benefit goes up by 3.6%, but the premium will go up by 3.6% to maybe 14%. So it's trying to find, and that information is not easy to find, so the insurers are fairly careful with the information that they release. Now, if you look at the documents that the insurers put out the reason they can assume that the premium never changes they put a little disclaimer in it, something along the lines of the figure shown is for registration purposes only and doesn't include any changes in premium for choosing cover indexation, something along those lines. Now it's. You might suggest that it's hiding in plain sight because it's there, but I've never spoken to a dentist that understood what that actually meant and the fact that it was saying that this figure is utter nonsense.

Dr James, 7m 41s:

Well, you know what's good, right, because you're bringing your technical brain to this and you clearly know loads about it, and I'm bringing my dentist brain to this and IP, all of this stuff I know of it. It's not something I've ever taken on, it's definitely not my forte. So when I hear you say the cover goes up by 3.6 percent, well, that suggests to me that the premium goes up as well. But there's actually a distinction there and that's how they make. You know what we talked about compounding just a second ago. Their profits are compounding right over and above inflation, literally, right, absolutely and that's the problem, because most people make that assumption.

Warren, 8m 18s:

They assume if the cover goes up by X percent so does the premium, and there are a couple of insurers where that is the case, but for most insurers the most common mechanism used by the insurers is 1.5. So it's one and a half times by. Whatever the cover goes up is what the premium goes up by, and that sort of 50 percent increase in the increase on the premium really adds up and kicks in over time awesome.

Dr James, 8m 43s:

Well, listen, food for thought and let's go deep on that and let's let's make it real and bring it into the real world. So next thing I want to talk about would be helpful to talk about is the real cost of this, because what I find extremely powerful for demonstrating to people with you know percentage points and how much things tally up with time, is if we can just pull it out of the abstract and say this will cost you 10 grand over the next five years, or 20 grand, or 30 grand, and I get that we're speaking average numbers, but it still makes it more real okay.

Warren, 9m 16s:

If we take a fairly typical 50 pound a month income protection policy over a 35 year term, which is the sort of thing that maybe a 30 year old dentist will go for which a lot of my clients tend to be in that sort of age band um, the total cost if you apply the 3.6 annual cover increase, depending on the insurer, will be between anywhere between 40,000 pounds and 155,000 pounds, and that's a massive difference. Now, obviously they all don't start at 50 pounds, but if they did, that is the total cost spread that you would get. So you've effectively got potentially more than three times the total cost with some insurers versus others and, as I've said, that information you will not see on the insurer documents. With one insurer exception, there is one insurer who actually does use a realistic three percent and they include their mechanism. No dentist will ever be with them because they're incredibly expensive for dentists. So it's almost an irrelevancy the fact that they exist. They're incredibly expensive for dentists, so it's almost an irrelevancy the fact that they exist. So they're really expensive and they're honest about the total cost, which makes them about as attractive as rattlesnake in a Lucky Dip, to be honest.

Dr James, 10m 27s:

I like that analogy. So yeah, so it's one of those things that you know.

Warren, 10m 31s:

I applaud their honesty, but no one would touch them with a barge pole, certainly not if you're a dentist, because they're doing everything to put people off. I think, um, I don't think they actually want then, uh, ink protection business from what I see, but most insurers much more discreet, um, and unless you can actually do a realistic progression, you won't be able to work out whether the insurance company that you're going with is going to give you the 40 000 pound total cost or 155 000155,000. And if you think about if you, and the one thing I would say is certain insurers that are very popular with dentists tend to be towards the top end when it comes to that total cost. So and I'm not going to mention any names because I quite enjoy not being sued, um, but essentially, you know, if you're a dentist, there's probably a couple of insurers you would come across. One of them has a very iffy mechanism in um, and both of them start off rather expensive. Anyway, they tend to be towards the higher end of the price range to begin with. So, um, choosing your insurer carefully makes a massive difference, and when I'm talking about the premiums, that's the raw savings. Now you know more about sort of the, the investment element and that side of stuff. So these are savings in just the money that goes out of your pocket. But if that money is saved, you then have the option of actually doing something with that money and earning a return on it. And it's so. It's not just the the extra premiums you're paying that's lost, it's the opportunity to grow that money. So the potential difference between if you go with a good insurer and when it's going to cost you an arm and a leg can be absolutely enormous. It's well into six figures on a common basis. So which is even for well-paid professionals like dentists. It is worthwhile making sure you've got a good deal.

Dr James, 12m 26s:

Yeah, and it doesn't hurt either, right? No, you know what I mean. There's all of the upside and literally no downside. Like literally the worst outcome is that you just keep the same policy that you had before, but chances are, according to what you're saying, most people who are listening well, there's something better out there for them.

