Why you should ask your boss for income protection

I wrote about why you need income protection cover a number of years ago. But when I ask clients if they have this benefit through work, most of them haven’t a clue. They know their salary, bonus, pension alright but not the catastrophe planning benefits like life cover or income protection. The benefits that help them and their families when they really need financial help. Now consider this situation that I was asked to help on.

An employee got brain cancer and it was very unlikely that he was going to return to work. He had been out of work for 6 months and his sick pay was at an end. As he couldn’t return to work, he could access his pension fund early through ill health early retirement (never mind that this wasn’t even a substantial fund). There was a high chance that the cancer would kill him within the next year. If he took ill health early retirement, he would no longer be an employee of the company and he would also leave the the death in service scheme that was in place. His family wouldn’t get the €300,000 lump sum pay out that was provided for him through the scheme.

Luckily for him, we found that the employer had added in an option that where an employee leaves, they can take on the cost of the cover themselves without providing any medical evidence. The employer told me they hadn’t realised they had ticked that box, so he was lucky in this case. But not everyone will be so lucky.

If his employer had provided income protection cover for him, he could have stayed on the payroll claiming up to 75% of his income, wouldn’t have to access his pension plan early and the death in service benefit would remain in place, without him having the added expense of having to pay the life cover personally.

Income protection is a hugely important benefit for people to have. It really is there for catastrophe planning; imagine how sick you must be if you can’t make it into work for over 3 months? But most people are put off by the cost (there is tax relief on the premiums). And it can be expensive given the huge pay outs that may be made. But a company can pay for this cover for an employer and offset the cost as a business expense. It is a benefit you hope you never have to claim on but it is invaluable if you do.

If you have any questions, you can email me directly at steven@bluewaterfp-ie