Why Do I need Income Protection Insurance?
Everyone has heard of Income Protection but is it something we should all have or is it a luxury if you have spare cash? The thoughts of being ill or injured at some point in the future and being unable to work is quite daunting.
Life unfortunately can be quite unpredictable, so best advice would be to be prepared. If you had to stop working tomorrow due to illness or injury would you be able to survive without your income? If the answer is no, then it is likely that you would need some level of Income Protection to replace your existing income.
Is It Worth Getting Income Protection?
If you are employed fulltime or are self employed and you become unable to work, Income Protection is something you need to consider, especially if you have other people depending on your income. You might not be entitled to sick pay in work, or the benefits you are eligible for may only last for a short period. Before taking out an Income Protection policy you should find out your entitlements with your employer.
How is Income Protection calculated?
Income protection gives you up to 75% of your normal income (up to a maximum of €262,500, less any social welfare payments). This ensures you cover your regular expenses and protect your lifestyle.
For example, if you earn €80,000 p/a, the maximum benefit payable would be 75% of your total earnings which would be €60,000 less any social welfare payments.
What Is A Deferred Period?
Your deferred period is the amount of time you need to be out of work due to illness or injury before your policy will start to pay you. When you take out your policy you will be asked to choose the deferred period for your policy, typically 4 weeks, 13 weeks, 26 weeks or 52 weeks.. The longer your deferred period, the cheaper your policy will be. If you choose a deferred period of 4 weeks, which means you must be unable to work for 4 weeks before the Income Protection payments will begin, the policy will cost more than if you were to choose 13, 26 or 52 weeks. Before you make a call on the deferred period, check if your employer offers sick pay and if they do, how much would you receive and for how long would you receive it.
How does your occupation affect the price of your Income Protection policy?
If you are considering taking out an Income Protection policy, then your occupation is a significant factor. Having an occupation which is more risky and manual than some is likely to increase your need to have income protection in place, but at the same time it will push up the price of your policy.
How does Income Protection work?
You make a monthly, tax-deductible payment, called a premium. The cost depends on a few factors - your age, occupation, health, whether you are a smoker, and how much of your income you want to protect. In return for this, you receive regular payments when illness or injury prevents you from working.
How long does Income Protection Last?
You will receive a regular payment until you are able to go back to work or until your policy ends (usually when you retire).
Is there tax relief on Income Protection?
Yes, Income Protection premiums are eligible for income tax relief at your marginal rate of tax.
Can I get Income Protection if I am Self-Employed?
If you’re self-employed you are not entitled to claim illness benefit from the state, so you can insure up to 75% of your pre-tax income.
What illnesses does Income Protection cover?
Income protection covers you for any illness or injury which results in you not being able to work. Serious illness on the other hand covers you once you have been diagnosed with one of a specified list of serious illnesses.
How much does Income Protection cost?
The cost of income protection depends on a number of factors including your age, health, occupation and level of cover. Therefore it is important to compare Income Protection costs across a number of insurers to ensure you are getting the best deal. Looking for an Income Protection quote? Fill out our online form (link below), and someone from our Income Protection team will give you a call back within the hour with your quote.
Should I use a broker for Income Protection?
It makes sense to use a broker for income protection for a number of reasons. Firstly, there’s no additional cost to use a broker. Secondly insurers attach a risk risk rating (or occupation class) to each occupation. The higher the occupation class, the more expensive the policy is. Not all insurance companies attach the same risk rating to each occupation. So you may get a better risk rating with certain insurance companies. We do the leg work here and shop around to ensure that you are getting the best deal on the market.
So if you are considering income protection, and would like to speak to an income protection broker we can talk you through your options. Call Helen on 086 602 5272 or email helen@citywidefinancial.ie