What is Income Protection?

For me, this is the most important protection benefit on the market. For most, if you die, you have a life cover plan to pay off the mortgage and other debts so your loved ones aren’t saddled with debt after you’re gone. But what if you don’t die? What if you have an accident that stops you from working or even contract an illness that stops you working for a number of years? How will the bills be paid then? The State disability is just €9,776 and if you run your own business, you don’t even get that.

That’s why income protection is such a great product. In effect, you insure your salary in case you cannot work due to an accident, illness or injury.

How much can I get paid?

The most a provider will pay out for is 75% of salary. The reason for this is they don’t want people to be too comfortable financially, otherwise people wouldn’t want to return to work! State disability is deducted from this amount.

A word of caution though. The provider will assess the 75% of income based on the income earned 12 months prior to a claim and and not just on the amount you are insured for. I have seen lots of people suffer drastic reductions in earnings after the collapse of the Celtic Tiger. In the event of a claim, the insurer will only pay out 75% of their lower salary even though these people have been paying premiums for a higher amount that they will never receive.

Is the benefit taxed?

Yes it is. If you go out on a claim, the income is taxed under PAYE. On the bright side, the premiums you pay get tax relief at your marginal rates.

How long will it pay out for?

You will be paid a salary until you are able to go back to work or you reach a pre-chosen retirement age that you pick, anywhere from 55 to 65. While it is a lot cheaper to have the cover stop at age 55, imagine what difference an additional 10 years of benefit will do for you?

How soon will I get paid?

You decide when the plan starts. The earliest is if you are unable to work for 4 weeks. The longest is if you are out of work for a year; this is typically used if an employer will pay salary for a years absence from work. The earlier the deferred period, the more expensive the premium.

How many times can I claim?

As many times as required. When returning from a claim, the providers like you to come back part time first and they pay a proportionate benefit. This is to avoid immediate relapses. In certain circumstances, if you suffer a relapse, there is no deferred period and you got straight back on claim. If you suffer a relapse in future years or a completely different illness, the benefit will pay out again.

What are the most common payouts?

For both men and women, the most common payouts are mental illness, musculosketel issues, circulatory issues and injuries.