Sarah is 33 and works as an accountant in a firm in the city centre. She’s mostly on time – though last week she was late because her cat vomited on the floor. Sarah suspects that Jim, the cat in question, took one look at the hardwood flooring in the hallway and thought, ‘Nah, the carpet is a way better shout.’
Sarah’s a great employee; she’s even started contributing to her employer pension scheme.
But then Sarah gets sick.
She’s out of work for a week because of cramps. The company she works for are decent and pay her ten sick days a year. Sarah’s not worried.
But then the cramps don’t go away, and she finds out she’s got stomach cancer and she’s about to face a long medical battle, and God knows how long out of work.
Those ten paid sick days are all the company offers.
So, what happens next? And what if something like that were to happen to you?
Stories like Sarah’s happen all the time. Life happens – and sometimes it happens hard. Most of us don’t think about protecting our salary in the event of illness – it’s not something we consider when negotiating over a new job or a revised contract.
You’re probably too busy finagling over the dollar bills you’re making.
But sick pay is important – especially if you’ve got a caring employer that’s willing to cough up for more than a few days.
Because here’s the thing: an employee (that’s you) has no legal right to pay while on sick leave.
None at all.
Your company doesn’t owe you a cent. It doesn’t matter if you’re toiling at your desk long past office hours or if you take the mick with extremely extended lunchbreaks – we all have the same rights when it comes to sick pay – none!
The amount of paid sick leave you get is up to your employer, though most businesses settle for a measly three days – which, in the grand scheme of an entire working year, isn’t a whole lot.
Especially as you get older and you end up with hangovers that last longer than those three days.
Remember that one particular session, when you were keeled over your desk until the Tuesday, clutching your stomach and considering selling all your worldly possessions and living out of the back of a van while you travel around Europe. Your kids could go live with their gran. We can dream, can’t we?
In all seriousness, make sure you know your company’s sick pay policy – including how many days you’ll get. Also, find out how soon your employer requires a medical certificate – it’s usually after two or three consecutive days off and should say when you’ll be able to go back to work.
And just a little pro-tip for you: if you’re on annual leave and you’re ill, and you get a cert to prove it, you should get the day back and can take it off at a later date.
Deep breaths, sonny, because we’re about to look at the cold, hard facts of being long term out of work. It ain’t pretty.
So, depending on your exact circumstances, you’ll be looking at various options – all of which have terrifying names like ‘Partial Capacity Benefit’.
Your next question, no doubt, is how much those benefits pay. I’m not going to go through an exhaustive list right now as it’s on a case-by-case basis, but to give you an idea, we’ll look at Illness Benefits, which Sarah will get for a year while she recovers.
Sarah isn’t married and doesn’t have any kids. It’s just her and her pukey cat.
Sarah would be looking at a personal rate of €203 a week – or €812 a month. If Sarah is lucky, the accountancy firm she works for will also cover a certain amount of her wages, but that’s rare.
Neither could I, to be honest. And that’d just be me – we’re not even factoring in my three demons kids or the wife.
Life is expensive.
So is being sick, especially long-term.
Yes, it’s crap, but it’s even worse if you’re unprepared.
When it comes down to it, you have two options to insure yourself should you have to take a considerable amount of time out of work.
Those two options are Serious Illness Cover and Income Protection.
Serious Illness Cover has a couple of different names because the insurers thought, “yes, let’s make this even more complicated.” Like Sarah’s cat, the insurers are annoying shits.
It’s usually known as Serious Illness Cover or Critical Illness Cover. If you get any of the serious/critical illnesses covered by your policy, you get a tax-free lump sum. Most people with Serious Illness Cover get pay-outs for cancer, heart attack, or a stroke. I go in-depth in my ultimate guide to Serious Illness Cover here, but in brief, what I’ll say is this: Serious Illness Cover is good if you have no other types of insurance.
It’s not a patch on Income Protection, which is your other option.
Income Protection (also known as Permanent Health Insurance / Salary Protection / Income Continuance) can pay you up to 75 per cent of your before-tax income (minus the state Illness Benefit) if you’re unable to work. If you’re working full-time or are self-employed, this could make a serious difference to your life.
