The deferred period on an income protection insurance policy is the period of time, chosen by you, between the first day you can’t do your job due to illness/injury up until the insurer will payout on your policy.
The deferred period is sometimes called
So if you choose an 8-week deferred period, your income protection policy will start to payout once you have been unable to do your job for 8 weeks due to any illness or injury.
If you choose a 26-week waiting period, your policy will payout if you can’t work for 26 weeks.
Aviva, Zurich and Royal London offer 4, 8, 13, 26 and 52-week deferred periods.
New Ireland starts at 8 weeks.
Irish Life at 13 weeks.
The longest waiting period for income protection is 52 weeks.
This is common to all of our insurers:
With a 52-week period, you must be unable to work for 1 year before your policy kicks in.
This may seem like a long time to wait but not if you are unable to work for 15-20 years:
By exhausting all other avenues of income (sick pay, savings, family support) you could struggle through financially for 12 months…but imagine being out of work and not earning an income for 15 years.
Look at your own situation and try to figure out how long you could survive without an income.
State illness benefit is just €203 per week (and isn’t available to the self-employed) so while it will help, you can’t really rely on it it pay the mortgage/rent, all the other bills and maintain your lifestyle.
Your income protection payment should kick in just when the smelly stuff is about to hit the fan.
You can choose a 4, 8, 13, 26 or 52 week waiting period if you are paying your premiums personally.
If your company or employer is paying the premiums, you can choose a monthly deferred period ranging from 1, 2, 3, 6 or 12-months.
The shorter the deferred period is, the higher the premium you will pay.
Logically, this makes sense as the risk to the insurer is greater for income protection policies with a short deferred period.
e.g. a broken arm keeps you out of work for 8 weeks. If you have a 4-week deferred period, the insurer will pay you a replacement income for 4 weeks.
However, if you have 8 week deferred period, you wouldn’t claim. There is less risk to the insurer on the 8-week deferred period compared to the 4-week deferred period. The insurer will offer lower premiums depending on the risk of a payout.
Here are some worked examples over 4, 8, 13, 26 and 52 weeks for a 35-year-old desk jockey – no manual work, earning €80,000 per year.
Quote Type: Income Protection
First Person: Non-Smoker, born on 01/01/1986
Cover Amount: €49,444 per year until age 65.
Occupation Class: Office Worker(Class 1)
Deferred Period: 4 weeks
Monthly premium: €264
after tax relief : €159 per month
Deferred Period: 8 weeks
Monthly premium: €187
after tax relief : €112 per month
Deferred Period: 13 weeks
Monthly premium: €128
after tax relief : €77 per month
Deferred Period: 26 weeks
Monthly premium: €89
after tax relief : €54 per month
Deferred Period: 52weeks
Monthly premium: €76
after tax relief : €46 per month
The sweet spot for most of our customers is 26 weeks as this is when they feel they will start to struggle financially without an income and this is the deferred period where the affordability meets their budget.
In the example above, if you earn €80,000, you have a monthly take-home of €4325 per month. The net premium on the 26-week deferred period policy is €54 per month which is just over 1% of your monthly take home.
Please let that sink in.
You pay just €54 to insure a monthly income of €4120 until you are 65.
Your income is the only money coming into your account each month. The direct debit to protect your pay cheque should be the first one leaving your account each month.
Insure your money machine to safeguard your future.
Looking for more information on income protection, our income protection FAQ is a good place to start.
Happy to get the ball rolling? Well, complete this income protection questionnaire and I’ll be right back with my advice.
I’m happy to chat through your options on 05793 20836 or you can schedule a call back below.
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