How to safeguard your income against any illness or injury.
Income Protection is a policy that pays you a portion of your income in the event you are unable to work due to illness or injury and covers you until you are either fit to return to work or reach retirement age. Income Protection is widely considered the most valuable protection policy one can have due to the frequency of claims and average payout.
You choose your annual benefit up to a maximum of 75% of your regular income, less the state illness benefit. The benefit is payable after a deferral period of your choice from 4-52 weeks and payable until your chosen ‘retirement age’ from age 55 to age 70. The benefit is payable once you are deemed unable to continue your current occupation due to any illness or injury, including mental health leave.
There are a number of ‘built in’ benefits to income protection policies that vary by provider, from rehabilitation support, proportionate benefit when returning to work in a reduced capacity and terminal illness benefit to name a few. Income Protection is often confused with serious/critical illness cover, which is a once off payment when diagnosed with a specific illness; Income Protection offers far broader cover on an ongoing basis.
Consider: You likely have your home, motor and maybe even phone insured, but do you have your earnings insured? Your ability to keep your home, motor and phone all rely on your income, is it secure?
Income Protection is suitable for anyone who relies on their income to meet their outgoings. The amount of cover an individual requires depends on their own savings, employer’s sick pay policy and whether or not their employer provides income protection as a benefit. Assessing your requirements with a qualified advisor is recommended.
Business Owner Suitability:
For small business owners, ‘executive income protection’ can be taken out by the company to benefit the owner and/or key employees. For larger companies/corporations group income protection can be taken out on all or segments of employees. When a company of any size provides income protection for their staff, tax relief is available on premium payments. Studies show that companies with employee benefits have improved retention rates and employee satisfaction. For smaller companies, providing income protection as a benefit is a valuable tool for attracting talent.
If you have fluctuating income, you can opt to have your finances underwritten at the inception of a policy to ‘lock in’ a set payment in the future, regardless of your income at the time of a claim. This was not previously available in the Irish market and can eliminate paying for a set benefit you may not qualify for, should you become disabled during a trading downturn.
The average claimant on an income protection policy is just 42 years of age. The average length of time for claimants in Ireland is 6 years. The two most claimed ailments in Ireland are Orthopaedic (back injury/pain) and Psychological (mental health/stress leave) with cancer and heart related conditions following.
Revenue allow tax relief on premium payments for individuals at their marginal rate (20%/40%) and corporate tax relief of 12.5% for companies providing income protection.
The above information is based on products available in the current Irish market as of February 2021.
Terms vary upon provider.
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