Warren, 12m 45s:

There's a I would say about nine out of 10 people, nine out of 10 dentists I speak to. There's benefits and improvements and savings that can be made and significant savings and significant savings, because there's certain insurers that are very popular with dentists that there are big savings that can be made.

Dr James, 13m 6s:

So yeah, you know, I'll just say something on that. A lot of dentists want about the dental tax or the dental premium that there is whenever it comes to buying products for their practice, and I suppose it's not too surprising for those same dentists to learn that it's happening in other areas of their life as well, and maybe it's not just purely because they are dentists, but it's something to be aware of, it's just something to be conscious of and certainly, well as I say, it doesn't hurt to look into these things, because it's a very worst case scenario. You're just going to continue exactly as you were before, so let's move on. I wanted to ask as well, when it comes to the real cost of these policies and how they're set up, how does that influence how the policies are created and how we go about these things? So say, for example, let's make this real why would one feasibly argue that a more expensive premium is worth it versus a less expensive premium? What are the pros and cons? Can you talk about that a little bit?

Warren, 14m 9s:

Yeah, there is the two insurance companies that tend to target and specialize in the medical and dental field. Insurance companies that tend to target and specialize in the medical and dental field. They will claim that their cover is superior to the mainstream insurers because they understand dentists and doctors better. Um, respectfully, I would disagree. Um, the the key thing with income protection is to make sure that you have an own occupation definition cover, which means that if you can't do the duties of your own occupation, then you have a valid claim that after the waiting period, will kick in and pay out. Um, and pretty much all of the insurers these days offer that type of cover. The you go back 10 years, then a lot of different types of variations, their own occupation there was any occupation, there was work tasks and suited and all sorts of things. But generally speaking, dentists can get own occupation cover, which is the gold standard from pretty much all the insurers that are available. So, and as long as you have that, you have pretty much an equivalent policy. There might be the odd little bell and whistle which differentiates us, but all the insurers have their own little things. But if you've got something, that's potentially a hundred thousand pounds difference in the total premiums. Having a nice name and maybe a few extra bells and whistles doesn't appear to be good value. From where I'm sat, you can buy a lot of bells and whistles for 100k it certainly doesn't sound that way, like it adds up.

Dr James, 15m 48s:

So it's basically about looking past the veneer and just exploring what's really going on, looking under the bonnet, so to speak, and that's where someone with expertise can be hugely beneficial. So so, warren, I know you talked earlier about the spreadsheet that you've created, and I know you've shown this to me before in the past and it really is quite something. A lot of hours poured into that. So hats off to you. I know some people are joining us tonight and they're watching this visually. There'll be some people who are listening on catch up as well on the your podcast, so we will, of course, narrate over the top so that people who are listening to this in an audio format will be able to understand what's going on. But if you have that spreadsheet in front of you, might be helpful to pop that up on the screen and we can go and play around with it and plug some numbers in. Is that something that's convenient to do?

Warren, 16m 34s:

if you give me one minute, I shut everything down, so I didn't have too much interference. But if you give me one minute, I I shut everything down so that I didn't have too much interference.

Dr James, 16m 41s:

But if you bear with me a second, we're gonna get that up on the screen in just a second and guys I know some people are joining us live now. If you have any questions about income protection, now is your chance to throw them in the chat and we can get to them at the end, if we have any time and when those questions do come in. But what we're going to do is we're going to really delve into detail with the time that we have tonight and give as much value as possible. There's an expression that I love, or an acronym that I love gpm gems per minute, and that pertains to the amount of value that you give somebody per second or per minute whenever they tune into your webinar. So we want a high gpm webinar tonight. That's what we're going for. Warren, are you good?

Warren, 17m 22s:

yeah, I'm just about to share.

Dr James, 17m 25s:

Hopefully I've got the option to share some hand signals, some smoke signals to let me know whatever. Okay, there we go, there we go, we're good. We're good. We're good because otherwise, I'll just talk and talk and talk. Okay, it looks like we're in to the spreadsheet that warren was talking about, so we're going to go ahead, get that up in just a second. Warren, the permission is to share the screen, or I've already granted permissions to share screen, so it's all yours whenever you're ready okay, bear with me, I'm just trying to write, hopefully there we are.

