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 our 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 Income Protection For You?
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 much of your income are you covered for?
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.
Your 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 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 will I be paid for?
You will receive a regular payment until you are able to go back to work or until your policy ends (usually when you retire).