Safe and sound
Featured Products Promotional FeaturesPosted by: Dental Design 6th December 2023
Why endowment policies are still a good idea
You may well be confident in undertaking an upper second molar root canal procedure, but what happens when it comes to financial planning? That’s not something that necessarily crops up on the syllabus at dental school.
And yet, making sound decisions about money and being financially stable is crucial to an individual’s wellbeing.[i] An effective way for dental professionals to mitigate any potential risk to their financial standing is by taking out an endowment policy.
An endowment policy is a type of investment policy that provides a lump-sum payment to the policyholder at a predetermined date or upon the occurrence of a specified event, such as retirement. The policyholder pays in money each month for a set period of time and this money is invested. Many endowments also build in a life insurance element so a beneficiary would receive the lump sum if the holder were to die before the end of the term. Some provide other insurance benefits, such as critical illness or disability cover, so can give financial protection in case of unexpected events.
Dentistry is a physically demanding profession, and many dentists often like to have the option of taking an early retirement. An endowment policy can serve as a retirement planning tool, providing a lump-sum payment upon retirement. This payment can supplement any retirement savings already accumulated. Of course, because the policies pay out a lump sum, they also suit those wanting to save for a particular goal, for example, new equipment for the practice or a child’s university fees.
Most endowment policies are established for 10 years or more, due to the advantageous taxation rules that apply to life assurance policies with terms of 10 years or more. This allows for investment gains to be paid by the policyholder without any personal tax being deducted.
There are three main types of endowment policy: unit-linked, with-profit and non-profit.
Money paid into a unit-linked endowment buys units in one or more investment funds. The value of these units can go up or down in line with the investments that make up the fund affecting the final value when the money is withdrawn.
Money paid into a with-profit endowment is invested in a with-profits fund, together with the savings of other policyholders. Bonuses are then added to the policy, depending on how the investments in the fund perform. There is no guarantee that a bonus will be applied each year, but once a bonus has been given, it is guaranteed. These endowments normally have a minimum final value which is added to any bonuses due when the money is taken out.
A non-profit endowment offers a pay-out of a guaranteed amount either at the maturity date, or if the policyholder dies during the policy term.
Endowment policies are a long-term saving proposition and should be considered as such but if a holder wanted to cash in early, they do have the option of selling their policy. Whoever buys it would own the policy and get the pay-out at the end, but it does give the policyholder access to some monies and the freedom to potentially invest what they receive elsewhere.
Dentistry is a profession that requires a significant investment of time, money, and effort. Dental professionals work tirelessly to ensure the oral health of their patients, and their financial well-being is critical to their overall career satisfaction. By obtaining an endowment policy, dentists can have peace of mind, knowing that they have a financial safety net in place to protect them and their loved ones from unexpected events and emergencies.
Finding the right insurer and policy for you is straightforward when you enlist help from an independent financial adviser, like money4dentists. They support you when finding the most appropriate cover for your individual situation, ensuring that you understand the fine print and exactly what you will be receiving from your policy. money4dentists provides peace of mind when you need it most.
An endowment policy provides dentists with essential financial protection in the face of unexpected events, helps in retirement planning, and offers personal well-being. By securing an endowment policy, dentists are safeguarding their financial future and increasing their overall financial security. What’s not to like?
For more information call 0845 345 5060, email info@money4dentists.com or visit www.money4dentists.com.
[i] Ryu S, Fan L. The Relationship Between Financial Worries and Psychological Distress Among U.S. Adults. J Fam Econ Issues. 2023;44(1):16-33. doi: 10.1007/s10834-022-09820-9. Epub 2022 Feb 1. PMID: 35125855; PMCID: PMC8806009. [Accessed August 2023]
