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How to Be Clever in a World of Stupid Workers

January 16 2019 6 min read Income Protection

first step to financial peace of mind text on image of person stepping onto road

Can I be brutally honest with you?

And I don’t mean honest in a “your bum looks big in that” sort of way.

I mean really honest.

Ok?

Here goes…

If you haven’t insured your income, you are a dumb-ass.

Yeah sonny, you heard it right and I’m sorry to have to be the one to say it.

But as long as you ignore income protection while wasting your money on bright shiny things, you’re not the smartest guy in the room.

You know it could happen to you

Illness, the bastard, can blindside you at any time, be it physical illness like a heart attack, cancer or a stroke, or a mental illness like anxiety, stress or depression. He creeps up when you least expect it.

And even if you think you’re incredibly healthy, almost invincible, “sure my grandparents are still alive at 136″, you can’t prevent a car accident, a sports injury or a fall at work.

All of these could force you to miss work for a long period of time.

What happens then?

You’ve worked damn hard to get where you are today, do you really want to be reliant on state handouts if you suddenly find yourself unable to work.

What can you do to protect yourself?

Insurance is all about risk, well, the transfer of risk really.

The risk you face every day is an injury or illness that keeps you out of work.

You can shoulder this risk yourself, cross your fingers, say a little prayer, rub a rabbit’s foot and hope illness or injury never strikes. 

This is what stupid workers do.

Or you can pay an insurance company a few quid per month to take away this risk. When illness or injury strikes, the insurer then ponies up and pays you an income until you get back to work.

This is what clever workers do.

What are you currently doing?

I can only assume that as of today, you’re taking all the risk yourself – very brave but you must be slightly worried, otherwise you wouldn’t be here.

Personal story:

Before I had income protection, the fear used to gnaw away at me like a fox chewing a bone especially if someone I knew, or my wife knew, got sick. Immediately I’d swear I’d put cover in place but then it went on the long finger until one day another friend got cancer and was out of work long term. The cancer, unfortunately, led to depression and he hasn’t worked since. His family is struggling financially. I vowed that would never be me so I put income protection in place and have slept very well ever since TYVM.

Sure, it costs a few quid every month, money I’d rather spend on beer my kids but my kids won’t keep a roof over my head if I can’t work. Those little feckers won’t even clear the table let alone pay the mortgage. Leeches the lot of them!

By the way, taking the risk yourself is perfectly normal especially if you haven’t heard of income protection. We all feel invincible, we don’t like to think about getting sick let alone prepare for it – that’s just human nature. It’s only when it happens someone close to us that we realise how financially exposed we would be if that happened to us.

How long would your savings last if your income stopped?

How long do you receive sick pay from your employer?

They are the two big questions you have to answer.

Can you afford it?

We all have bills out the wazoo – mortgage, creche, food, utilities, life insurance, pet insurance – the reality is that all of these bills will fall by the wayside if you don’t have an income. Your income pays for everything so protecting it should be your first priority. Yes, your first priority. It’s more important than the mortgage, because, and sorry for repeating myself…if you don’t have an income, you won’t be able to pay the damn mortgage.

So if you have pet insurance, but no income insurance, you’re doing it wrong. If you think about it, you’re showing your love for Fido by protecting your income because if you don’t have an income…yep, you’ve guessed it, you won’t be able to pay for his pooch insurance.

Income protection “keeping pets happy since 2019”.

So you’re going to save instead of insure, are you?

Let’s say you’re squirreling away €400 per month and you have a savings fund of €50,000. Take a step back and think what this is for. What are you really saving for? If it’s a college fund, excellent, that makes sense because you can’t buy “college fund” insurance. If it’s for a new car or holiday, again, brilliant stuff, because you can’t buy “replacement car or luxury holiday” insurance.

But if you’re saving up so you can replace your income if you get sick, then we have a problem because there’s a much cleverer and more cost efficient way to do this. Any idea?

Self insuring, while giving you some comfort is pretty worthless if you can’t work long term.

Take a guess at how long that €50,000 will last if you can’t work.

G’wan.

3 years?

2?

50k will last for 17 months if you drawdown 3k per month graph

17 months – less than a year and a half! (Yeah, I know I’m a maths whizz)

What happens when the €50,000 runs out and you’re not yet back to work? You might get illness benefit for two years but then you’re means tested. If there’s another income in the house it’s unlikely you’ll qualify for illness benefit so your income could fall to zero. Think about that, after all the years of hard slog to get where you are, you could end up with no income. It’s a frightening thought.

Saving to protect yourself against a long term inability to work simply doesn’t work. Instead of saving €400 per month, you should use a portion of those savings to insure your income and put the rest of the money in a “sunshine fund” saving up for things you’ll actually look forward to.

How much of your savings will you have to use to insure your income?

Let’s take a 40 year old non smoker, earning €60,000 per annum in an office based job. They can insure up to €34,704. If they can’t work past their waiting/deferred period  they’ll get €667 from their income protection policy plus €198 from state illness benefit giving a total weekly income of €865 until they get back to work. Not too shabby.

Here’s an indicative quote

Quote Type: Income Protection
First Person: Non-Smoker, born on 23/12/1979
Cover Amount: €34,704 per year until age 65.
Occupation Class: Class 1 Office Based
Deferred Period: 26 weeks
Initial premium : €75
after tax relief : €45

If you thought it would cost a lot more, you’re not alone. Most people wildly over-estimate the cost of income insurance. For €45 net per month, you can sleep easy knowing if you’re unable to work long term, you have the safety net of a guaranteed income until age 65.

Hopefully now you can understand why I think you’re stupid if you don’t have income protection.

Decision time

It’s time to accept that you can’t properly self insure against long term absence from work. It’s impossible to put enough by to replace a long term lost income. I know it’s hard to buy more insurance “more dead money” as people love to say, “what if I don’t claim?”

The big question should be “what if I have to claim”. How much financial torture and stress will you avoid by having a piece of paper with “income protection” printed on it.

Will this be the wisest purchasing decision you have ever made?

Over to you

What are your financial goals in life, are they similar to mine?

  • Owning and living in a nice home.
  • Being able to afford to travel and take nice holidays.
  • Being able to afford college education for the little feckers.
  • Peace of mind that comes with a feeling of being in control of your finances.
  • Not worrying about money.
  • Knowing you are doing the right things financially and not making mistakes.
  • Being clever, not stupid.

The common denominator in all of these is a steady flow of income. If this stops, those goals become impossible to achieve.

This is why income protection is the most important thing you can buy.

It’s your first step to financial peace of mind and the foundation of any solid financial plan.

If you have some questions, please call me on 05793 20836 or complete this short questionnaire I’ll email you a no obligation recommendation on how you can best protect yourself from all the bad shit life can throw at you.

It’ll be fun, trust me.

Nick McGowan 
lion.ie | making life insurance easier

 

 

 

 

 

 

 

 

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