Warren, 17m 55s:

Right. Hopefully anybody that's watching is now seeing my magical spreadsheet. So this is something that models the behaviour of all the insurers. So what you do when I've done the research, you put in all the premiums across here, client's age, term of the cover, the amount of cover, the interest rate that you want to look at, the projections for. You put in the client's income and it then works out the maximum cover to make sure you don't get over-insurance, which is this sort of band across here, so you can work out maximum cover available for each insurer for any income. And then what it does it shows the progression of the premium change each year when the 3.6% cover increase is applied. And then at the bottom you have the total cost in yellow, which is highlighted because that's one of the key measures for all of the different insurers, and just below the yellow bands you have this red band figure here and that is actually the figure that you would actually see on the insurer documents. So so this is effectively that in red it's the total, with no increases in cover. So and the premium never changes. So that's what the insurers use, apart from a couple. And then the yellow is a realistic figure with based on a fairly sensible annual cover increase and some of these premiums get very big over time with some of the insurers and the one thing to point out is this sounds a little bit scary to some degree because these premiums can get large. But you have to bear in mind this is over 35 years and the cover in this instance starts at £3,000. But by the end of it you've got nearly £10,000 a month of cover. So those little three, even 3.6% increases add up over 35 years and you've got more than treble the amount of cover that you started with.

Dr James, 20m 1s:

And you know, I don't mean to interrupt, but I'm just casting my eye at the bottom of the screen there, uh, the over the various numbers and which companies they're in relation to, and there's just some big names on there. Let's just say that. But uh, I'll let everybody do their own math. Whenever they are watching the video uh, either live or on catch up they can really really really just cast their own eye over it and do their own math on that one, because we're not here to hear name names and that but no, exactly I'm not going to sort of discuss um or sort of discuss it.

Warren, 20m 33s:

People can see, make their own conclusions, but um, yeah, so it's it's interesting to to see um and and it's very informative and I think this is such a valuable tool because it enables me to. Yeah, originally, when I sort of worked out that there was a serious impact on on the cost, I started trying to do this with a calculator and it's so time consuming um and and this just takes away all the work. It's taken a few hundred hours to build this um and if you look at sort of well, you can see the I'm a nerdy mathematician at heart. You can see the. I'm a nerdy mathematician at heart, so you can see the sort of formulas that are required to build this. It adds up a bit.

Dr James, 21m 12s:

Hey man, listen, nerds rule the world, it's true. It's true, the pen is madder than the sword, mate. So listen. Thanks for figuring it out on behalf.

Warren, 21m 22s:

I'll come out of that now, so I'm going to stop sharing that.

Dr James, 21m 27s:

Cheers man behalf of that now, so I'm going to stop sharing that. So, cheers man, thanks so much for that. And to the people who are watching the video live and who were able to see that you can see that there's quite a startling difference there between what you are paying over that period of time. So I just wanted to have, I just wanted to ask you, warren, whenever it comes to reviewing your policy, how often should that be? Should that be every year, two years, three years? How does that normally look?

Warren, 21m 51s:

what do you? I, I contact my clients on an annual basis. Um, some some very good reasons for that. The first thing is because these policies, the cover increases every year so you need to make sure that the cover increase that you've got if you've got the maximum cover available the future goes up and your income hasn't increased you won't qualify for that additional cover that you're paying for. So I always like to make sure each year that the cover increase that's going to be applied to the policy for my clients can be justified so that they're not wasting their money. The second thing is you know things change, so you know. Has somebody moved from a sole trader to a limited company? There's a lot of dentists I'm seeing that are doing that at the moment because they're moving from nhs work to a mix of nhs and private to purely private, and when they do that they lose the, the pension and sick pay benefits from the nhs work and their accountants typically recommend they go limited so that they can get the tax efficiency of keeping some of their income as retained profits in the business and the vast majority of my clients when they do that, their accountant accountant says 12.5k a year in salary, 37.5k in dividends, keep the rest in the business and do something with it. But the problem is then, if they've gone from 100k as a sole trader, their allowable income for most insurers then becomes 50k, which means there's a damn good chance that they won't be able to qualify for the amount of cover that they got. In which case you then go look at insurers and there are only a handful that will allow salary and retain profits rather than salary dividends, and that figure typically is much bigger.

Dr James, 23m 41s:

So you can then get a decent amount of cover if you need it, and it's not just one of the dental specialists that offers that I see and is it fair to say that sometimes, on occasion, or maybe more often than not, accountants are suggesting that people should do that and people are following through, and maybe they don't always have a thorough understanding of the the ip side of things. So it's something we have to seize the initiative on as dentists. Is that correct?

Warren, 24m 6s:

yeah, 100. I think it's sort of fairly common that um because it's fine print and and I think the expression the devil is in the detail was developed for income protection or it certainly should have been, because you can go from having a completely legitimate income protection policy and just by switching from sole trader through working through your unlimited company, you know you're earning the same money, but you've, from the insurer's viewpoint, there's a damn good chance you've probably got half the half the liable income that you had previously. And if you're not getting a regular review and your advisor hasn't spotted that, if you come to claim you might think you've got five grand's worth of cover and you've only got two and a half that you can claim on. And guess what? It's not the insurer's fault.

