Why you need income protection

Clients come into me with lots of plans for what they want to do in the future; renovate an old house, go scuba diving in tropical waters, own a log cabin, even just maintain their current lifestyle. All these ambitions are based on their ability to earn an income.

What is income protection?

Income protection is insurance against your salary. You pay an insurance company a premium and in return, they will pay you a percentage of your salary (up to 75%) if you are unable to work due to accident, illness or injury. They will continue to pay you until you return to work or reach retirement age.

Why do I need income protection?

1. Sickness takes so many forms. Anyone can be in accident at any time. The most common payouts are cancer, back problems and mental illness. Can you guarantee you won’t get one of those?
2. If you are unable to work, the bills will still need to be paid. The bank still wants you to keep up your mortgage repayments. Your kids will still want to have money to buy clothes or computer games.
3. State benefits aren’t much help. If you are self employed or a company director, you get nothing. If you are an employee, you get €9,776 a year. Is this enough to live on?

Isn’t Income Protection expensive?

Yes, it can be expensive if you are on a good salary. €50,000 in cover for a 40 year old will cost €190 a month. You do get tax relief on the premiums though, reducing the cost of cover to €114. Your company can pay the premium with no benefit in kind.

While €190 a month is expensive, have a think what the potential payout is. If the 40 year old went out on a claim and couldn’t work again, by the time the policy stopped at age 65, he would have received €1.82m from the insurance company.

The ability to earn an income is the biggest asset you have. Lose it and your lifestyle will change drastically.

If you have any questions, please contact me directly at steven@bluewaterfp.ie