When it comes to financial security, one term that often comes to mind is Income Protection Insurance. Also known as Permanent Health Insurance, Salary Protection, or Income Continuance, it pays out a regular income if you are not in a position to work due to a medium or long term illness, an accident or injury. Some of the most common income protection claims arise due to work-related injuries such as stress or back-pain. This payment comes into effect after a pre-determined period of time and can continue indefinitely or until you return to work. This can help pay your bills and support your dependents, while you concentrate on your recovery.
Your income is undoubtedly your most valuable asset, and it’s essential to protect it.
The government’s statutory sick pay scheme has risen to 5 days payable in 2023 and will increase to 7 days payable in 2024 and 10 days payable in 2025. Although this is a welcome increase, the average duration of income protection claim is 4 years and the longest claim currently being paid is over 31 years. Some employers will pay sick pay for a pre-determined period but this is usually less than six months unless there is an employer-paid group income protection scheme in place. Individual income protection cover can be obtained by anyone who is in full-time employment or self-employed. A person who is in full-time employment can insure up to 75% of their income minus the state illness benefit while a person who is self-employed does not qualify for state illness benefit so can insure 75% of their income. As mentioned above if you are an employee you are entitled to the state illness benefit. This is an amount just below €11,000 which for most people would mean a massive drop in earnings and would certainly lead to a change in lifestyle and reduction in discretionary spending. However, if you are a self-employed person you are not entitled to the state illness benefit so this would mean a complete loss of income and no means to fund your current lifestyle.
Income protection policies are usually taken out on an individual basis (with the exception of a group income protection scheme which may be offered by your employer – Click here if you are an employer interested in learning more about our group and corporate offerings). This means they are subject to individual medical underwriting. This involves filling out an application form with a list of questions regarding your health and lifestyle. It also lists some questions regarding your occupation. Some jobs are considered higher risk than others, and a list of occupational classes is available from all providers. Office and desk jobs tend to be deemed low-risk whereas manual jobs tend to be deemed at a higher risk level. The other main factor to be considered is the income protection deferred period. This is the period of time you are unable to work before your income protection payments begin. The shorter your deferred period is, the more expensive your income protection premium will be. The usual options are 4 weeks, 8 weeks, 13 weeks, 26 weeks or 52 weeks, but it’s important to talk to your financial broker to assess what is the best option for you.
There are many benefits to income protection insurance and here at Ollie Moran Financial Services, we think it is one of the most important covers to have in place. The main benefit is of course security for you, your family and the continuance of your lifestyle. Your income is your most valuable asset and insuring this provides great security to ensure your family can continue to maintain a satisfactory lifestyle even if you are not in a position to earn. Income protection premium prices can be fixed at the start which means they will not increase throughout the lifetime of the policy even if you have a claim, unless you wish to increase your cover. Income protection policies can be claimed more than once, which means that if make a successful claim and return to work, you are entitled to make another claim after you return if you find yourself unable to work again at any point. Income protection premiums can seem high but the premium is tax-deductible upto 40% every year.
Due to the technical aspect of income protection insurance we would certainly recommend using a financial broker to help you choose the right product for you. There are subtle differences between the different providers with respect to financial limits, medical limits, classification of occupational classes etc. Some providers come with free additional benefits such as a doctor’s second opinion (for you and all your family on any medical issues), a waiver of premium meaning you won’t need to pay your premium while you are in receipt of a claim or free or subsidised counseling to help you get back to work. Your financial broker can help you build a product that suits your needs and wants.
In conclusion, Income Protection Insurance is a vital financial tool that ensures your financial well-being in the face of unexpected events. It offers peace of mind, safeguards your family’s financial future, and can be customised to your specific needs. To explore income protection options further, please contact us.