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Income Protection

income protection insurance

updated July 2016

Income Protection – Pays the bills if you’re unable to work

Imagine you were involved in a car accident yesterday and were seriously injured.
It puts you out of work for two years. (Don’t worry, you make a full recovery)

Sick Pay Maybe?

There’s no legal obligation on your employer to pay sick pay but you may be fortunate enough to have some.

Check your contract to see if you are entitled to any and for how long it is paid.

Disability Allowance Possibly?

If you qualify for disability allowance you will receive just €188 per week.

After two years you are reassessed for disability benefit.

If you can do any job, your allowance is stopped.

You could end up doing a job you hate just to survive.

Remember if you’re self employed, you have no entitlement to disability allowance. If you can’t work, your income drops to zero.

Savings Somehow?

Do you have enough put by to cover two years salary?

Or is the money you have in savings ring fenced for something else, your children’s education perhaps?.

Q. What is income protection?

A. If you’re unable to do your job due to sickness or injury, income protection provides you with a monthly payment that replaces your income.

You can choose the amount of this payment – up to 75% of your salary.

What does it cover me for?

Q. Who needs it?

A. As a general rule – if you depend on your monthly pay cheque then you should make sure it’s protected.

If you’re the sole earner or self employed, without question, you need income protection.

Q. How long can I claim income protection?

A. For as long as you are unable to carry out your occupation up until age 65.

Q. What is a deferred period?

A. Your income protection payments won’t start until after your deferred (waiting) period.

This is the period of time that your must be out of work for.

After your deferred period you will be paid a monthly income.

You choose the deferred period. It can be as short as 4 or as long as 52 weeks.

If you pick a 4 week deferred period, you will be paid an income after 4 weeks out of work.

The shorter the deferred period, the higher the premium.

The deferred/waiting period that’s right for you depends entirely on your situation and how long you could realistically get by without an income.

If it will only last 4 weeks then choose a 4 week deferred period, if savings and/or sick pay will last for 26 weeks then you pick a 26 week deferred period.

Q. Can I fix the cost or will it increase very year?

A. You can fix the cost.

Q. How much does Income Protection cost?

It depends on a variety of factors including age, occupation, income and your general health.

Who has the best income protection calculator?

Q. Do I get tax relief on my payments?

A. Yes, you get tax relief at your marginal rate of income tax be it 20 or 41%.

Q. Do I need to pay tax on the benefit received?

A. Your income protection payments will be treated as normal income and so are assessed for income tax, PRSI and the Universal Social Charge.

Your insurer will pay the benefit direct to you.

They will take any income tax, PRSI and Universal Social Charge in the same way as an employer would take them from a normal income.

Basically, the insurance company will become your employer paying you a net income each month.

Over to you…

If you’re considering income protection, give me a bell on 05793 20836 and I can answer any questions you may have.

Or complete the short form below and I’ll be in touch.

Still lost when it comes to the whole of life cover? Have a look at the different types that could suit you. If you’re happy enough with income protection, let’s move on to the next lesson – critical illness cover.

Nick McGowan
LION.ie | Life Insurance for Smart People

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