Dr James, 24m 54s:

And probably still continuing to pay the same premium.

Warren, 24m 57s:

Oh yeah, and you won't get a refund on that, because it's effectively your mistake. There we go Something to watch out for.

Dr James, 25m 3s:

Well, it's always good to go through life with a healthy skepticism, isn't?

Warren, 25m 6s:

it, but here's the thing we shouldn't we should, we should.

Dr James, 25m 9s:

Um, you know, I'm sure there's everybody out there cares for their clients, and what have you so?

Warren, 25m 13s:

yeah, and to be fair, there will be occasions where it is the best option, so. So I'm not saying it's never is, but always be. Do your research, get the comparisons d-y R?

Dr James, 25m 26s:

Absolutely, and we certainly can't generalize and everything, but this is this is the great thing. This is great thing about these discussions this is what I always say to people is very few hard and fast rules in life, but what we can do is give you information that helps you decide what is the best thing for you as the listener, as the person who is uh, there's the person who is watching this video live, or the person who is following us on Catch Up. Warren, that has been amazing. This evening we're coming up to the 30, 40 minute mark and we like to keep these webinars and pieces of content around about to that mark, because that's just the most bite-sized, perfect amount of information for most people. Warren, we're gonna go ahead and round up quite soon. Is there anything that you'd like to say in conclusion, just to top off everything that we've talked about tonight?

Warren, 26m 14s:

Probably just the one final point is because the cost of any income protection policy is going to be a massive amount, more than anybody realises from the documentation. Setting it up correctly is a really smart thing to do and if you look at the premium differences and the total cost differences for the different deferred periods, if you go for a three-month deferred period versus, something say, a day one cover, because you want to make sure that you don't miss out on sort of some extra money if you're off for a month, consider this. If you go for the day one cover versus three months on a 50 pound policy or, sorry, three thousand pound a month cover, it's likely to cost you about 170 000 pounds more in premiums for the day one cover versus the three month cover. So I think the um, the expression false economy was generated for that example, because you know you'd have to make something like nine claims of full three months to actually sort of break even with an average payment, so, which is extremely unlikely to ever happen, um. So think carefully about sort of if you can afford a decent waiting period and three months tends to be the sweet spot because that's where the biggest drop in premiums comes you're going to save premiums in spades, and well more than you'd like to ever get back in claims, so consider that Good for thought. So yeah, definitely some interesting points there.

Dr James, 27m 45s:

Rhys, you'd like to ever get back in claims, so so consider that good for thought. So, yeah, definitely some interesting points to raise tonight. And, just as we were saying just to reiterate earlier, obviously it's a very individual thing and we can only really speak generally tonight and whatever your advisor is whatever you're doing, um, you know it's. They may have the reasons for that specific policy that you're on. We couldn't possibly comment on every single one but, like I said, by us sharing this information tonight we can help people get the best deal still, because it does make a huge difference. I mean, there was someone that I was talking to the other week and they were like flipping 32, I believe, and they were paying 400 quid a month in cover and I was like that is wild, that's crazy. And they then got back to me the other day and they said actually they got it down to an equivalent cover that was around about 150 quid mark. So 250 quid is nothing to be sniffed at. That's like three grand a year, three grand in your pocket a year as well, three grand that you don't have to go hunting or working for. Okay, because it's already come off your overheads. You know you're kicking back and you're making money, food for thought, and we're thinking about one. Thank you so much for sharing your knowledge this evening on Dennis who invest. I'm sure we're going to have more content in the near future. If anybody wants to reach out to you, what's the best way to get in touch?

Warren, 29m 4s:

through the website, probably as good as any, um the medidentfscouk. Um you can send mea message directly through the website. Um, if you want an obligation, just a 10-minute chat, then it's possible to book um directly into my diary um a 10-minute chat. Or if you want a full consultation, you can do that directly through the website as well. So um and contact details are on there. So if somebody wants to use the, the old phone not an option, not a problem and and email details are on there as well.

Dr James, 29m 33s:

So, um, all of the, all the normal sort of channels, really so cool, and it's also worth noting that when we post this video on catch up, we're going to put a link just below this video which somebody who is watching this video can use to input their details, should they need a protection review off the back, off the things that we've covered today, if they feel the time is right and if they feel like that's something that is appropriate. Guys, thank you so much for joining this evening. On dennis, who invest looking forward to the next week's content that warren and I do together already. Hope everybody has an absolutely amazing evening, as ever, and we'll see each other very soon.

Warren, 30m 6s:

Bye-bye thank you, james.