Income Protection…is it necessary?

If you were unable to return to work long-term due to an illness or from the after-effects of an illness, would it be possible for you to sustain your current standard of living? How long will your employer pay your salary if you are unable to work for an extended period?

What is Income / Salary Protection?  Income Protection is different to serious illness cover and is designed to provide people with income replacement in the event of serious illness or if they are unable to work for a prolonged period of time. It can also be called Permanent Health Insurance (PHI).

Who is it for?  It is particularly important for those who are self-employed or people who are not entitled to a salary while off work due to a medium to long term illness or disability.

Why would I need it?  If you had an ATM in your house which held more than €500,000 in cash that you could access monthly for your day-to-day expenses, would you insure it?

We do not always think about income and future earnings as an asset. It funds our lifestyle, mortgage/rent bills, children’s education, life in retirement etc. In turn we also do not realise that as one of our biggest assets, this needs to be protected or insured. We don’t hesitate to insure our cars, houses, pets but we rarely think to insure the one thing that pays for these items…our income.

Pros: It can cover up to 75% of your income, tax relief is available on premiums paid subject to specified limits.

Cons: Depending on age, occupation and medical history, the premium can be costly, but the tax relief can bring the cost down.

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Executive Income Protection can be set up by an employer who wants to provide income security for key employees or directors. The cost of pension contributions can also be covered under this plan. One benefit for employers or business owners is that the premiums qualify as allowable business expenses so they can be offset against corporation tax.

Personal Income Protection is similar to Executive Income Protection and can be set up by individuals who pay the premium themselves and claim the appropriate tax relief personally.

Wage Protector is more budget-friendly and most suitable for more manual occupations or for workers in riskier jobs which may be more expensive to insure.

Did you know....?

Did you know... Multi-Claim Protection can pay out multiple times for different illnesses over the lifetime of the policy and it can also trigger multiple claim components for one illness.

Did you know... Life insurance pays out a lump sum if you die or suffer a critical illness (depending on the type of cover you hold). Death in service is similar. Death in service may be offered by companies as part of an employee’s benefits package. It’s paid out as a tax-free lump sum if you’re employed by the company (i.e. on the payroll) at the time of your death.

Did you know... When you apply for life insurance, you may be asked to complete a medical exam and the life company will pay for this medical exam. It might be a good opportunity to avail of a complimentary check up!

Did you know... Key Person Insurance is a business-specific life insurance (also known as Business Protection) which can compensate a company for the financial loss and other consequences of the death or serious illness diagnosis of a key member of the business.

Did you know...  Income Protection policies and some Life Assurance policies allow you to claim tax relief at either standard tax rate (20% or 40%). This means if you are paying €100 monthly, you may get as much as much as €40 refunded on this premium

Did you know... When structuring life assurance for cohabiting clients and their family, it is important to remember that cohabitants have no automatic rights to their deceased partner’s assets under the Succession Act. By setting up an individual Life Assurance policy on the other person (i.e. Life of Another) with the premiums being paid from their individual bank accounts, this can help avoid a potential inheritance tax bill.

Did you know... If you are self-employed, Shareholder/Directorship Protection is an arrangement between company directors, which allows for a deceased’s directors share of a company to be bought by the remaining Directors.

Did you know... by reviewing your Mortgage Protection policy, you may be able to obtain more cover and additional benefits for the same or reduced price than with your original policy.

Did you know... the application process has become a much easier process these days with the availability of editable PDFs and Docusign …one pro to come out of the current situation!

Did you know... For any change in lifestyle (e.g. New house, starting a family) it is a good practise to review your financial needs and check if you are fully covered or to see where you may require additional protection.

Protect Your Wage

We have in the past discussed the benefits of protecting your income (Income Protection) but some factors can affect whether you will be in a good position to obtain this type of policy. If you are self-employed and depending on your profession, the cost may be too high for the cover you need.

In this instance there is a similar budget-friendly option – Wage Protector. Wage Protector is an everyday essential that works when you cannot. It is designed specifically for workers in riskier jobs who are generally more expensive to insure, such as construction workers, electricians, plumbers, mechanical engineers and the self-employed. It has all the same features of the full income protection plan, with the only difference being that it will only pay out for a maximum of 24 months per claim.

The product is divided into two types of cover:

Transitional cover: This cover kicks in after the deferred period and pays you a replacement income for 24 months if you are unable to do your own job. This gives you an opportunity to get back on your feet or prepare for an alternative job. After this initial period, depending on your circumstances, full Disability Cover may apply.  

Disability cover: This cover will apply if you are unable to return to any work due to significant illness or injury and suffer a loss of earnings as a result. You must pass a Functional Assessment Test to qualify for this cover. This is a simple, easy to understand set of physical and mental ability tests.

There are many other additional benefits included with this type of policy so visit www.drumgoolebrokerage.ie/income-protection for more details. Have a question or want to review your cover? #justcallOran on 087 668 6624. Quote source Aviva L&P