If you ask me can you afford income protection, I’ll ask you:
How much can you afford to pay per month?
I know answering a question with a question is a head wrecker of a habit – my wife does is all the time, I think it’s a woman thing 😉
But there are so many variables at play when pricing income protection that it’s impossible to give you a useful answer.
Unfortunately most people’s first experience with income protection is through their bank when they are getting their mortgage.
You may have experienced this when you got your mortgage.
You’re bored to tears with all the paperwork – and that’s just for the mortgage.
Then the banker starts scaring the bejaysus out of you with horror stories of what would happen if you couldn’t work.
Of course, he quotes you for all the bells and whistles so your final income protection quote ends up around the same level as your monthly mortgage repayments.
You politely decline and bounce happily out of his office.
But your interest is piqued.
Income protection does seem like a useful product but that quote was so expensive…
You start to google, you find me…and here we are.
That’s why I think a better starting point is to ask how much can you comfortably afford to pay every month and we take it from there.
The factors that you can control that affect the cost of your income protection insurance policy are as follows:
This is the continuous amount of time that you must be unable to work before your policy pays out.
The shorter the deferred period, the higher your premium will be.
So if you find a 4 week deferred period too expensive, I recommend quoting for a 13 or 26 week deferred period to reduce the cost.
You can insure up to a maximum of 75% of your income.
The more income you insure, the higher your premium.
If your quote for 75% of your income is off the charts, reduce it to 60% or 50% and see what happens.
You can choose to insure your income to any age from age 55 to 70.
We’d all love to insure our income to age 70 but that may be unaffordable.
Again, play around with the ceasing age, instead of 70, try 65 or 60.
The savings will be substantial.
Irish Life and Friends First offer reviewable quotes. The premiums start off around 20% lower that fixed premium quotes.
But the insurer can increase your premium every 5 years.
It’s not ideal but isn’t it better to have a reviewable policy that you can afford rather than no income protection at all?
Smokers pay around double what non smokers pay!
But after 12 months of non-smoking, you can get non smoker rates.
It’s yet another reason to seriously consider kicking the habit.
Have a look at these indicative quotes from Friends First, focusing on the top left – a Class 1 Occupation (office worker).
As you can see, a 40-year-old office worker can spend as little as €18 per month to insure an income of €189 per week.
Or they can spend €60 per month and insure an income of €758 per week.
That’s €60 per month to make sure you’re not relying on state illness benefit of between €84 and €188 per week should you be unable to work.
For me, that’s a small price to pay.
And remember if you’re self-employed, you don’t even get that measly state benefit.
Would you like to see how much your income protection premium would be?
It’s easy to reduce the cost of income protection to an affordable level, you just need to know what to tweak.
As you’re checking out how much is income protection, I presume you are interested in taking out some cover.
But you still have some final questions?
If you do, I’d love to help.
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