Let’s say you earn €80,000 per annum. You can insure up to 75 per cent of this less the state Illness Benefit of €10,296 per year.
If you’re self-employed, you’re not entitled to any Illness Benefit so that you can insure the full 75 per cent of your pre-tax income.
75% x €80,000 (minus €10,296) = €49,704
So you can insure €49,704 using Income Protection. If you’re unable to work, you claim €49,704 from the insurer and €10,296 from the state, giving you a total annual income of €60,000.
This replacement income lets you concentrate on getting better without constantly worrying about how you’ll keep your head above water.
Some workplaces offer a group scheme wherein they’ll cover you under the terms of their policy. If your workplace is scabby and doesn’t offer any Income Protection, you should buy a policy yourself.
The deferred period (also known as the waiting period) is important: it’s how long before you can claim on your policy? You can usually choose a deferred period of 4, 8, 13, 26, or 52 weeks.
Your cover will be cheaper if you have a longer deferred period – but is the few extra quid a month really worth surviving for a whole year on the government’s measly Illness Benefit?
Let’s look at an example real quick: Jane, a 26-year-old chemist on €45,000.
She wants to see how much she might pay with various deferral periods for 75 per cent cover until she’s 55.
A 4-week deferral period will set her back €36 per month after tax relief
A 13-week deferral period will set her back €17 per month
If she chooses a 52-week deferred period, she will pay just €11 per month
As you can see, there’s a significant difference between the pricing at four weeks versus 52 – but could you afford to wait that long?
In this instance, Jane picks the 13-week deferral period because work will pay her for the first three months if she can’t work. She can easily afford the €28 payment, especially as it’s actually only costing her €17 once she claims back 40% tax relief.
If you’re curious about how to claim tax relief on income protection / permanent health insurance, take a look at the graphic below:
Factors like your age, health, medical history and lifestyle will impact the cost of your cover. (Smoking is the divil for life insurance.)
Your occupation may cause increases too – and I don’t mean if you do something bananas like working as a bullfighter.
Occupations fall into categories from Class 1 to Class 4. Class 1 is your fairly standard office worker, who’ll be sat at the desk all day while Class 4 is more dangerous and includes people doing a lot of physical work like
Life Insurance brokers builders.
Look, if you’re young and single and footloose and fancy-free, you could probably survive without Income Protection. Worst comes to worst; you could move home for a year or two and get by.
It’d be grim, but you could do it.
However, if you have kids or a mortgage or loved ones to look after, the state’s Illness Benefit won’t cut it. You could probably muddle through for a few weeks, but do you want to be stressed about finances while you’re trying to get better?
You’re going to feel awful already, and the financial stuff’s stress definitely won’t help.
If you’re not sure if it’s worth it, why not give the Income Protection quote calculator a whirl and take it from there?
I’ve described Income Protection as the big daddy of insurance, and I’m going to tell you why right now. You go to work to make money. That money funds your lifestyle. If that money dries up, you’re in big, big trouble.
So what if you could back up that money? Insure it, if you will.
One more case study for ya!
Let’s look at the cat lady Sarah again. Let’s say she took out a policy a year before she got ill. She was earning €55,000 as an accountant and wanted to insure the full 75 per cent of that (less social welfare, she can insure €30,694), with a deferral period of 13 weeks (how long she’d have to be out before the policy kicks in).
Tax relief applies to Income Protection, so for €39.80 every month, Sarah would receive 75 per cent of her salary (less social welfare!) until she’s recovered and can go back to work.
And all for a tenner a week.
It’s worth considering.
From 2022, there will be statutory sick pay in Ireland.
But don’t get too excited – it’s capped at €110 per day to a maximum of 3 days.
Crappy sick pay?
Reckon you’d struggle to live on Illness Benefits of €203 a week?
Make the smart decision and protect yourself.
You’ll never be younger; premiums will never be cheaper. Take the plunge.
I hope not, but there is a chance that future you may look back on today as the most important day of your life.
Give me a call on 057 93 20836, and let’s get it sorted or complete this short questionnaire to get the ball rolling.
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