Hello my learned friend.
You’ve studied hard – contract, tort, land law, jurisprudence and the rest.
You’ve trained hard, getting through Blackhall place and your apprenticeship unscathed.
Now you’re finally earning a decent salary, it’s time to protect it.
In this article, I’ll explain what income protection is…and what it’s not.
Income protection is not the same as serious illness cover.
You don’t have to suffer a specific illness for your policy to pay out.
Solicitors income protection will cover any injury or illness that prevents you from doing your job as a solicitor.
You’ve trained and worked hard to get where you are so make no apologies that you make a decent living.
But the more you earn, the less help there is, in relative terms, if you cannot work.
Let me explain:
Let’s say a friend of yours takes home €500 per week.
If she can’t work due to an illness, she is entitled to €188 in disability benefit per week.
So her income drops by 62%.
Let’s say you take home €1000 per week.
If you can’t work, you’re entitled to the same €188 per week.
Your income drops by 81%!
You see the more you earn, the more you’re exposed if you cannot work long-term.
The biggest factor affecting the price of income protection is your occupation class.
Solicitors income protection is classed as category 1 which is the lowest risk.
The lower the risk the lower your premium will be.
If you are an employee paying the higher rate of tax, you can get tax back of 40% of your premiums.
This means a monthly premium of €166 per month really only costs you €100 per month after tax relief.
Using solicitors income protection, you can insure up to 75% of your salary less disability allowance (assuming you’re entitled to it).
Let’s look an example to see how it works in practice:
Therefore if you cannot work long-term due to any illness or injury, you are entitled to an annual income of €49,964 + €10,036 = €60,000 per year until you get back to work.
Without income protection you would have to survive on just €10,036 per year.
Just think about that for a minute, could you even pay your mortgage, let alone feed and clothe your family for just €193 per week.
Scary isn’t it?
That’s why solicitors income protection is essential.
Self employed workers are not even entitled to the €193 per week.
If you can’t work, I’m afraid you’re on your own.
You face a 100% drop in income.
If you’re self-employed in any occupation, and you don’t have income protection, you’re either very brave or a lunatic.
There’s a little known trick that could save you fortune on your premiums in the long run.
If you’ve just started out as a solicitor, you can get a solicitors income protection policy right now, even though your salary is at the low-end of the scales.
This helps you lock in a low price due to your age and good health, while also giving you the option to buy more cover in the future without answering medical questions.
You see you can increase your cover automatically by 20% every 3 years.
Every year you wait, your premium will increase due to age.
They say a picture paints a thousand words…
You work in a high pressure, high stress environment so you need to protect yourself from absences from work due to mental fatigue.
Last year, mental health conditions accounted for 25% of all income protection claims.
Traditionally, solicitors practices don’t have a formal sick pay arrangement so you might only be covered for a couple of weeks.
Check with your HR department – if you have one.
Income protection can pay out after a 4 week absence from work.
Cover will continue if you change jobs, regardless of what your new job entails.
If you’re made redundant, your plan will continue while you are looking for another job.
This means that although you won’t be eligible to claim while you’re between jobs, you won’t need to reapply for cover.
It’s easy to think
It won’t happen to me
but here are some stats that may surprise you. Unfortunately illness and injury can strike at any time:
How long would €50,000 in savings last do you think?
5 years, 3 years, 2 years?
In fact if your monthly outings are €3000 per month then €50,000 will last just 17 months.
What happens then?
1. Does it cover absence from work due to work related stress?
2. Does it cover absence from work due to traffic accident and sports injury as well as illness?
3. What level of medical certification is required?
A report from your GP generally suffices but the insurer can ask for more medical information.
4. Are my Doctors fees covered in addition to income protection?
No, income protection replaces your income only.
5. Is there a time limit on how long my income will be protected?
You choose the time limit, the maximum age is to age 68.
6. Will I receive my current full after tax income for the duration of the protected period?
No, you will receive 75% of your gross income less state disability benefits. Your gross income is taxable.
7. How long will it take from date of submission of claim to receiving payment?
Once all relevant medical information has been received and it satisfactory, payment will begin immediately.
8. Are payments additional to Welfare benefits paid during the period of absence?
You can insure up to 75% of your gross income less social welfare payments and any other sick pay arrangements.
9. Is there a limit on the number of times I can claim or a period that I can’t claim after making a claim and receiving income protection payment?
10. How much does solicitors income protection cost?
You can use these income protection calculators to get an indicative quote or else give me a shout and I’ll do one for you.
That’s a decent introduction to income protection but I’m sure you have lots of questions.
Or call me directly on 05793 20836.
Nick McGowan BCL (I could have been one of you guys!)
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